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CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share and per share data)
| September 30, 2017 | December 31, 2016 | |||||||
| Assets | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 79,171 | $ | 21,362 | ||||
| Restricted deposit | 197 | 95 | ||||||
| Accounts receivable | 34 | 83 | ||||||
| Inventory | 137 | 105 | ||||||
| Prepaid expenses and other current assets | 910 | 396 | ||||||
| TOTAL CURRENT ASSETS | 80,449 | 22,041 | ||||||
| NON-CURRENT ASSETS | ||||||||
| Property and equipment, net | 710 | 741 | ||||||
| Restricted deposit | 29 | 24 | ||||||
| Other non-current assets | 250 | |||||||
| TOTAL ASSETS | $ | 81,188 | $ | 23,056 | ||||
| Liabilities and shareholders equity | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | 3,488 | $ | $1,880 | ||||
| Employee related accrued expenses | 1,139 | 687 | ||||||
| Deferred revenues | 300 | |||||||
| Proceeds from exercise of warrants for preferred shares | 570 | |||||||
| TOTAL CURRENT LIABILITIES | 4,927 | 3,137 | ||||||
| NON-CURRENT LIABILITIES | ||||||||
| Warrants for preferred shares | 3,612 | |||||||
| TOTAL LIABILITIES | 4,927 | 6,749 | ||||||
| SHAREHOLDERS EQUITY: | ||||||||
| Ordinary shares, NIS 0.01 par value: 100,000,000 shares and 17,600,000 shares authorized at September 30, 2017 and December 31, 2016, respectively; 13,178,400 and 2,305,743 issued and outstanding at September 30, 2017 and December 31, 2016, respectively. | 35 | 6 | ||||||
| Preferred A and Preferred A-1 shares, NIS 0.01 par value: 14,400,000 shares authorized at December 31, 2016, 5,193,427 shares issued and outstanding at December 31, 2016. | 13 | |||||||
| Additional paid-in capital | 113,354 | 43,502 | ||||||
| Accumulated deficit | (37,128 | ) | (27,214 | ) | ||||
| TOTAL SHAREHOLDERS EQUITY | 76,261 | 16,307 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS EQUITY | $ | 81,188 | $ | 23,056 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| REVENUES | $ | 7,831 | $ | $ | 7,812 | $ | ||||||||||
| COST OF REVENUES | 313 | 295 | ||||||||||||||
| GROSS PROFIT | 7,518 | 7,517 | ||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES, NET | 11,936 | 7,915 | 5,621 | 2,873 | ||||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | 5,374 | 5,188 | 2,199 | 3,237 | ||||||||||||
| OPERATING LOSS | 9,792 | 13,103 | 303 | 6,110 | ||||||||||||
| FINANCE EXPENSES (INCOME), net | 122 | 1,761 | (5 | ) | 1,877 | |||||||||||
| NET LOSS | $ | 9,914 | $ | 14,864 | $ | 298 | $ | 7,987 | ||||||||
| NET LOSS PER ORDINARY SHARE BASIC AND DILUTED | $ | 1.31 | $ | 7.25 | $ | 0.02 | $ | 3.73 | ||||||||
| WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES OUTSTANDING USED IN COMPUTATING BASIC AND DILUTED LOSS PER ORDINARY SHARE | 8,223,124 | 2,305,410 | 13,051,117 | 2,305,743 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(U.S. dollars in thousands, except share data)
| Ordinary shares | Preferred shares | Additional paid-in capital | Accumulated deficit | Total | ||||||||||||||||||||||||
| Number of shares | Amounts | Number of shares | Amounts | Amounts | ||||||||||||||||||||||||
| BALANCE AS OF JANUARY 1, 2017 | 2,305,743 | $ | 6 | 5,193,427 | $ | 13 | $ | 43,502 | $ | (27,214 | ) | $ | 16,307 | |||||||||||||||
| CHANGES DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2017: | ||||||||||||||||||||||||||||
| Exercise of options into ordinary shares | 170,816 | * | 333 | 333 | ||||||||||||||||||||||||
| Share-based compensation | 4,031 | 4,031 | ||||||||||||||||||||||||||
| Exercise of warrants into preferred shares | 364,036 | 1 | 4,731 | 4,732 | ||||||||||||||||||||||||
| Conversion of preferred shares into ordinary shares | 5,557,463 | 14 | (5,557,463 | ) | (14 | ) | ||||||||||||||||||||||
| Issuance of ordinary shares, net of issuance expenses | 5,144,378 | 15 | 60,757 | 60,772 | ||||||||||||||||||||||||
| Net loss | (9,914 | ) | (9,914 | ) | ||||||||||||||||||||||||
| BALANCE AS OF SEPTEMBER 30, 2017 | 13,178,400 | $ | 35 | $ | $ | 113,354 | $ | (37,128 | ) | $ | 76,261 | |||||||||||||||||
| BALANCE AS OF JANUARY 1, 2016 | 2,300,959 | $ | 6 | 5,193,427 | $ | 13 | $ | 41,535 | $ | (25,273 | ) | $ | 16,281 | |||||||||||||||
| CHANGES DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2016: | ||||||||||||||||||||||||||||
| Exercise of options into ordinary shares | 4,784 | * | * | * | ||||||||||||||||||||||||
| Share-based compensation | 1,386 | 1,386 | ||||||||||||||||||||||||||
| Net loss | (14,864 | ) | (14,864 | ) | ||||||||||||||||||||||||
| BALANCE AS OF SEPTEMBER 30, 2016 | 2,305,743 | $ | 6 | 5,193,427 | $ | 13 | $ | 42,921 | $ | (40,137 | ) | $ | 2,803 |
(*) Represents less than one thousand
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
| Net loss | $ | (9,914 | ) | $ | (14,864 | ) | $ | (298 | ) | $ | (7,987 | ) | ||||
| Adjustments required to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
