Business Context and Reporting Period
This Form 8-K reports the consummation of a business combination between Alpha Healthcare Acquisition Corp. (AHAC) and Legacy Humacyte, Inc. on August 26, 2021. Following the merger, AHAC changed its name to Humacyte, Inc. ("New Humacyte"), and Legacy Humacyte became a wholly-owned subsidiary named Humacyte Global, Inc. The company is a regenerative medicine firm developing bioengineered human, acellular tissue-based vessels (HAVs) for vascular repair, hemodialysis access, and other indications. The filing includes unaudited financial data for Legacy Humacyte through June 30, 2021, and pro forma information reflecting the combined entity.
Key Financial Metrics
Revenue: Humacyte has not generated revenue from product sales. Revenue is derived solely from government grants (DoD, NIH, CIRM). For the six months ended June 30, 2021, revenue was $0.8 million (up 87% from $0.5 million in the prior year period).
Profitability: The company has incurred net losses since inception. For the six months ended June 30, 2021, the net loss was $37.5 million (compared to $32.6 million in the prior year period). As of June 30, 2021, the accumulated deficit was $425.6 million.
Cash Flow and Liquidity:
- Cash and cash equivalents as of June 30, 2021: $29.0 million.
- Net cash used in operating activities for the six months ended June 30, 2021: $29.2 million.
- Net proceeds from the Business Combination and PIPE Investment received on August 26, 2021: $223.5 million.
- Management believes combined cash resources are sufficient to fund operations for at least 12 months from August 27, 2021.
Debt:
- Term loan facility with Silicon Valley Bank: Up to $50.0 million total; $20.0 million outstanding as of June 30, 2021. Interest rate is 7.5% or Prime + 4.25%.
- Paycheck Protection Program (PPP) loan of approximately $3.3 million was forgiven in May 2021, resulting in a gain on extinguishment.
Material Changes Versus Prior Period
Operating Expenses: Total operating expenses increased 24% to $39.9 million for the six months ended June 30, 2021, compared to $32.2 million in the prior year period.
- Research and Development (R&D): Increased 13% to $29.7 million, driven primarily by higher lab supply costs ($1.7 million increase) and payroll expenses ($1.5 million increase) to support commercial manufacturing process development and clinical trials.
- General and Administrative (G&A): Increased 70% to $10.2 million, primarily due to a $2.3 million increase in non-cash stock-based compensation and $1.0 million in external services/professional fees related to commercial launch preparations.
Other Income/Expense: Turned from a net expense of $0.8 million in the prior year period to net income of $1.5 million in the current period, largely due to the $3.3 million gain on PPP loan forgiveness.
Guidance, Outlook, and Risks
Outlook and Strategy:
- Humacyte intends to submit a Biologics License Application (BLA) to the FDA for vascular trauma indications in 2022 and for AV access for hemodialysis in 2023.
- The company plans to scale its 83,000 square foot manufacturing facility to meet commercial demand.
- Future funding requirements will depend on clinical trial progress, regulatory outcomes, and commercialization costs. The company expects to continue incurring significant operating losses for the foreseeable future.
Risks and Contingencies:
- Going Concern: Prior to the business combination, the independent auditor included an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern. This was resolved by the capital raised in the transaction.
- Regulatory Approval: Success depends on obtaining marketing approval from the FDA and EMA. Delays or failures in clinical trials (V005 Phase II/III and V007 Phase III) could materially impact the business.
- Capital Requirements: The company will need additional funding for future operations. If capital is not available, the company may be forced to delay or cease R&D programs.
- Lock-up Agreements: Certain stockholders are subject to a one-year lock-up period, with an early release provision if the stock price exceeds $15.00 for 20 trading days within a 30-day period (commencing 180 days post-closing).
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $223.5 million in net proceeds combined with existing cash to fund the specific clinical trial milestones (V005, V007) and manufacturing scale-up through 2023.
- Debt Covenants: Review the terms of the Silicon Valley Bank loan agreement, specifically the milestone-based tranches and covenants that were met upon closing.
- Grant Revenue Sustainability: Assess the timeline for the expiration of current government grants (DoD, NIH, CIRM) and the lack of commercial product revenue.
- Clinical Trial Status: Confirm enrollment rates and interim data for the Phase II/III trials in vascular trauma and hemodialysis access.
- Stock-Based Compensation: Monitor the impact of the new 2021 Long-Term Incentive Plan and ESPP on future G&A expenses and dilution.