Humacyte, Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; comparisons are with FY2021. Humacyte is a clinical-stage regenerative medicine company developing bioengineered human acellular vessels (HAVs). It has no approved products and has generated no product revenue.
Business context
The company’s lead 6 mm HAV is being studied for vascular trauma and arteriovenous (AV) access for hemodialysis; it is also following patients in Phase 2 peripheral artery disease (PAD) studies. As of year-end, HAVs had been implanted in approximately 533 patients. Humacyte reported eight operational LUNA200 manufacturing systems, with estimated annual gross capacity of approximately 7,200 HAVs. Its other programs, including CABG, pediatric heart surgery and the biovascular pancreas, remain preclinical.
Financial performance and liquidity
| Metric | FY2022 / Dec. 31, 2022 | FY2021 / Dec. 31, 2021 |
|---|---|---|
| Grant revenue | $1.6 million | $1.3 million |
| Research and development expense | $63.3 million | $61.3 million |
| General and administrative expense | $22.9 million | $21.1 million |
| Total operating expenses | $86.1 million | $82.5 million |
| Operating loss | $84.6 million | $81.2 million |
| Net loss | $12.0 million | $26.5 million |
| Net cash used in operating activities | $71.1 million | $81.2 million |
| Cash, cash equivalents and short-term investments | $151.9 million | $225.5 million |
| Working capital | $134.6 million | $218.3 million |
All FY2022 revenue was grant revenue reimbursing eligible costs under a Department of Defense award; that program ended in November 2022. The company reported no product sales, and gross margin is not meaningful for its current revenue base. FY2022 net loss included a $75.8 million non-cash gain from remeasurement of the contingent earnout liability; this helped reduce reported net loss despite a higher operating loss. The liability declined to $27.9 million from $103.7 million at year-end 2021.
Cash and cash equivalents declined by $67.7 million during FY2022. Humacyte stated that cash, cash equivalents and short-term investments were expected to fund operations, clinical trials and capital expenditure requirements for at least 12 months from the filing date. The filing also says additional capital may be needed for development, commercialization and manufacturing expansion; no committed external funding source beyond the loan facility was identified.
At year-end, $30.0 million of principal was outstanding under the SVB facility, with a $20.0 million additional capacity subject to milestones. The facility matures March 1, 2025; its interest rate was 11.75% at December 31, 2022, and principal repayment was scheduled to begin as early as July 2023. The loan is secured by substantially all assets other than intellectual property. Humacyte reported $32.0 million in non-cancellable purchase commitments, primarily for R&D supplies and services.
Material changes and operating developments
- Operating expenses rose 4% year over year, with R&D up 3% and G&A up 8%. The company attributed higher R&D costs mainly to expanded preclinical work; G&A growth included public-company and commercial-readiness costs.
- Net cash used in operations improved year over year, mainly because FY2021 included $14.5 million of payments for merger-assumed liabilities; the improvement was partly offset by increased development and personnel spending.
- The Phase 3 V006 dialysis-access trial did not meet its primary non-inferiority endpoint for secondary patency at 24 months versus ePTFE. HAV showed fewer conduit infections in that study, but secondary patency was lower at 18 and 24 months.
- V005 vascular-trauma enrollment reached 60 patients overall, including 42 of the 50 planned primary-analysis extremity-injury patients. V007 dialysis-access enrollment reached 230 of a target 240.
- The FDA had authorized use of HAV manufactured on the commercial-scale LUNA200 system in ongoing trials. The filing reports a comparability assessment and V011 crossover study supporting comparable product characteristics and safety profile.
Outlook, commentary and key risks
Management plans to complete the ongoing trials and pursue BLAs for vascular trauma and hemodialysis access. It discussed potential U.S. launches and manufacturing expansion if approval is obtained, but provided no numerical revenue, earnings or cash-flow guidance. As of the filing, no BLA was pending and no HAV was approved for marketing. Humacyte expects continued operating losses and negative operating cash flows.
Key risks include clinical and regulatory uncertainty, particularly in light of the V006 endpoint miss; enrollment and trial execution; manufacturing scale-up and dependence on sole-source suppliers; uncertain coverage and reimbursement; reliance on Fresenius Medical Care for specified international rights and U.S. commercialization collaboration; and the need for additional capital. COVID-19 had disrupted supply chains and delayed trial enrollment, though the company reported no material financial impact from the pandemic to date. Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not provide an internal-control attestation because Humacyte qualified for the emerging-growth-company exemption. No material legal proceedings were reported.
As an unusual contractual development, Humacyte gave Yale notice in December 2022 to terminate its small-diameter vessel-coating license, effective March 21, 2023, stating it did not intend to use the underlying technology.
Important facts for investors to verify
- Progress, final results and FDA acceptance of the V005 and V007 trials, and the regulatory path following V006’s missed primary endpoint.
- Actual cash burn, remaining runway, access to the loan’s milestone-dependent capacity, and potential need for further equity or debt financing.
- Manufacturing capacity, yield, quality and supply continuity, including plans for alternate sources for critical single-source materials.
- Reimbursement prospects and the economics of the Fresenius Medical Care agreement, including revenue sharing and international commercialization arrangements.
- Future effects of contingent earnout and warrant fair-value remeasurement on reported earnings, which can differ materially from operating performance.