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 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 RTGelTM reverse-thermal hydrogel, a proprietary sustained release, hydrogel-based technology that has the potential to improve therapeutic profiles of existing drugs. Our technology is designed to enable longer exposure of the urinary tract tissue to medications, making local therapy a potentially effective treatment option. Our approved product Jelmyto (mitomycin) for pyelocalyceal solution, and our investigational candidate UGN-102 (mitomycin) for intravesical solution, are designed to ablate tumors by non-surgical means and to treat several forms of non-muscle invasive urothelial cancer, including low-grade upper tract urothelial cancer (“low-grade UTUC”) and low-grade intermediate risk non-muscle invasive bladder cancer (“low-grade intermediate risk NMIBC”), respectively.

We estimate that the annual treatable patient population of low-grade UTUC in the United States is approximately 6,000 to 7,000; the estimated annual treatable population oflow-grade intermediate risk NMIBC is approximately 80,000.

RTGel is a novel proprietary polymeric biocompatible, reverse thermal gelation hydrogel, which, unlike the general characteristics of most forms of matter, is liquid at lower temperatures and converts into gel form when warmed to body temperature. We believe that these characteristics promote ease of delivery into and retention of drugs in body cavities, including the bladder and the upper urinary tract, forming a transient reservoir of drug that disintegrates over time while preventing rapid excretion, providing for increased dwell time. RTGel leverages the physiologic flow of urine to provide a natural exit from the body.

We believe that RTGel, when formulated with an active drug, may allow for the improved efficacy of treatment of various types of specialty cancers and urologic diseases without compromising the safety of the patient or interfering with the natural flow of fluids in the urinary tract. RTGel achieves this by:

• 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 Jelmyto and UGN-102. Further, RTGel may be particularly effective in the bladder and upper urinary tract where tumor visibility and access are challenging, and where there exists a significant amount of urine flow and voiding. We believe that these characteristics of RTGel may prove useful for the local delivery of active drugs to other bodily cavities in addition to the bladder and upper urinary tract.

Jelmyto

On April 15, 2020, the FDA approved our new drug application (“NDA”) for Jelmyto (mitomycin) for pyelocalyceal solution, formerly known as UGN-101, for the treatment of adult patients with low-grade UTUC. Jelmyto consists of mitomycin, an established chemotherapy, and sterile hydrogel, using our proprietary sustained release RTGel technology. It has been designed to prolong exposure of urinary tract tissue to mitomycin, thereby enabling the treatment of tumors by non-surgical means. New product exclusivity for Jelmyto exists through April 15, 2023, Orphan Drug exclusivity through April 15, 2027 as well as a composition of matter patent through 2031.

Low-grade UTUC is a rare cancer that develops in the lining of the upper urinary tract, ureters and kidneys. In the United States, there are approximately 6,000 - 7,000 new or recurrent low-grade UTUC patients annually. It is a challenging condition to treat due to the

complex anatomy of the urinary tract system. The current standard of care includes multiple surgeries, and most patients require a radical nephroureterectomy, which includes the removal of the renal pelvis, kidney, ureter and bladder cuff. Treatment is further complicated by the fact that low-grade UTUC is most commonly diagnosed in patients over 70 years of age, who may already have compromised kidney function and may suffer further complications as a result of a major surgery.

The FDA approval is based on results from our Phase 3 OLYMPUS trial showing Jelmyto achieved clinically significant disease eradication in adults with low-grade UTUC. Findings from the final study results include:

The FDA evaluated Jelmyto under Priority Review, which is reserved for medicines that may represent significant improvements in safety or efficacy in treating serious conditions. Jelmyto was also granted Breakthrough Therapy designation by the FDA, which was created to expedite the development and review of drugs developed for serious or life-threatening conditions with high unmet need.

In June 2020, we initiated our commercial launch of Jelmyto in the United States. We have staffed, trained and prepared a commercial team comprising a field force of approximately 48 representatives with deep experience in both urology and oncology. The sales representatives are led by seven regional business managers. Each region is supported by a Clinical Nurse Educator to provide education and training around instillation, as well as a Field Reimbursement manager to help ensure access and reimbursement for appropriate patients. In addition, we have a team of seven medical science liaisons who appropriately engage with physicians interested in learning more about UroGen, Jelmyto and our technology, including through virtual meetings.

We are committed to helping patients access Jelmyto. Our market access teams have laid the foundation for coverage and reimbursement, meeting multiple times with payers. The majority of large commercial plans have policies in place, covering over 150 million lives. In addition to reimbursement and access, we have also been focused on ensuring seamless integration into physician practices. We have implemented processes to help make Jelmyto preparation and administration safe and seamless for practitioners and patients, including entering into an agreement with a major national pharmacy under which the pharmacy, following receipt of a patient prescription, prepares and dispenses the Jelmyto admixture on our behalf. In October 2020, a Medicare C-Code was issued for Jelmyto. Centers for Medicare & Medicaid Services established a permanent and product-specific J-code for Jelmyto that took effect on January 1, 2021 and replaced the C-Code.

UGN-102

We are evaluating the safety and efficacy of UGN-102, our novel sustained-release high dose formulation of mitomycin, for the treatment of low-grade intermediate risk NMIBC.

We have shared final topline data from the Phase 2b OPTIMA II trial for our lead product candidate, UGN-102, in patients with low-grade intermediate risk NMIBC, defined as those with one or two of the following criteria: multifocal disease, large tumors and rapid rates of recurrence. The single-arm, open label trial completed enrollment of 63 patients at clinical sites across the United States and Israel in September 2019. Patients were treated with six weekly instillations of UGN-102 and underwent assessment of complete response, or CR (the primary endpoint) four to six weeks following the last instillation. The interim data were also published as a supplement to the April 2020 issue of The Journal of Urology, and we anticipate publishing the final data in a peer-reviewed journal in 2021.

In November 2020, we reported final topline data consistent with our previous reports showing that 65%, or 41 out of 63 patients, treated with UGN-102 achieved a complete response three months after the start of therapy. In this subset of patients, duration of response at nine months (12-months from initiation of therapy) was estimated by Kaplan-Meier (KM) analysis to be 72.5%. Median duration of response was not reached. The most common adverse events, greater than 10%, were most often reported as mild to moderate in severity and include dysuria, hematuria, urinary frequency, fatigue, urgency and urinary tract infection.