| Depreciation | 149 | 132 | 17 | 57 | ||||||||||||
| Share-based compensation | 4,031 | 1,386 | 2,158 | 513 | ||||||||||||
| Exchange rates differences | (2 | ) | ||||||||||||||
| Fair value adjustment of warrants for preferred shares | 168 | 1,761 | 1,875 | |||||||||||||
| Changes in operating asset and liabilities: | ||||||||||||||||
| Decrease (increase) in inventory | (32 | ) | 261 | |||||||||||||
| Decrease (increase) in accounts receivable | 49 | (24 | ) | |||||||||||||
| Decrease (increase) in prepaid expenses and other current assets | (514 | ) | 763 | (206 | ) | 113 | ||||||||||
| Increase in accounts payable and accrued expenses | 1,704 | 1,663 | 673 | 1,990 | ||||||||||||
| Increase (decrease) in deferred revenues | 300 | (11 | ) | |||||||||||||
| Increase (decrease) in employee related accrued expenses | 452 | 2 | 27 | (87 | ) | |||||||||||
| Net cash provided by (used in) operating activities | (3,609 | ) | (9,157 | ) | 2,597 | (3,526 | ) | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
| Purchase of property and equipment | (118 | ) | (578 | ) | (20 | ) | (135 | ) | ||||||||
| Change in restricted deposit | (105 | ) | (94 | ) | (100 | ) | 4 | |||||||||
| Net cash used in investing activities | (223 | ) | (672 | ) | (120 | ) | (131 | ) | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
| Exercise of options into ordinary shares | 333 | 329 | ||||||||||||||
| Issuance of ordinary shares, net of issuance expenses | 60,926 | (728 | ) | |||||||||||||
| Payment of deferred equity offering cost | (510 | ) | ||||||||||||||
| Proceeds from exercise of warrants to preferred shares | 382 | 570 | 378 | |||||||||||||
| Net cash provided by (used in) financing activities | 61,641 | 60 | (399 | ) | 378 | |||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 57,809 | (9,769 | ) | 2,078 | (3,279 | ) | ||||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | 21,362 | 17,975 | 77,093 | 11,485 | ||||||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | $ | 79,171 | $ | 8,206 | $ | 79,171 | $ | 8,206 | ||||||||
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||||||||||
| Exercise of warrants into preferred shares | $ | 4,732 | $ | $ | $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
UroGen Pharma, Inc. a subsidiary of UPL, was incorporated in Delaware in October 2015 and began operating in February 2016 ( UPI ).
UPL and UPI are referred to herein together as the Company.
The Company is a clinical stage biopharmaceutical company focused
on developing novel therapies designed to change the standard of care for urological pathologies.
The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America ( U.S. GAAP ) for interim financial statements. Accordingly, they do not contain all information and notes required by U.S. GAAP for annual financial statements. In
the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company s financial position as of
September 30, 2017, the results of operations and cash flows for the nine and three month periods ended September 30, 2017 and 2016.
These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements for
the year ended December 31, 2016 and notes thereto included in the Company s annual financial statements for the year ended December 31, 2016. The condensed balance sheet data as of December 31, 2016 included in these unaudited
condensed consolidated financial statements was derived from the audited financial statements for the year ended December 31, 2016, but does not include all disclosures required by U.S. GAAP.
The results for the nine and three months period ended September 30, 2017 are not necessarily indicative of the results to be expected
for the year ending December 31, 2017.
NOTE 3 RECENTLY ISSUED ACCOUNTING PRONOCEMENTS:
In May 2014, the FASB issued Accounting Standards Update ( ASU ) No. 2014-09,
Revenue from Contracts with Customers (Topic 606), ( ASU 2014-09 ). ASU 2014-09 requires entities to recognize revenue that represents the transfer
of promised goods or services to customers in an amount equivalent to the consideration to which the entity expects to be entitled to in exchange for those goods or services. The following steps should be applied to determine this amount:
(1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and
(5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in ASU 605, Revenue Recognition, and most
industry-specific guidance in the Accounting Standards Codification. In August 2015, the FASB issued ASU 2015-14 on this same topic, which defers for one year the effective date of ASU 2014-09, therefore, the guidance is effective for the Company for annual reporting periods, including interim periods therein, beginning January 1, 2018. The new revenue standards may be applied retrospectively
to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is currently evaluating the impact of adopting the guidance on its Consolidated Financial Statements.
