It may not be as sexy as the latest gene therapy start-up, but UroGen Pharma (NASDAQ: URGN) is quietly and confidently preparing for life as a commercial-stage pharmaceutical company.
The business exited 2018 with $101 million in cash and cash equivalents, and it raised another $162 million in net proceeds through a January 2019 share offering. Management thinks that's enough to fund operations for up to 36 months based on "anticipated activities." Those activities are widely expected to include the market launch of its first commercial product, UGN-101, which one analyst estimates could generate peak annual sales of more than $500 million.
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A balance sheet flush with cash and a promising drug candidate should catch the attention of individual investors, especially considering UroGen Pharma is valued at just $800 million. Is there a reason Wall Street seems to be overlooking this promising Israeli-based healthcare company?
A novel approach to oncology -- and beyond?
As the name implies, UroGen Pharma is focused on urologic diseases. The first three drug candidates being developed focus specifically on cancers of the urothelial tract and bladder, which are among the costliest cancers to treat. That's because the position of the upper urothelial tract in the body makes it difficult to target with drugs, access in surgery (while also sparing the kidneys), and visualize all tumors that might be present. Today's standard treatment involves a cycle of surgery, followed by recurrence, followed by surgery, and so on.
UroGen thinks it has a promising solution for patients and urologists alike: reverse thermal hydrogels. The special polymers behave in "reverse" of what might be expected, existing in liquid at lower temperatures, and becoming viscous gels at higher temperatures. That allows the product to be inserted into a patient via a standard catheter and placed directly at the site of tumors, where the body's temperature forces it to become a gel that remains in place for long periods of time, slowly administering cancer-fighting drugs.
The company's technology platform, RTGel, could transform the treatment of certain urologic cancers from one of the costliest in oncology into a routine outpatient procedure. It could also be formulated to work with various active pharmaceutical ingredients, whether treating cancer or other diseases. While UroGen is keen to explore additional applications and partnerships, the business is focused on three visible catalysts in 2019.
The road ahead
First and foremost, UroGen Pharma is preparing for the potential approval of UGN-101 as a first-line treatment for low-grade upper tract urothelial cancer (LG UTUC) from the U.S. Food and Drug Administration (FDA).
While nothing is guaranteed in pharma, it's increasingly likely that regulators will grant the drug candidate marketing approval. The FDA has granted UGN-101 orphan drug designation, fast track status, and breakthrough therapy designation -- all of which will help to prioritize its regulatory review. It also breezed through clinical trials. In a phase 3 study, 57% of patients achieved a complete response, and all that did remained disease free six months after treatment.
UroGen began a rolling submission of a New Drug Application (NDA) in December 2018 that should be completed in the second half of 2019, which enables a potential marketing approval and market launch in the first half of 2020.
Considering there are no approved drugs for LG UTUC and the significant cost of recurring surgeries (an estimated 78% of patients have to have a kidney removed), Oppenheimer analyst Leland Gershell thinks UGN-101 could have peak annual sales of more than $500 million. That may be a bit optimistic considering UroGen estimates there are only 6,000 to 8,000 cases of the cancer in the U.S. each year, which may explain Wall Street's apparent lack of interest in backing the $800 million company.
That said, UroGen Pharma expects the next most advanced drug in its pipeline to achieve an important milestone in 2019. UGN-102 is being evaluated as a first-line treatment for low-grade non-muscle invasive bladder cancer (LG NMIBC) using the same active drug as UGN-101, and phase 2 data should become available this year. Similar to LG UTUC, there are currently no approved drugs for use as a first-line treatment for LG NMIBC, although there are over 80,000 cases of the bladder cancer in the U.S. annually.
A third hydrogel-based drug candidate, for more aggressive high-grade NMIBC and relying on novel drug formulations, could soon enter a phase 1 clinical trial, although UroGen Pharma appears to be focusing on its more advanced shots on goal in 2019. That means investors will have to look outside the pipeline for the third catalyst expected this year.
Phase 2 data for BotuGel, a combination of RTGel technology from UroGen Pharma and Botox from Allergan, are expected later this year. The hydrogel is being evaluated as a potential treatment for overactive bladder. While Allergan holds exclusive worldwide rights, the Israeli-based company is eligible to earn milestone payments and royalties. BotuGel could also be an important proving ground for the RTGel platform and help it to court other partnerships outside of its core oncology focus.
A promising, overlooked healthcare stock
UroGen Pharma is focusing on an unglamorous niche in oncology and isn't expected to own a blockbuster drug (read: at least $1 billion in annual sales), which could explain why it's been largely ignored by Wall Street to date. But the company's RTGel technology platform has enjoyed quick success, and it could soon earn its first-ever marketing approval while simultaneously upending treatment for one of the costliest cancers. If the hydrogel platform proves as versatile as management believes, then individual investors might want to think about opening a position in this innovative pharma.
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