We believe that UGN-102 has the potential to be a new therapeutic option for the treatment of low-grade intermediate risk NMIBC patients. We initiated the Phase 3 ATLAS trial in December 2020 and are currently enrolling patients in this trial assessing UGN-102 with or without trans-urethral resection of bladder tumor (TURBT) compared to standard of care, TURBT.

Urothelial cancer, which is comprised of bladder cancer and UTUC, affects a large, and what we believe to be, an underserved patient population. Annual expenditures for Medicare alone in the United States for the treatment of urothelial cancer were 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 2017, the estimated prevalence of urothelial cancer in the United States was 748,000 and in 2020 the annual incidence of urothelial cancer was approximately 85,000. The prevalence in 2017 of low-grade intermediate risk NMIBC was approximately 340,000. We estimate based upon a review of peer-reviewed literature and publicly available data that there are approximately 80,000 low-grade intermediate risk NMIBC patients in the U.S. annually.

UGN-102 is administered locally using the standard practice of intravesical instillation directly into the bladder via a catheter. The instillation into the bladder is expected to take place in a physician’s office as a same-day treatment, in comparison with TURBT or similar surgical procedures, which are operations conducted under general anesthesia and may require an overnight stay. Surgical tumor removal often has limited success due to the inability to properly identify, reach and resect all tumors. We believe that an effective chemoablation agent can potentially provide better eradication of tumors irrespective of the detectability and location of the tumors. In addition, by removing the need for surgery, patients may avoid potential complications associated with surgery.

UGN-302

Our immuno-uro-oncology pipeline includes UGN-302, the sequential use of UGN-201, a TLR 7/8 agonist and UGN-301, an anti-CTLA-4 antibody, being studied as an investigational treatment for high-grade non-muscle invasive bladder cancer (high-grade NMIBC). UroGen’s approach involves the local delivery of these potent immunomodulators. UGN-301, an immune checkpoint inhibitor, is delivered using UroGen’s proprietary RTGel platform to increase dwell time, which has been shown to significantly improve the effectiveness of intravesical therapy. UGN-201 is a proprietary novel, liquid formulation of imiquimod, a generic toll-like receptor 7/8, or TLR 7/8 agonist, which has been evaluated for the treatment of high-grade NMIBC, which may include carcinoma in situ, or CIS. Toll-like receptor agonists play a key role in initiating the innate immune response system. We believe that the combination of UGN-201 with UGN-301 could represent a valid alternative to the current standard of care for the post-TURBT adjuvant treatment of high-grade NMIBC. In November 2019, we entered into a worldwide license agreement with Agenus Inc. to develop and commercialize zalifrelimab, an anti-CTLA-4 antibody, via intravesical delivery in combination with UGN-201 (together referred to as UGN-302) for the treatment of urinary tract cancers, initially in high-grade NMIBC. We believe that the combination treatment makes local therapy a potentially more effective treatment option while minimizing systemic exposure and potential side effects.

Our Research and Development and License Agreements

Allergan/AbbVie Agreement

In October 2016, we entered into the Allergan/AbbVie Agreement and granted Allergan an exclusive worldwide license to research, develop, manufacture and commercialize pharmaceutical products that contain RTGel and clostridial toxins including BOTOX. The license grants the exclusivity for the RTGel and clostridial toxins including BOTOX alone or in combination with certain other active ingredients, referred to as the Licensed Products, which are approved for the treatment of adults with overactive bladder who cannot use or do not adequately respond to anticholinergics. Additionally, we granted Allergan a non-exclusive, worldwide license to use certain of our trademarks as required for Allergan to practice its exclusive license with respect to the Licensed Products.

Under the Allergan/AbbVie Agreement, Allergan is solely responsible, at its expense, for developing, obtaining regulatory approvals for and commercializing, on a worldwide basis, pharmaceutical products that contain RTGel and clostridial toxins (including BOTOX), alone or in combination with certain other active ingredients, collectively, the Licensed Products. Allergan is obligated to pay us a tiered royalty in the low single digits based on worldwide annual net sales of Licensed Products, subject to certain reductions for the market entry of competing products and/or loss of our patent coverage of Licensed Products. We are responsible for payments to any third party for certain RTGel-related third-party intellectual properties.

In August 2017, we announced that Allergan had submitted an IND to the FDA in order to be able to commence clinical trials in the United States using an RTGel formulation in combination with BOTOX. In October 2017, Allergan commenced a Phase 2 clinical trial of BOTOX/RTGel for the treatment of OAB, with the potential to evolve from multiple injections of BOTOX into the bladder to a single instillation of the novel formulation.

In August 2020, we announced that the Phase 2 APOLLO trial did not meet the primary endpoint, it is believed to be the result of BOTOX not effectively permeating the urothelium. We are continuing to explore the potential use of RTGel in combination with other products in AbbVie’s portfolio.

Agenus Agreement

In November 2019, we entered into a license agreement with Agenus Inc. (“Agenus”). Pursuant to the agreement, Agenus granted us an exclusive, worldwide license (not including Argentina, Brazil, Chile, Colombia, Peru, Venezuela and their respective territories and possessions), royalty-bearing, sublicensable license under Agenus’s intellectual property rights to develop, make, use, sell, import and otherwise commercialize products incorporating a proprietary antibody of Agenus known as AGEN1884 for the treatment of cancers of the urinary tract via intravesical delivery. AGEN1884 is an anti-CTLA-4 antagonist that is currently being evaluated by Agenus as a monotherapy in PD-1 refractory patients and in combination with Agenus’ anti-PD-1 antibody (AGEN2034) in solid tumors. UGN-301 is a formulation of RTGel and zalifrelimab that is in early stage development for high-grade NMIBC.

MD Anderson Agreement

Based on nonclinical studies conducted by us, UGN-201 in combination with anti-CTLA-4 antagonists have shown encouraging results for the potential treatment of high-grade NMIBC. In January 2021, we announced that we entered into a three-year strategic research collaboration agreement with MD Anderson focusing on UGN-302 as an investigational treatment for high-grade NMIBC. Under the agreement, MD Anderson and UroGen will collaborate on the design and conduct of non-clinical and clinical studies with oversight from a joint steering committee. UroGen will provide funding, developmental candidates, and other support.

