What happened

Shares of Urogen Pharma (NASDAQ:URGN) dropped over 12% today after the urology treatment-focused company announced a public share offering. The clinical-stage company said it will put approximately 4.2 million shares up for grabs at $41 apiece, which could raise as much as $172.5 million in gross proceeds. 

The company reported a cash balance of $109 million at the end of September 2018, so the offering will add a comfortable cushion to the balance sheet. Urogen Pharma is going to need it, given its maturing pipeline and plans for receiving key regulatory approvals in 2019.

As of 12:08pm EST, the stock had settled to a 10.7% loss.

A paper airplane representing a descending line on a chart.

Image source: Getty Images.

So what

In the first nine months of 2018 the company reported an operating loss of $53 million, compared to a loss of just $9.8 million in the year-ago period. The increase was due to a sharp jump in R&D and selling, general, and administrative expenses. The sharp jump was due to a large noncash charge for stock-based compensation and a quickly maturing drug pipeline led by UGN-101. 

In October 2018 the U.S. Food and Drug Administration granted UGN-101 its breakthrough therapy designation as a potential treatment for low-grade upper tract urothelial cancer (LG UTUC). It had already received orphan drug status and a fast track designation from the regulatory body. Currently no drugs have been approved for treatment of the cancer, but that might soon change.

Urogen Pharma reported top-line results for the drug candidate in a phase 3 study in January 2019. An impressive 57% of patients taking the drug achieved complete response, and all those who did and were evaluable remained disease free at the six-month mark. A complete data set will be available in the second quarter of 2019, which is when the new drug application will be submitted to the FDA. The company could receive marketing approval later this year. 

Now what

Urogen Pharma will soon be flush with cash and has a solid chance of earning marketing approval for UGN-101. It has a promising clinical program in UGN-102 as a potential treatment for low-grade nonmuscle-invasive bladder cancer (NMIBC), which affects 85,000 people in the United States and has no direct treatment options. Data from a phase 2b trial are expected in the first half of 2019. Allergan has even licensed one of the company's drug formulations and is evaluating it as a treatment for overactive bladder.

In other words, the recent dilution and stock plunge create an opportunity for investors with a long-term mind-set to take a closer look at the business.

Check out the latest Urogen Pharma earnings call transcript.

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