Humacyte, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited. Humacyte is a clinical-stage biotechnology company developing bioengineered human acellular vessels (HAVs) and other tissue products. It reported no product sales; all period revenue was grant revenue, entirely from a Department of Defense award.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Grant revenue | $1.3M | $0.7M | $1.5M | $0.8M |
| Operating expenses | $19.8M | $20.0M | $41.8M | $39.9M |
| Operating loss | $18.5M | $19.3M | $40.3M | $39.0M |
| Net income (loss) | $36.9M | $(17.2)M | $17.0M | $(37.5)M |
| Cash used in operating activities | — | $35.4M | $29.2M |
Q2 net income was not indicative of operating profitability: it included a $56.4M non-cash gain from remeasurement of the contingent earnout liability. For the six-month period, the comparable gain was $59.6M. Operating losses continued, and cash used in operations increased year over year. No product gross margin was reported because the company had no product sales.
At June 30, 2022, cash and cash equivalents were $181.0M and short-term investments were $8.0M, totaling $189.0M, versus $225.5M at December 31, 2021. Working capital was $182.0M, down from $218.3M. Total assets were $246.4M, total liabilities $104.1M, and stockholders’ equity $142.3M.
SVB loan principal outstanding was $30.0M; its balance-sheet carrying amount was $28.1M. The June 30 interest rate was 9.0%. Principal repayment was scheduled to begin no earlier than July 2023, with maturity on March 1, 2025. The company reported compliance with loan covenants. Finance lease obligations were also material, with $31.1M of future minimum payments disclosed.
Material changes versus prior period
- Q2 grant revenue increased 89% year over year, mainly reflecting timing of reimbursement of eligible DoD grant costs.
- Q2 operating expenses were broadly flat. For the first half, R&D rose 4% and general and administrative expenses rose 7%; the company cited increased personnel, materials, public-company, legal, audit and insurance costs.
- First-half operating loss widened by $1.3M and operating cash use increased by $6.1M year over year.
- First-half net income improved primarily because of the non-cash earnout-liability fair-value gain. The 2021 comparison included a $3.3M PPP loan forgiveness gain.
Outlook, commentary and risks
- Management expects substantial operating losses and negative operating cash flows for the foreseeable future. It estimated existing cash and investments would fund operations for at least 12 months from the filing date; additional capital may be required, and no committed external funding source beyond the SVB facility was identified.
- Planned spending includes clinical development and regulatory work for the 6 mm HAV, manufacturing scale-up, pipeline development and preparations for potential commercialization. The filing describes V005 Phase II/III and V007 Phase III trials as ongoing; approval and launch timing remain uncertain.
- The company reported $16.1M of non-cancellable commitments for supplies and services, primarily for R&D. Further funding could come from equity, debt, collaborations or grants; availability and terms are uncertain and equity financing could dilute shareholders.
- Risks include clinical and regulatory outcomes, trial enrollment and timing, manufacturing scale and supply-chain constraints, commercial acceptance and reimbursement, intellectual-property protection, reliance on third parties, and the need for additional capital. COVID-19 had disrupted supply chains, facilities and production; future effects remained uncertain, although no material financial impact or impairment was reported to date.
- The 15.0M contingent earnout shares are issuable in two tranches if specified share-price thresholds of $15 and $20 are met. The associated liability fell to $44.0M from $103.7M at year-end, generating the non-cash gain. The company also disclosed 5.59M common-stock warrants outstanding.
- Management reported no legal proceedings believed likely to have a material adverse effect, no material changes to previously disclosed risk factors, and effective disclosure controls as of June 30, 2022.
Important facts for investors to verify
- How the non-cash earnout remeasurement affects reported earnings, and the assumptions behind its Level 3 valuation.
- Cash-burn trends and the assumptions supporting management’s at-least-12-month liquidity estimate, including whether additional financing will be needed.
- Clinical-trial progress, FDA requirements and timelines for the HAV programs, including V005 and V007.
- Conditions for drawing the remaining $20M of SVB loan capacity, covenant compliance, interest costs and scheduled principal repayment.
- Revenue concentration in the DoD grant, the $16.1M purchase commitments, and potential dilution from warrants, options and earnout shares.