For additional information regarding our research and development and license agreements, see Note 11 to our financial statements appearing elsewhere in this Annual Report.

Impact of COVID-19 Pandemic

In the event of a prolonged disruption related to COVID-19, there could be detrimental impact to our ongoing and future clinical trials, our ongoing commercial launch and future commercialization activities for Jelmyto, and our ability to access capital markets.

Recently, the U.S. has mounted a comprehensive COVID-19 vaccination campaign. The staged vaccination rollout prioritizes health-care workers, certain other essential workers and high-risk populations, which generally includes individuals in their 60s and 70s, and individuals with certain underlying medical conditions. The vaccination effort in the U.S. may impact our ongoing commercialization of Jelmyto in two main aspects. Prioritization of hospital and clinic resources towards the vaccination effort may delay or hinder the ability of patients who are currently using Jelmyto or who are eligible to use Jelmyto to schedule Jelmyto instillation procedures. Additionally, these current or potentially eligible patients may choose to delay their procedures until after they have been vaccinated for COVID-19. We expect the vaccination rollout will have an impact on our first quarter 2021 results and we continue to monitor the evolving COVID-19 situation, and the impacts that the pandemic and related government response may have on our business throughout 2021.

Components of Operating Results

Revenues

During the year ended December 31, 2020 we recognized $11.8 million of revenues from sales of our product, Jelmyto which we launched in June 2020. In the fourth quarter of 2020, due to concerns over potential shipment delays around the holidays, we received several bulk orders at the end of 2020 that were recognized in 2020 revenue. We do not anticipate similar bulk purchases or stocking patterns in the first quarter of 2021.

During the year ended December 31, 2019, we recognized $18,000 of revenue related to RTGel supplied to Allergan. We did not recognize any revenues from RTGel sales under the Allergan/AbbVie Agreement during the year ended December 31, 2020.

Cost of Revenues

Cost of revenues consist primarily of inventory and related costs associated with the manufacturing, distribution, warehousing and preparation of Jelmyto. In periods prior to receiving FDA approval for Jelmyto, we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expenses.

Research and Development Expenses

Research and development expenses consist primarily of:

We expense all research and development costs as incurred.

We estimate nonclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contract research organizations that conduct and manage nonclinical studies and clinical trials on our behalf based on actual time and expenses incurred by them.

We accrue for costs incurred as the services are being provided by monitoring the status of the trial or project and the invoices received from our external service providers. We adjust our accrual as actual costs become known. Where at risk contingent milestone payments are due to third parties under research and development and collaboration agreements, the milestone payment obligations are expensed when the milestone results are achieved.

We have received grants under the Israeli Law for the Encouragement of Industrial Research, Development and Technological Innovation, 5754-1984 (the “R&D Law”) from the Israel Innovation Authority in Israel (the “IIA”) formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry, an independent and impartial public entity, for some of our development programs. Through December 31, 2020, we received grants in the aggregate amount of $2.1 million. On January 12, 2020, the IIA Office of Chief Scientist approved our request to unwind its obligation to the IIA regarding grants that were loaned to us between January 2004 and September 2016. The total payment under the IIA approval, net of the royalties already paid, amounted to $6.6 million, which was fully paid during the first quarter of 2020. See Note 17 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;

• delays or operational challenges resulting from the ongoing COVID-19 pandemic;

• the number of doses that patients receive;

• the drop-out or discontinuation rates of patients;

• the duration of patient follow-up; and

• the efficacy and safety profile of the product candidates.

In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

Other than Jelmyto, which was approved by the FDA in April 2020, we have not received approval of any of our product candidates. UGN-102 is still in clinical development and our other product candidates are in nonclinical development, and the outcome of these efforts is uncertain. As such, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

License fees and development milestone payments related to in-licensed products and technology are expensed as incurred if it is determined at that point that they have no established alternative future use. 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 worldwide, 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 preclinical and clinical supply of AGEN1884. No inventory was purchased on the effective date of the License Agreement and subsequent purchases of preclinical and clinical supplies 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 11 to the Consolidated Financial Statements for further information.

Selling and Marketing Expenses

To date, selling and marketing expenses consist primarily of commercial personnel costs (including share-based compensation) along with pre-commercialization and initial commercialization activities related to Jelmyto, formerly known as UGN-101. We anticipate that our selling and marketing expenses will increase in 2021 as we continue the commercialization of Jelmyto.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs (including share-based compensation related to directors, executives, finance, medical affairs, business development, investor relations, and human resource functions). Other significant costs include medical affairs services, external professional service costs, facility costs, accounting and audit services, legal services, and other consulting fees.

We anticipate that our general and administrative expenses will increase in the future as we increase our administrative headcount and infrastructure to support the potential approval and commercialization of our other 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 tax loss carry forwards losses totaling approximately $250.2 million as of December 31, 2020. We anticipate that we will continue to generate tax losses for the foreseeable future and that we will be able to carry forward these tax losses indefinitely to future taxable years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We have provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses. Income tax expense also consists of our estimate of uncertain tax positions, and related interest and penalties. See Note 15 to the Consolidated Financial Statements for further information.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

The following table sets forth our results of operations for the years ended December 31, 2020 and 2019.

Year Ended December 31,

(in thousands)

Operating expenses:

Revenues

Revenues were $11.8 million and $18,000 for the years ended December 31, 2020 and 2019, respectively. The increase of $11.8 million reflects sales of our product Jelmyto following its approval by the FDA in April 2020.

Cost of Revenues

Cost of revenues were $1.0 million and $0 for the years ended December 31, 2020 and 2019, respectively. In periods prior to receiving FDA approval for Jelmyto, we recognized inventory and related costs associated with the manufacture of Jelmyto as research and development expenses. We expect this to continue to impact cost of revenues through the first quarter of 2022 as we produce Jelmyto at costs reflecting the full costs of manufacturing and as we deplete inventories that we had expensed prior to receiving FDA approval. Gross margin would have been approximately 86% versus 91% for year ended December 31, 2020 if we had not sold Jelmyto units that were expensed prior to regulatory approval.