NOTE 4 FAIR VALUE MEASUREMENT
Fair value is based on the price that would be received from the sale of an asset or that would be paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the guidance establishes a fair value hierarchy that prioritizes observable and unobservable inputs used
to measure fair value into three broad levels, which are described as follows:
Level 1: Quoted prices (unadjusted) in active markets
that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.
The Company s assets and liabilities that are measured at fair value as of September 30, 2017 and December 31, 2016 are
classified in the tables below in one of the three categories described above:
| September 30, 2017 | December 31, 2016 | |||||||
| Warrants for preferred shares Level 3 | $ | $ | 3,612 |
The fair value of the preferred share warrants as of December 31, 2016 was measured in accordance with
the Hybrid Method. The Company utilized the Hybrid Method to combine the probability of an IPO scenario at such date, which was estimated at 20%, with the probability of a liquidation event at such date, which was estimated at 80%. As of
December 31, 2016, the fair value of the warrants for preferred shares was determined mainly based on estimation of the Company s equity value derived from a discounted cash flow, or DCF, calculation and based on assumptions relating to
the Company s revenue forecast, clinical success probabilities, relevant discount rates between 10.5%-19 % (10.5% for the cash flow expected to be derived from the license agreement with Allergan and
19% for the cash flow expected to be derived from the Company s internal development), and expected volatility at a rate of 73.93%.
The table below sets forth a summary of the changes in the fair value of the warrants for preferred shares classified as Level 3:
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Balance at the beginning of the period | $ | 3,612 | $ | 872 | $ | $ | 758 | |||||||||
| Changes in fair value during the period | 168 | 1,761 | 1,875 | |||||||||||||
| Exercise of warrants to preferred shares | (3,780 | ) | ||||||||||||||
| Balance at end of period | $ | $ | 2,633 | $ | $ | 2,633 |
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.
NOTE 5 PROCEEDS FROM EXERCISE OF WARRANTS FOR PREFERRED A-1
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.
During 2017 and 2016, the Company notified holders of these warrants that it was ready to accept an exercise notice that was conditioned on
the price per share at which the Company s shares would be sold in an anticipated IPO. Prior to the IPO, the Company received a total amount of $952 as consideration for the conditional cash exercise of these warrants. The cash received was
recorded among current liabilities as proceeds from exercise of warrants for preferred shares. As of September 30, 2017, following the exercise of the warrants, the cash received was re-classified to
additional paid in capital. See also note 6.
NOTE 6 SHARE CAPITAL
Upon the 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. Subsequently, the Company converted all outstanding Preferred A and Preferred A-1 shares into ordinary shares at
a ratio of 1:1. As of September 30, 2017, the Company s share capital was composed entirely of ordinary shares.
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Research and development expenses | $ | 2,513 | $ | 760 | $ | 1,499 | $ | 306 | ||||||||
| General and administrative expenses | 1,518 | 626 | 659 | 207 | ||||||||||||
| $ | 4,031 | $ | 1,386 | $ | 2,158 | $ | 513 |
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 6 SHARE CAPITAL
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.
The plan administrator determines the exercise
price for stock options, within the terms and conditions of the 2017 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our Ordinary Shares on the date of grant. Options granted
under the 2017 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.
NOTE 7 RELATED PARTIES
UPI entered into a lease agreement in November 2015, which commenced in May 2016, for office space in New York, which serves as the
headquarters for our U.S. subsidiary. UPI shares the office space equitably with Kite Pharma, Inc., a Delaware corporation that is a co-signatory to such lease. Arie Belldegrun, M.D., UPL 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.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 8 LOSS PER SHARE:
The following table sets forth the calculation of basic and diluted loss per share ( LPS ) for the periods indicated:
| Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Basic and diluted: | ||||||||||||||||
| Net Loss attributable to equity holder of the Company | $ | 9,914 | $ | 14,864 | $ | 298 | $ | 7,987 | ||||||||
| Dividend accumulated on preferred shares during the period | $ | 825 | $ | 1,845 | $ | $ | 615 | |||||||||
| Net Loss attributable to equity holders of the Company, after reducing dividend accumulated on preferred shares | $ | 10,739 | $ | 16,709 | $ | 298 | $ | 8,602 | ||||||||
| Weighted average number of ordinary shares outstanding used in computing basic and diluted net loss per ordinary share | 8,223,124 | 2,305,410 | 13,051,117 | 2,305,743 | ||||||||||||
| Basic and diluted net loss per ordinary share | $ | 1.31 | $ | 7.25 | $ | 0.02 | $ | 3.73 |
For the nine and three months periods ended September 30, 2017 and 2016, all ordinary shares underlying
outstanding options, A-1 warrants and convertible preferred shares have been excluded from the calculation of the diluted loss per share since their effect was anti-dilutive.
The shares accounted for in diluted loss per ordinary share do not include 2,918,349 and 2,594,698 ordinary shares underlying outstanding
options for the nine and three months periods ended September 30, 2017 and 2016, respectively, and 728,312 shares issuable upon exercise of the Preferred A-1 warrants, which were converted to ordinary