Note 9 - Prepaid Forward Obligation

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Prepaid Forward Obligation Disclosure [Text Block]

Note 9 – Prepaid Forward Obligation

In March 2021, the Company entered into a prepaid forward agreement with RTW. Under the terms of the RTW Transaction, the Company received $75.0 million ($72.4 million net of transaction costs) to support the launch of Jelmyto and the development of UGN-102. In return for the transferred funds, RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of Jelmyto and, if approved, UGN-104, in an amount equal to: (i) 9.5% of annual net sales up to $200 million, (ii) 3.0% of annual net sales for annual net sales between $200 million and $300 million, and (iii) 1.0% of annual net sales for annual net sales above $300 million. Pursuant to the agreement, the initial cash payment rate of 9.5% on Jelmyto aggregate worldwide annual net sales of up to $200 million was increased to 13.0% and remained at that rate during the nine months ended September 30, 2024 because certain revenue thresholds were not met. This rate  may decrease in the future back to 9.5% if the Company subsequently meets certain Jelmyto aggregate worldwide annual net sales thresholds. 

In addition, subject to FDA approval of UGN-102 and UGN-103, RTW is entitled to receive tiered, future cash payments based on aggregate worldwide annual net product sales of UGN-102 and UGN-103 in an amount equal to: (i) 2.5% of annual net sales up to $200 million, (ii) 1.0% of annual net sales for annual net sales between $200 million and $300 million, and (iii) 0.5% of annual net sales for annual net sales above $300 million. If the Company does not receive FDA approval for UGN-102 by June 30, 2025, the future cash payments to RTW with respect to aggregate worldwide annual net sales of Jelmyto across all Jelmyto annual net sales tiers will increase by 1.5%. 

In accordance with the prepaid forward agreement, the Company will be required to make payments of amounts owed to RTW each calendar quarter, through and until the quarter in which the aggregate cash payments received by RTW are equal to or greater than $300 million. As of September 30, 2024, the cumulative amounts paid and payable by the Company were $31.6 million. As security for the payment and fulfilment of these amounts throughout the arrangement, the Company has granted RTW a first priority security interest in Jelmyto, UGN-102, UGN-103 and UGN-104, including the regulatory approvals, intellectual property, material agreements, proceeds and accounts receivable related to these products.

In  May 2021, following the receipt of necessary regulatory approvals, the Company received the $75.0 million prepaid forward payment ($72.4 million net of transaction costs) from RTW and recognized an associated prepaid forward obligation liability. Each period the Company makes a payment to RTW, an expense is recognized related to financing on the prepaid forward obligation based on an imputed rate derived from the expected future payments. Management reassesses the effective rate each period based on the current carrying value of the obligation and the revised estimated future payments. Changes in future payments from previous estimates are included in future financing expense. The Company does not expect to make any principal payments in the next 12 months.

The following table shows the activity with respect to the carrying value of the prepaid forward liability for the year ended December 31, 2023 and for the nine months ended September 30, 2024, in thousands:

Carrying value of prepaid forward obligation as of December 31, 2022	$	98,923
Financing on prepaid forward obligation		21,552
Amounts paid and payable (1)		(10,753	)
Carrying value of prepaid forward obligation as of December 31, 2023		109,722
Financing on prepaid forward obligation		17,348
Amounts paid and payable (1)		(8,544	)
Carrying value of prepaid forward obligation as of September 30, 2024	$	118,526

⁽¹⁾ $3.3 million and $3.0 million of the Amounts paid and payable are included as current portion of the prepaid forward obligation within other current liabilities on the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.