Research and Development Expenses

Research and development expenses decreased by $2.0 million to $47.3 million in the year ended December 31, 2020 from $49.3 million in the year ended December 31, 2019. Excluding the $10 million milestone payment related to our license agreement with Agenus Inc during 2019, research and development expenses increased by $8.0 million. The increase of $8.0 million resulted primarily from a one-time payment of $6.6 million to unwind the Company’s obligation to the Israeli Innovation Authority during the first quarter of 2020 and increased expenses related to the UGN-102 clinical trial and UGN-201 studies, partially offset by the completion of the Phase 3 clinical trial and regulatory activity for Jelmyto.

Selling and Marketing Expenses

Selling and marketing expenses were $46.5 million and $17.9 million for the years ended December 31, 2020 and 2019, respectively. The increase in selling and marketing expenses of $28.6 million resulted primarily from increased costs and activities related to the commercial launch of Jelmyto in June 2020, including headcount and related costs associated with our sales force.

General and Administrative Expenses

General and administrative expenses were $43.7 million and $42.3 million for the years ended December 31, 2020 and 2019, respectively. General and administrative expenses were comprised most significantly of personnel related costs, followed by external professional services and facility costs The increase in general and administrative expenses of $1.4 million resulted primarily from increased costs and activities related to the commercial launch of Jelmyto in June 2020, including headcount and related administrative costs.

Interest and Other Income (Expenses), Net

Interest and other income (expenses), net was income of $1.6 million and income of $4.3 million for the years ended December 31, 2020 and 2019, respectively. The decrease of $2.7 million was primarily due to a decrease in our cash and cash equivalents and marketable securities.

Liquidity and Capital Resources

As of December 31, 2020, we had $103.9 million in cash and cash equivalents and marketable securities. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation, and is held primarily in U.S. dollars. Based on our cash flow projections, we believe that our existing cash and cash equivalents and marketable securities are sufficient to fund our planned operations for at least the next 12 months.

Through December 31, 2020, we funded our operations primarily through public equity offerings, private placements of equity securities and through the upfront payment received under the Allergan/AbbVie Agreement.

In December 2019, we entered into a sales agreement (the “ATM Sales Agreement”) with Cowen and Company, LLC (“Cowen”) pursuant to which we may from time to time offer and sell our ordinary shares having an aggregate offering price of up to $100.0 million. The shares are offered and will be sold pursuant to a shelf registration statement on Form S-3 which was declared effective by the SEC on January 2, 2020.

During the second quarter of 2020 and the full year ended December 31, 2020, we sold 700,000 ordinary shares under the ATM Sales Agreement, for gross proceeds of approximately $16.6 million. The net proceeds to us after deducting sales commissions to Cowen and other issuance expenses were approximately $15.8 million. The remaining capacity under the ATM Sales Agreement is approximately $83.4 million.

In March 2021, UroGen and RTW Investments (“RTW”) announced a transaction totaling $75.0 million in funding for us to support the launch of Jelmyto and the development of UGN-102. RTW will provide us with an upfront cash payment of $75.0 million and will receive tiered future payments based on global annual net product sales of Jelmyto and UGN-102, if approved.

We have incurred losses since our inception and negative cash flows from our operations, and as of December 31, 2020 we had an accumulated deficit of $356.5 million. We anticipate that we will continue to incur losses for at least the next two years. Our primary uses of capital are, and we expect will continue to be, commercialization activities, research and development expenses, including third-party clinical research and development services, laboratory and related supplies, clinical costs, including manufacturing costs, legal and other regulatory expenses and general and administrative costs, partially offset by proceeds from sales of Jelmyto.

We cannot estimate the actual amounts necessary to successfully commercialize any approved products, including Jelmyto, or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

Cash Flows

The following table sets forth the significant sources and uses of cash for the periods set forth below:

Year Ended December 31,

(in thousands)

Net cash (used in) provided by:

Net change in cash and cash equivalents $ 3,879 $ (51,360 )

Operating Activities

Net cash used in operating activities was $105.9 million during the year ended December 31, 2020, compared to $71.0 million used in operating activities during the year ended December 31, 2019. The $34.9 million increase was attributable primarily to the increase of $23.4 million in the net loss for the year and a net increase in operating assets and liabilities of $10.7 million.

Investing Activities

Net cash provided by investing activities was $93.2 million during the year ended December 31, 2020, compared to net cash used in investing activities of $145.6 million during the year ended December 31, 2019. The increase of $238.8 million is primarily related to increased maturities without associated repurchases in marketable securities through the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Financing Activities

Net cash provided by financing activities was $16.5 million during the year ended December 31, 2020, compared to net cash provided by financing activities of $165.3 million during the year ended December 31, 2019. The decrease is primarily due to the net proceeds received from the underwritten public offering completed in 2019 as compared to the net proceeds received from sales under the ATM Sales Agreement in 2020.

Funding Requirements

Our present and future funding requirements will depend on many factors, including, among other things:

• the progress, timing and completion of clinical trials for UGN-102;

• potential new product candidates we identify and attempt to develop; and

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.

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

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

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 lease terminated on February 1, 2021, 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.

The total obligation for future minimum lease payments under our operating leases $2.9 million as of December 31, 2020. See Note 9to the Consolidated Financial Statements for further information.

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.

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.

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 our 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 our co-pay assistance program, which are estimated based on industry benchmarking studies as well as our historical experience.

We also may derive revenues from the Allergan/AbbVie Agreement. Under the Allergan/AbbVie Agreement, we granted Allergan an exclusive license to develop, commercialize, and otherwise exploit products that contain reverse thermal hydrogel and agreed to supply Allergan with pre-clinical and clinical quantities of the RTGel product, also referred to as the RTGelvials. The Allergan/AbbVie Agreement contains up-front license fees, future supply fees, development, regulatory, and sales-based milestone payments, and sales-based royalty payments.

Research and Development

Researchanddevelopmentcostsareexpensedasincurredandconsistprimarilyofthecostofsalaries,share-basedcompensationexpenses,payrolltaxesandotheremployeebenefits,subcontractorsandmaterialsusedforresearchanddevelopmentactivities, including nonclinical studies, clinical trials, other manufacturing costsandprofessionalservices. Thecostsofservicesperformedbyothersinconnectionwiththeresearchanddevelopmentactivities of anentity,includingresearchanddevelopmentconductedbyotherson behalfof theentity,shallbeincludedin researchanddevelopment costs and expensed as the contracted work is performed. 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 its external service providers. We adjust accruals 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.

