Urogen Stock: Binary Bet On UGN-102 (NASDAQ:URGN)

This is my first article on Urogen (NASDAQ:URGN) a clinical stage biotech with one approved therapy. It has strong ratings support — all three ratings profiles followed on Seeking Alpha show up Christmassy green on its ratings summary page as I write on 12/25/2023:

Q3, 2023 was strong for Urogen with beats on the top and bottom lines.

Urogen’s Q3, EPS of -$0.68 were negative; they nonetheless counted as an earnings beat of $0.17. In doing so they signified that the loss was not as bad as analysts had expected. Indeed during its Q3, 2023 earnings call (the “Call”), Urogen management was positively ebullient about its results.

Its enthusiasm was supported by multiple points of focus during the Call, including:

1. data, which it characterized as extraordinary, on its key clinical trials for UGN-102 being developed as the first nonsurgical therapy for patients with low-grade intermediate-risk nonmuscle-invasive bladder cancer;
2. pre-NDA meeting with FDA confirming path forward for UGN-102 which could lead to NDA submission during Q3, 2024;
3. $20.9 million in JELMYTO net revenues, an increase of 30% year-over-year;
4. closing of $120 million private placement.

Urogen’s stock took this earnings report right in stride. Its stock had enjoyed a massive runup following its 07/27/2023 release of data on its UGN-102. Since that time, its stock has dropped off.

JELMYTO, Urogen’s sole approved therapy has shown nice growth but has challenges.

The FDA approved JELMYTO (mitomycin gel) in treatment of low-grade upper tract urothelial cancer (UTUC) on 04/15/2020. Urothelial cancer is a cancer of the lining of the urinary system. It ran into a buzzsaw of COVID disruption chilling its launch.

The dosage and administration panel on JELMYTO’s FDA label hint to potential challenges on its uptake:

I have to say pyelocalyceal use is a new one on me. Urogen’s slide 14 from its Latest website presentation (the “Presentation“) describes its preferred method of administration. It characterizes nephrostomy tube administration of JELMYTO as efficient for doctors and well tolerated by patients.

It cites studies showing that antegrade administration is preferable to retrograde administration in that it:

1. minimizes manipulation of the ureter during treatment which may limit stricture formation associated with repeated instrumentation of the upper urinary tract;
2. may be performed by trained nursing professionals under clean rather than sterile conditions;
3. does not require fluoroscopy after a nephrostogram confirms placement at the first instillation.

Still yet administration of JELMYTO is a resource hog. During the Call CCO Bova pointed to the issues JELMYTO has compared to more routine therapies such as:

1. the use of specialized equipment;
2. scheduling time in the OR;
3. necessity of mixing with an anticipated 1-week shelf life.

During its Q4, 2021 earnings call, CFO Henderson described JELMYTO’s potential. She noted that Urogen considers its approved indication as presenting a $700. million opportunity. Urogen expects that JELMYTO will be able to ultimately realize 25%-35% of this $700,000 million or $175-245 million by 2025.

UGN-102 in development presents Urogen’s best opportunity for financial success.

Presentation slide 6 below provides a succinct overview of Urogen’s therapeutic portfolio:

Its UGN-102 underwent analysis in its phase 3 trial ATLAS (NCT04688931). As discussed during the Call, ATLAS met its primary end points; it demonstrated meaningful and compelling results overall and compared to the current standard of care, TURBT.

During the Call an analyst asked why ATLAS did not serve as a pivotal trial. CMO Schoenberg responded:

…we were [indiscernible] really plan to enroll a larger number of patients in the ATLAS trial, substantially larger than we ultimately enrolled. The data are very strong but I think the fact that we halt enrollment would continue the trial with a smaller number of patients than originally anticipated in the original statistical analysis plan, probably inform some of the FDA’s position on the aggregate value of the ATLAS data as a stand-alone submission.

CEO Barrett went on to explain that while the data from the study was highly positive it provided insufficient clarity on UGN-102’s durability of response. She assured that the FDA was on board with treating its current ENVISION study as a pivotal trial.

Its plans for UGN-102 are well advanced. During her introductory remarks Barrett announced its anticipated timeline as worked out with the FDA during a pre-NDA meeting. Urogen will be reporting data from the duration of response endpoint in the second quarter of 2024. Assuming favorable data Urogen expects:

…to submit the NDA to the FDA a few months later. If granted priority review, we anticipate approval and launch in early 2025. If approved, we believe that UGN-102 would represent a groundbreaking nonsurgical option for approximately 82,000 annual patients suffering from low-grade intermediate-risk nonmuscle-invasive bladder cancer, who currently face frequent recurrences, necessitating the need for multiple surgeries….

She characterized UGN-102 as a major growth driver for Urogen, with a substantial market in the U.S. exceeding $3 billion.

Urogen’s finances are adequate but uninspiring.

Nothing about Urogen’s Presentation slide 33 setting out its Q3, 2023 Financial Snapshot stands out as exceptional:

Its full year 2023 guidance for JELMYTO of $76-86 million is nowhere near the $175-245 million it was anticipating as its potential by 2025.

According to Urogen’s Q3, 2023 10-Q statement of operating cash flows it ran through ~$63 million during its first nine months of 2023. Its $154 million in liquidity should be sufficient to take it well past its important Q2, 2024 UGN-102 data readout.

Conclusion

Urogen is pretty clearly a binary bet on its UGN-102. How this bet will play out depends on how UGN-102 fares as its pivotal trial reads out. Looking at its price chart for the last year as shown above demonstrates exactly how volatile the situation is.

Over the last year, its market cap has bounced from a low of ~$190 million to a high of ~$680 million. With a current market cap of ~$445 million I see little reason to buy at its current price. Rather for those interested in following this firecracker, it makes more sense to ease in on downdrafts.

Its path during the new year 2024 is of course unknowable. That said I anticipate its highs and lows could easily match those of 2023 as the new year unfolds. Howsoever you play it, keep in mind its extreme volatility.