Humacyte, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Humacyte is a clinical-stage regenerative medicine company developing bioengineered human acellular vessels (HAVs) and other tissue products. It has not generated product revenue and continues to fund research and development primarily through financing and grants.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0 | $233,000 grant revenue |
| Research and development expense | $17.3 million | $16.3 million; up 6% |
| General and administrative expense | $5.2 million | $5.7 million; down 8% |
| Operating loss | $22.5 million | $21.8 million |
| Net loss | $37.0 million | $19.8 million |
| Net loss per share | $0.36 | $0.19 |
| Cash used in operating activities | $18.6 million | $18.8 million |
Cash and cash equivalents were $129.6 million at March 31, 2023, with $2.1 million of short-term investments, for combined liquidity of $131.7 million. Working capital was $110.3 million, down from $134.6 million at year-end 2022. Management said available cash and short-term investments were expected to fund operations for at least 12 months from the report date. The company expects substantial operating losses and negative operating cash flows for the foreseeable future.
Total assets were $183.0 million and total liabilities were $101.1 million at March 31, 2023. Stockholders’ equity was $81.9 million, including an accumulated deficit of $463.5 million. The company had $30.0 million principal outstanding under its SVB term loan; the rate was 12.25% at quarter-end, and principal repayment was scheduled to begin in July 2023. Finance lease obligations were $20.6 million. No product-sales margin is reported because the company had no product revenue.
Changes, outlook and notable items
- Net loss increased by $17.1 million year over year, chiefly because of a $14.2 million non-cash loss from remeasuring the contingent earnout liability, versus a $3.3 million non-cash gain in Q1 2022. Higher interest income partly offset this effect. This valuation-driven expense should be distinguished from operating cash use.
- R&D spending rose by $1.0 million, principally from higher payroll and personnel costs. Materials and supplies spending fell by $1.6 million after a scheduled manufacturing-facility shutdown for refurbishment ahead of an expected FDA pre-approval inspection related to a planned vascular-trauma BLA filing.
- The company is conducting Phase 2 and Phase 3 trials of its 6 mm HAV for vascular trauma and hemodialysis AV access, and continuing long-term follow-up in PAD studies. It expects to pursue BLA submissions for vascular trauma and AV access following completion of Phase 3 trials. These are plans, not assured outcomes; timing depends on clinical progress and regulatory review.
- On May 12, 2023, after quarter-end, the company received $40 million less expenses under a revenue-interest financing and used the proceeds to repay the SVB loan in full. Up to approximately $110 million of additional funding is conditional: $20 million upon BLA acceptance by March 31, 2024; $40 million, at the company’s option, upon FDA approval for vascular trauma by December 31, 2024; and $50 million, at its option, upon reaching specified sales by December 31, 2025.
- In exchange, the financing provides for an initial 7.5% royalty on global net sales, subject to specified variations and adjustment provisions, as well as investor put rights and company call rights with stated repurchase prices. Payments generally continue until specified return thresholds are reached; the agreement is secured by substantially all company and subsidiary assets and includes debt and lien restrictions. A separate option agreement permits investors to buy up to $10 million of common stock at an exercise price equal to the greater of $7.50 or the applicable 15-day VWAP.
- On April 1, 2023, Humacyte entered a JDRF agreement providing up to $0.8 million tied to milestones for BVP development and preclinical testing. In May 2023, the FDA granted RMAT designation for HAV in urgent arterial repair following extremity vascular trauma.
- Key risks include clinical-trial and regulatory uncertainty, manufacturing scale-up, future capital needs, commercialization and reimbursement, and dependence on third parties and strategic partners. The company reported no legal proceedings believed likely to have a material adverse effect and no material changes to the risk factors in its 2022 Form 10-K. Management reported disclosure controls were effective as of March 31, 2023.
Important facts for investors to verify
- Clinical-trial enrollment, results, regulatory discussions and the timing and requirements for planned HAV BLA submissions.
- Whether the manufacturing facility refurbishment and expected FDA inspection proceed as planned.
- Availability and conditions of the additional financing installments, and the effective long-term cost of the revenue-interest agreement, including royalty, return, put/call and security terms.
- Cash burn, committed purchase obligations of $18.5 million at quarter-end, lease payments, and whether liquidity remains sufficient as development and commercialization spending increases.
- Potential dilution: 103.3 million common shares were outstanding at quarter-end, with additional options, warrants, contingent earnout shares and the financing-related stock option.