Thecostsofintangiblesthatarepurchasedfromothersforaparticularresearchanddevelopmentprojectandthathavenoalternativefuture uses(inotherresearchanddevelopmentprojectsorotherwise)andthereforenoseparateeconomicvaluesare recognized as researchanddevelopment expenseatthetimethecostsareincurred.

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 we accrue 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

Weaccountforemployees’anddirectors’share-basedpaymentawardsclassifiedasequityawardsusingthegrant-datefairvalue method.Thefairvalueofshare-basedpaymenttransactionsisrecognizedasanexpenseovertherequisiteserviceperiod, 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. We account forforfeituresastheyoccurin accordance with ASC Topic 718, “Compensation—Stock Compensation”.

Weelectedtorecognizecompensationcostsforawardsconditionedonlyoncontinuedservicethathaveagradedvestingscheduleusingthestraight-linemethodandtovaluetheawardsbasedonthesingle-optionawardapproach.Performancebasedawardsareexpensedovertherequisiteserviceperiodwhentheachievementofperformancecriteriaisprobable.

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. Deferredtaxesarecomputedusingtheassetandliabilitymethod.Undertheassetandliabilitymethod,deferredincometaxassetsand liabilitiesaredeterminedbasedonthedifferencesbetweenthefinancialreportingandtax basesofassetsandliabilitiesandaremeasuredusingthecurrentlyenactedtaxratesandlaws.Avaluationallowanceisrecognizedtothe extentthatitismorelikelythannotthatthedeferredtaxeswillnotberealizedintheforeseeablefuture.

TheCompanyfollowsatwo-stepapproachinrecognizingandmeasuringuncertaintaxpositions.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.

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.

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, 2020, we had $103.9 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, 2020, 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, 2020 or 2019.

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 during 2019 and 2020 by a total of 14.2%. 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.

Item 8. Financial Statements and Supplementary Data

UroGen Pharma, Ltd.

Index to financial statements

Pages

Report of Independent Registered Public Accounting Firm 89

Consolidated Balance Sheets 92

Consolidated Statements of Operations and Comprehensive Loss 93

Consolidated Statements of Shareholders’ Equity 94

Consolidated Statements of Cash Flows 95

Notes to Consolidated Financial Statements 96

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of UroGen Pharma Ltd.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of UroGen Pharma Ltd. and its subsidiary (the “Company”) as of December 31, 2020, and the related consolidated statements of operations and comprehensive income, of shareholders' equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit 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 audit 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. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

As described in Note 15 to the consolidated financial statements, the Company has recorded liabilities for uncertain tax positions of $2.7 million as of December 31, 2020. The Company operates on a global basis and is subject to tax laws and regulations in the US and Israel. The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations, expectations regarding the outcome of tax authority examinations, as well as the ultimate measurement of potential liabilities. As disclosed by management, the Company has received final tax assessments up to and including its 2014 tax year.

The principal considerations for our determination that performing procedures relating to uncertain tax positions is a critical audit matter are (i) the significant judgment by management when determining uncertain tax positions, including a high degree of estimation uncertainty relative to the interpretation of tax laws; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s timely identification and accurate measurement of uncertain tax positions; (iii) the evaluation of audit evidence available to support the tax liabilities for uncertain tax positions is complex and resulted in significant auditor judgment as the nature of the evidence is often highly subjective; and (iv) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing the information used in the calculation of the liability for uncertain tax positions, including intercompany agreements and the related final tax returns; (ii) testing the calculation of the liability for uncertain tax positions, including management’s assessment of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained; and (iii) testing the completeness of management’s assessment of both

the identification of uncertain tax positions and possible outcomes of each uncertain tax position. Professionals with specialized skill and knowledge were used to assist in the evaluation of the completeness and measurement of the Company’s uncertain tax positions, including evaluating the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, the application of relevant tax laws, and estimated interest and penalties.

/s/ PricewaterhouseCoopers LLP

Florham Park, New Jersey

March 18, 2021

We have served as the Company’s auditor since 2020.

To the Board of Directors and Shareholders of UroGen Pharma Ltd.

Opinion on the Financial Statements

WehaveauditedtheaccompanyingconsolidatedbalancesheetofUroGenPharmaLtd.anditssubsidiary (the “Company”) as of December 31, 2019, and the related consolidated statements of operations and comprehensive loss, of shareholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States ofAmerica.

Basis for Opinion

The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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.

Tel Aviv, Israel /s/Kesselman & Kesselman

March 2, 2020 Certified Public Accountants (Isr.)

A member of PricewaterhouseCoopers International Limited

We served as the Company’s auditor from 2010 to 2019.

UROGEN PHARMA, LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

December 31,

Assets

Current assets:

Accounts receivable 7,047 —

Prepaid expenses and other current assets 3,364 1,034

Non-current assets:

Property and equipment, net 2,046 977

Other non-current assets 66 264

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable and accrued expenses $ 10,023 $ 11,186

Employee related accrued expenses 9,554 6,711

Non-current liabilities:

Uncertain tax positions liability 2,717 —

Commitments and contingencies (Note 17)

Shareholders' equity:

Accumulated other comprehensive income 271 276

Total Liabilities and Shareholders' Equity $ 122,005 $ 202,388

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

UROGEN PHARMA, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

Year Ended December 31,

Cost of revenues 1,009 —

Operating expenses:

Selling, general and administrative expenses 90,219 60,199

Interest and other income, net 1,629 4,332

Income tax expense 3,374 —

Statements of Comprehensive Loss

Other comprehensive income

Unrealized (loss) gain on marketable securities (5 ) $ 276.0

Loss per ordinary share basic and diluted $ (5.90 ) $ (5.12 )

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

UROGEN PHARMA, LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share amounts)

Number of Shares Amount Amounts

Other comprehensive income 276 276

Other comprehensive loss (5 ) (5 )

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

UROGEN PHARMA, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Year Ended December 31,

Cash Flows From Operating Activities

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

Depreciation and amortization 416 296

Amortization (accretion) on marketable securities 439 (572 )

Amortization of right of use asset 1,628 1,028

Changes in operating assets and liabilities:

