Humacyte, Inc. — Q1 2022 10-Q
Reporting period: Three months ended March 31, 2022. The financial statements are unaudited. Humacyte is a clinical-stage biotechnology company developing bioengineered human acellular vessels (HAVs) and other tissues. It reported no product revenue; revenue consisted of government grants.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 or comparison |
|---|---|---|
| Grant revenue | $0.233 million | $0.155 million |
| Research and development expense | $16.314 million | $15.137 million |
| General and administrative expense | $5.682 million | $4.787 million |
| Operating loss | $21.763 million | $19.769 million |
| Net loss | $19.832 million | $20.301 million |
| Net loss per share | $0.19 | $3.46; prior-period weighted-average shares were substantially lower following the 2021 merger |
| Cash used in operating activities | $18.797 million | $14.543 million |
| Cash and cash equivalents | $198.222 million | $217.502 million at December 31, 2021 |
| Short-term investments | $8.000 million | $8.000 million at December 31, 2021 |
| Working capital | $198.5 million | $218.3 million at December 31, 2021 |
| Accumulated deficit | $434.4 million | $414.6 million at December 31, 2021 |
There is no meaningful product gross margin reported because the company has not begun product sales. Grant revenue was entirely from a Department of Defense award. Interest expense was $1.432 million. The company reported a $1.931 million net gain in other income and expense, including a $3.258 million non-cash gain from remeasuring the contingent earnout liability and a $0.074 million non-cash gain on warrant liabilities.
Material changes versus Q1 2021
- Revenue rose $0.078 million, while operating expenses increased 10% to $21.996 million. R&D increased 8%, mainly from personnel, materials and other development costs; G&A increased 19%, reflecting higher headcount, professional fees and public-company insurance costs.
- Operating loss widened by $1.994 million, but net loss declined by $0.469 million, largely because of the non-cash earnout remeasurement gain. Interest expense also increased by $0.899 million.
- Operating cash use increased by $4.254 million, which management attributed primarily to higher preclinical, clinical, pre-commercial and personnel spending. Q1 2021 financing included $19.7 million of loan proceeds; there were no loan proceeds in Q1 2022.
Liquidity, debt and commitments
- Cash, cash equivalents and short-term investments totaled $206.2 million at March 31, 2022. Management stated these funds were expected to cover operations, clinical trials and capital expenditure requirements for at least 12 months from the filing date. The company expects continued losses and negative operating cash flows.
- SVB loan principal outstanding was $30.0 million; the balance-sheet carrying amount was $27.739 million after accounting adjustments. The facility matures March 1, 2025, bears interest at the greater of 7.5% or prime plus 4.25% (7.75% at quarter-end), and principal repayment was scheduled to begin no earlier than July 2023. Two additional $10 million tranches were potentially available subject to milestones and other conditions. The company reported covenant compliance.
- Non-cancellable purchase commitments for supplies and services, primarily R&D, were $13.4 million. Finance lease obligations were $32.052 million in scheduled future payments; operating lease payments totaled $1.073 million.
- The company had no committed external funding beyond the loan facility. It may seek equity or debt financing, collaborations, strategic transactions or grants; additional financing may be unavailable or dilutive.
Outlook, commentary and risks
- Management expects significant expenses and operating losses to continue for the foreseeable future as it advances clinical programs, manufacturing capacity and potential commercialization. Spending priorities include the 6 mm HAV for vascular trauma and hemodialysis access, further pipeline development, and scaling manufacturing if products are approved. No quantified revenue or earnings guidance was provided.
- Key uncertainties include clinical-trial execution and results, FDA and other regulatory decisions, manufacturing scale-up, market acceptance and reimbursement, dependence on third parties and strategic relationships, intellectual-property protection, and the ability to raise capital.
- The COVID-19 pandemic had disrupted supply chains and suspended facilities or production; management said its future effects on trials, operations and financing remained uncertain. It reported no material COVID-related financial impact or asset impairment to date.
- The filing reported no legal proceedings management believed would have a material adverse effect and no material changes to the risk factors disclosed in the 2021 annual report. Management concluded disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Whether the clinical and regulatory timelines for the 6 mm HAV programs remain achievable, and what the FDA requires for the ongoing trials.
- Cash runway under the actual pace of operating cash use, planned development and manufacturing spending, and the stated 12-month liquidity assessment.
- Milestone eligibility and availability of the remaining SVB loan tranches, along with repayment terms and covenants.
- The potential dilution from 15 million contingent earnout shares, outstanding options and 5.589 million warrants; the contingent earnout and warrant liabilities are fair-value estimates using significant unobservable inputs.
- Whether purchase commitments, lease obligations and the Fresenius Medical Care distribution arrangement materially affect future cash requirements or commercialization economics.