Accounts receivable (7,047 ) —

Prepaid expenses and other current assets (2,330 ) (394 )

Accounts payable and accrued expenses (1,245 ) 2,928

Employee related accrued expenses 2,843 1,786

Current tax payable 657 —

Uncertain tax positions 2,717 —

Net cash used in operating activities (105,886 ) (71,017 )

Cash Flows From Investing Activities

Change in restricted deposit — (172 )

Purchase of property and equipment (1,215 ) (325 )

Net cash provided by (used in) investing activities 93,238 (145,593 )

Cash Flows From Financing Activities

Proceeds from exercise of options into ordinary shares 740 3,664

Issuance of ordinary shares, net of issuance expenses 15,853 161,662

Issuance cost related to at-the-market issuances (66 ) (76 )

Net cash provided by financing activities 16,527 165,250

Decrease in Cash and Cash Equivalents 3,879 (51,360 )

Cash, Cash Equivalents and Restricted Cash at Beginning of Year 50,211 101,571

Cash, Cash Equivalents and Restricted Cash at End of Year $ 54,090 $ 50,211

Supplemental Disclosures of Non-Cash Activities

Purchase of property and equipment $ 270 $ —

Issuance cost $ — $ 188

New lease liabilities $ 51 $ 1,741

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

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-BUSINESS AND NATURE OF OPERATIONS

Nature of Operations

UroGenPharmaLtd.isanIsraelicompanyincorporatedinApril2004 (“UPL”).

UroGenPharmaInc.,a wholly owned subsidiaryof UPL,wasincorporatedinDelawareinOctober2015andbeganoperatinginFebruary2016 (“UPI”).

UPLandUPI(togetherthe“Company”)isabiopharmaceuticalcompanyfocusedondeveloping and commercializingnoveltherapiesdesignedto changethestandardofcareforurologicalpathologies. 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, clinical development of 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 financial statements have been prepared in accordance with accounting principles generally accepted in the United States. 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 $356.5 million and $228.0 million as of December 31, 2020 and 2019, 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 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 are sufficient to fund the Company’s planned operations for at least the next 12 months. The Company will need to raise additional capital to finance the continued launch of Jelmyto and support its Phase 3 ATLAS trial. 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.

NOTE 3-SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of UPL and its subsidiary, UPI. Intercompany balances and transactions have been eliminated during consolidation.

Use of Estimates

ThepreparationoffinancialstatementsinconformitywithU.S.GAAPrequiresmanagementtomakeestimatesandassumptionsthataffect thereportedamountsofassetsandliabilities,thedisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthe reportedamountsofrevenuesandexpensesduringthereportingperiod.Actualresultsmaydifferfromthoseestimates.Asapplicableto theseconsolidatedfinancialstatements,the critical accounting estimates relate tothefairvalueofshare-basedcompensation,measurementofrevenue and estimate of uncertain tax positions.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 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.

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.

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 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.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Useful Lives

Computers and software 3

Laboratory equipment 3-6.5

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 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.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 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.

The Company has lease agreements with lease and non-lease components.

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 (“Transition Date”).

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 co-pay assistance program, which are estimated based on industry benchmarking studies as well as the Company’s historical experience.

The Company also derived revenues from its license and supply agreement with Allergan Pharmaceuticals International Limited (“Allergan”), a wholly owned subsidiary of Allergan plc which is now a part of AbbVie Inc. (the “Allergan/AbbVie Agreement”). Under the Allergan/AbbVie Agreement, the Company granted Allergan an exclusive license to develop, commercialize, and otherwise exploit products that contain reverse thermal hydrogel (“RTGel”) and agreed to supply Allergan with pre-clinical and clinical quantities of the RTGel product, also referred to as the RTGelvials. See Note 11 for additional discussion related to the Company’s license and collaboration agreements.

Research and Development Expenses

Researchanddevelopmentcostsareexpensedasincurredandconsistprimarilyofthecostofsalaries,share-basedcompensationexpenses,payrolltaxesandotheremployeebenefits,subcontractorsandmaterialsusedforresearchanddevelopmentactivities, including nonclinical studies, clinical trials, manufacturing costs and professional services. Thecostsofservicesperformedbyothersinconnectionwiththeresearchanddevelopmentactivities of the Company,includingresearchanddevelopmentconductedbyotherson behalfof theCompany,areincludedin researchanddevelopment 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. 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.

UROGEN PHARMA, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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. TheCompanyaccountsforforfeituresastheyoccur in accordance with ASC Topic 718, “Compensation—Stock Compensation”.

TheCompanyelectedtorecognizecompensationcostsforawardsconditionedonlyoncontinuedservicethathaveagradedvestingscheduleusingthestraight-linemethodandtovaluetheawardsbasedonthesingle-optionawardapproach.

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.

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):

Year Ended December 31,

Basic and diluted:

Loss attributable to equity holders of the Company $ 128,484 $ 105,146

Loss per ordinary share $ 5.90 $ 5.12

Recently Adopted 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 the Company to measure and recognize expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the Company’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 prior other-than-temporary impairment model.

The Company applied the modified retrospective transition method as of the date of initial application, January 1, 2020. As of December 31, 2020, 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. Similarly, the Company estimates minimal current expected credit losses on trade receivables and has not recognized any allowance for doubtful accounts in the period.

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NOTE 4-OTHER FINANCIAL INFORMATION

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following as of December 31, 2020 and 2019 (in thousands):

Accrued sales reserves 382 —

Accrued research and development costs 1,356 2,644

Accrued general and administrative expenses 2,440 2,767

Total accrued expenses and other current liabilities $ 10,023 $ 11,186

Interest and Other Income (Expenses), Net

Interest and other income (expenses) consisted of the following as of December 31, 2020 and 2019 (in thousands):

Year Ended December 31,

Other finance expenses (357 ) (284 )

Total interest and other income $ 1,629 $ 4,332

NOTE 5-INVENTORIES

Inventories consist of the following as of December 31, 2020 and December 31, 2019 (in thousands):

Raw materials $ 1,051 —

Finished goods 913 —

Total inventories $ 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.

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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 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

Marketable securities:

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, 2019 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

Marketable securities:

The Company’s investments in money market funds are valued based on publicly available quoted market prices for identical securities as of December 31, 2020 and 2019.

NOTE 7-MARKETABLE SECURITIES

The following table summarizes the Company’s marketable securities as of December 31, 2020 (in thousands):

Amortized Cost Basis Unrealized Gains Fair Value

Marketable securities:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company classifies its marketable securities as available-for-sale, and they consist of all debt securities. As of December 31, 2020, 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, 2020, the Company did not hold any marketable securities in an unrealized loss position. In accordance with the Company’s general investment strategy, the Company does not intend to sell the investments before maturity. As of December 31, 2020, 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 December 31, 2020 mature at various dates through February 2022. The fair values of marketable securities by contractual maturity consist of the following (in thousands):

Maturities after one year through three years 1,893 48,556

NOTE 8-PROPERTY AND EQUIPMENT

Property and equipment, consists of the following as of December 31, 2020 and 2019 (in thousands):

December 31,

Laboratory equipment $ 333 $ 259

Computer equipment and software 1,676 416

Manufacturing equipment 226 226

Less: accumulated depreciation and amortization (1,395 ) (998 )

Property and equipment, net $ 2,046 $ 977

Depreciation and amortization expense was $0.4 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively.

NOTE 9-LEASES

Operating Leases

The Company has the following office and laboratory facility leases:

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In addition, the Company leases operating office equipment and vehicles. 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 2023, with varying renewal and termination options.

The components of lease cost for the year ended December 31, 2020 were as follows (in thousands):

Operating lease cost $ 1,812

Sublease income (224 )

Variable lease cost 129

The amounts recognized as of December 31, 2020 were as follows (in thousands):

Right of use asset $ 2,158

Long-term lease liability 1,497

Other current liabilities 1,202

In October 2020, the Company committed to and announced a plan to close the New York office and recognized impairment losses of approximately $0.2 million in relation to the associated right of use asset.

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 1,726

Right-of-use assets obtained in exchange for new operating lease liabilities 135

Weighted-average remaining lease term of operating leases 2.26 years

Weighted-average discount rate of operating leases 5.38%

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2020, maturities of lease liabilities were as follows (in thousands):

Operating Leases

Years ending December 31,

2025 and thereafter —

Total future minimum lease payments $ 2,872

Less: Interest (173 )

Present value of lease liabilities $ 2,699

As of December 31, 2019, maturities of lease liabilities were as follows (in thousands):

Operating Leases

Years ending December 31,

Total future minimum lease payments $ 4,534

Subleases

As of December 31, 2020, undiscounted cash flows to be received under the Company’s operating sublease on an annual basis was as follows (in thousands):

Operating Leases

Years ending December 31,

2025 and thereafter —

Total future minimum sublease payments $ 778

Sublease income is recognized net within operating expenses. Sublease income for the year ended December 31, 2020 was as follows (in thousands):

Sublease income from fixed lease payments $ 224

NOTE 10-REVENUE FROM PRODUCT SALES

Net product sales consist of the following for the year ended December 31, 2020 and 2019 (in thousands):

Year Ended

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- LICENSE AND COLLABORATION AGREEMENTS

Allergan/AbbVie Agreement

In October 2016, the Company entered into the Allergan/AbbVie Agreement and granted Allergan (now part of AbbVie) 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 the Company’s trademarks as required for Allergan to practice its exclusive license with respect to the Licensed Products.

Under the Allergan/AbbVie Agreement, Allergan is solely responsible for costs and development of the Licensed Products and obtaining all regulatory approvals for Licensed Products worldwide, as well as worldwide commercialization of the Licensed Products 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.

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. As of December 31, 2020, since inception of the Allergan/AbbVie Agreement the Company has received a total of $25.0 million in milestone payments from Allergan. 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 the Company’s 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/AbbVie 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.

In August 2020, the Company announced that the Phase 2 APOLLO trial did not meet the primary endpoint, it is believed to be the result of BOTOX not effectively permeating the urothelium. The Company and AbbVie are continuing to explore the potential use of RTGel in combination with other products in AbbVie’s portfolio.

Agenus Agreement

In November 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 NMIBC 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.

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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.

NOTE12-EMPLOYEERIGHTSUPONRETIREMENT

In Israel, theCompanyisrequiredbylawtomakeseverancepaymentsupondismissalofanemployeeoruponterminationofemploymentincertain othercircumstances.

TheCompanyoperatesanumberofpost-employmentdefinedcontributionplans.Adefinedcontributionplanisaprogramthatbenefitsan employeeafterterminationofemployment,underwhichtheCompanyregularlymakesfixedpaymentstoaseparateandindependententitysothattheCompanyhasnolegalorconstructiveobligationtopayadditionalcontributionsifthefunddoesnotholdsufficientassetstopayall employeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.ThefundassetsarenotincludedintheCompany’s financialposition.

TheCompanyoperatespensionandseverancecompensationplanssubjecttoSection14oftheIsraeliSeverancePayLaw, 5723-1963.Theplansare fundedthroughpaymentstoinsurancecompaniesorpensionfundsadministeredbytrustees.Inaccordancewithitsterms,theplansmeetthe definitionofadefinedcontributionplan,asdefinedabove.

NOTE 13-SHAREHOLDERS’ EQUITY

Ordinary Shares

The Company had 100.0 million ordinary shares authorized for issuance as of December31,2020 and 2019. The Company had 22.2 million and 21.0 million ordinary shares issued and outstanding as of December 31, 2020 and 2019, respectively. Eachordinaryshareisentitledtoonevote.Theholdersofordinarysharesarealsoentitledtoreceivedividendswheneverfundsarelegally available,whenandifdeclaredbytheBoardofDirectors.Sinceitsinception,theCompanyhasnotdeclaredanydividends.

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 (the “ATM Sales Agreement”) with Cowen and Company, LLC (“Cowen”), 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 to or through Cowen, acting as sales agent or principal. During the second quarter of 2020, the Company sold 700,000 ordinary shares under the ATM Sales Agreement, for gross proceeds of approximately $16.6 million. The net proceeds to the Company after deducting sales commissions to Cowen and other issuance expenses were approximately $15.8 million. The remaining capacity under the ATM Sales Agreement is approximately $83.4 million.

NOTE 14-SHARE-BASED COMPENSATION

InOctober2010,theBoardapprovedashareoptionplan(the“Plan”)forgrantstoCompanyemployees,consultants, directors,andotherserviceproviders.

ThegrantofoptionstoIsraeliemployeesunderthePlanissubjecttothetermsstipulatedbySection102oftheIsraeliIncomeTaxOrdinance (“Section102”).TheoptiongrantsaresubjecttothetrackchosenbytheCompany,eitherthe“regularincome”trackor

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

the“capitalgains”track,assetoutinSection102.TheCompanyregisteredthePlanunderthecapitalgainstrack,whichoffersmorefavorabletaxratestothe employees.Asaresult,andpursuanttothetermsofSection102,theCompanyisnotallowedtoclaimasanexpensefortaxpurposesthe amountscreditedtotheemployeesinrespectofoptionsgrantedtothemunderthePlan,includingamountsrecordedassalarybenefitsinthe Company’saccounts,withtheexceptionofthework-incomebenefitcomponent,ifany,determinedongrantdate.Fornon-employeesandfor non-Israeliemployees,thePlanissubjecttoSection3(i)oftheIsraeliIncomeTaxOrdinance.

Employees are typically granted stock options and/or restricted stock units, or RSUs, upon commencement of employment. Also, eligible employees may receive an annual grant of options or RSU’s. Non-employee members of the Board typically receive a grant of RSUs and/or stock options annually. The term of any 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 equity of the Company, the exercise price shall not be less than 110% of the fair market value of an ordinary share of stock on the date of grant.

The Company’s RSU and 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 either equal quarterly or annual amounts for the two years following the one-year anniversary of the grant date. Options generally vest in a 33% increment upon the first anniversary of the grant date, and in either equal quarterly or annual amounts for the two years following the one-year anniversary of the grant date.

In March 2017, the Board adopted the 2017 Equity Incentive Plan (the "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, RSU awards, performance share awards, performance cash awards, and other forms of share 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 the Board. The maximum number of ordinary shares that may be issued upon the exercise of 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 increased the amount of registered ordinary shares of the Company’s 2017 Plan by 1,900,000 to 3,550,167. On June 8, 2020 the Company increased the amount of registered ordinary of the Company’s 2017 plan by 400,000 to 3,950,167.

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 grant-date 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, the Board 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In December 2019, the Board 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.

In June 2020, the Board approved grants of an aggregate of 70,000 options to its non-employee directors. Each 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 $28.24 per share. The options vest quarterly over one year and expire 10 years from the grant date. The grant date fair value of these options was approximately $1.5 million.

Optionsgranted:

SetforthbelowaregrantsmadebytheCompanyasofDecember31,2020.Themajorityofoptionsvestoverthreeyearsandexpireonthetenthanniversaryofthedateofgrant.

b) During2019,theCompanygranted955,732 optionswithexercisepricesrangingfrom$33.21to$47.57pershare.

The fair value of options granted during 2020 and 2019 was $6.7 and $27.6 million, respectively.

Thetotalunrecognizedcompensationcostofoptionsas ofDecember31,2020was $13.5 million,whichisexpectedtoberecognizedovera weightedaverageperiodof1.37years.

ThefairvalueofoptionsgrantedwascomputedusingtheBlack-Scholesmodel.The underlyingdatausedforcomputingthefairvalueoftheoptionsareasfollows:

Dividend yield 0% 0%

Theexpectedvolatilityisbased on a mix of the Company's historical volatility andthehistoricalvolatilityofcomparablecompanies with similar attributes to the Company, including industry, stage of life cycle, size and financial leverage.Therisk-freeinterestrateassumptionisbasedon observedinterestratesappropriatefortheexpectedtermoftheoptionsgranted.Theexpectedtermisthelengthoftimeuntil theexpecteddatesofexercisingtheoptions andisestimatedforemployeesusingthesimplifiedmethoddueto insufficientspecifichistoricalinformationofemployees’exercisebehavior,andfornon-employees,and directorsusingthecontractualterm.

Thefollowingtablesummarizesthenumberof employee and non-employee optionsoutstandingunderthePlanfortheyearsendedDecember31,2020 and 2019,and relatedinformation:

Number of options Weighted Average price per share

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The intrinsic value of stock options exercised was $2.3 million and $14.2 million for the years ended December 31, 2020 and 2019, respectively.

Thefollowingtablesummarizestheoutstandingandexercisableoptions asofDecember31,2020:

Options outstanding Options exercisable

TheaggregateintrinsicvalueofthetotalvestedandexercisableoptionsasofDecember31,2020is$7.7 million.

The following table summarizes information about RSU activity as of December 31, 2020:

Outstanding Restricted Stock Units

The fair value of RSUs granted during 2020 and 2019 was $15.6 and $19.9 million, respectively. The total unrecognized compensation cost of RSUs as of December 31, 2020 is $17.6 million with a weighted average recognition period of 1.84 years.

Thefollowingtableillustratestheeffectofshare-basedcompensationontheStatementsofOperations:

Year ended December 31,

Research and development expenses $ 6,432 $ 8,291

Selling, general and administrative expenses 21,593 21,676

Total share-based compensation expense $ 28,025 $ 29,967

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NOTE 15-INCOME TAXES

TheCompanyistaxedunderIsraelitaxlaws:

Corporate tax rate

The applicable Israeli tax rate relevant to the Company for 2018 and thereafter is 23%.

For financial reporting purposes, the expense for current income taxes consists of the following:

Current taxes:

U.S. Federal $ 3,218 -

U.S. State 156 -

Total current taxes $ 3,374 -

Deferredincometaxes:

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:

December 31,

In respect of:

Research and development expenses 5,362 4,591

In-process research and development 2,329 2,749

Right of use asset (372 ) (800 )

Depreciation of fixed assets (299 ) (90 )

Net deferred tax assets $ — $ —

The change in valuation allowance for the years ended December 31, 2020 and 2019 were as follows:

Balance at the beginning of the year $ (50,593 ) $ (28,249 )

Balance at the end of the year $ (76,963 ) $ (50,593 )

The main reconciling item between the statutory tax rates of the Company and the effective rate is the share-based compensation

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URGN US Equity

URGN · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

Item 8. Financial Statements and Supplementary Data

URGN US Equity☆

URGN · 10-K · period ended 2020-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

Item 8. Financial Statements and Supplementary Data

URGN US Equity