Humacyte, Inc. Q4 FY2022 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Humacyte Fourth Quarter and Year-End 2022 Results Conference Call. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I will now turn the call over to Lauren Marek with LifeSci Advisors. Please go ahead.

Thank you, operator. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements, except as required by law. Information presented on this call is contained in the press release we issued this morning and in our Form 10-K, which will be filed today and may be accessed from the Investors page of the Humacyte website. Joining me on today's call from Humacyte are Dr. Laura Niklason, President and Chief Executive Officer; Dale Sander, Chief Financial Officer and Chief Corporate Development Officer; and Dr. Heather Prichard, Chief Operating Officer. Dr. Niklason will provide a summary of the company's progress during the quarter and recent weeks; and Dale will review the company's financial results for the quarter and year ended December 31, 2022. Following their prepared remarks, the management team will be available for your questions. I will now turn the call over to Dr. Niklason.

Thank you, Lauren. Good morning, everyone, and thank you for joining us for our fourth quarter and year-end 2022 financial results and business update call. Humacyte has made significant progress throughout 2022 in advancing our universally implantable, bioengineered human tissue product candidate, the HAV or Human Acellular Vessel. We're very close to completing enrollment in two trials of the HAV, both in vascular trauma and in arteriovenous access, and we also continue to advance our earlier stage programs. As we begin 2023, we remain focused on advancing our HAV towards regulatory milestones and commercialization, beginning with the vascular trauma indication. During this call, I will review our recent highlights and the progress of our key programs before turning the call over to Dale for a review of our financial results, then we'll be happy to open up the call to your questions. I'll begin with our HAV program in vascular trauma. We're pleased that our Phase 2/3 V005 trial is nearing enrollment completion. We currently have a total of 63 patients who received the HAV in the V005 trial, and an additional 17 patients who have been treated with the HAV under our humanitarian program in Ukraine, bringing the total patients treated with the HAV for traumatic injury to 80. All patient results will be included in our upcoming BLA filing with the FDA. The efficacy of the endpoint of the HAV in trauma will be based on the 30-day patency in 50 patients from the V005 trial, who suffered vascular trauma in an extremity, either the arm or the leg. The primary efficacy analysis will not include torso injuries or iatrogenic trauma, which is trauma caused by physicians in patients who were enrolled in the V005 trial. Although data from these patients will contribute to the safety database. Currently, in the V005 trial, 46 patients comprising the extremity injury population have been treated with the HAV. We expect to enroll approximately six additional patients to support the BLA filing. This should bring us past the target of 50 patients that was discussed with the FDA in our recent meeting. We're working expeditiously to enroll the remaining six patients in V005. In addition to the recent addition of clinical sites in Israel, we now have efforts underway to add sites in Ukraine to the V005 trial in order to speed enrollment. We've been pleased to partner with the U.S. FDA and map out our strategy for BLA filing in trauma. Within approximately four months after completion of the V005 trial with the additional six patients, we plan to file a BLA for accelerated approval for an indication in vascular trauma. The targeted indication will be an accelerated approval of the HAV for arterial repair following extremity trauma when synthetic graft is not indicated and when autologous vein is not feasible. Our plans for the BLA filing, including the primary efficacy analysis, are consistent with the recent pre-BLA meeting and other meetings that we've held with the FDA over the past several months. The potential of the HAV in vascular trauma, particularly in the wartime setting, was further highlighted in a webinar that we hosted in December, featuring Ukrainian surgeons, Dr. Alexander Sokolov; Dr. Vasyl Shaprynsky and Dr. Oleksandr Stanko, who shared their experiences using the HAV to treat patients with wartime traumatic injuries. As I mentioned previously, 17 patients in Ukraine have now been treated with the HAV, and our Ukrainian colleagues shared a series of case studies highlighting the types of injuries they're treating with the HAV and their successful outcomes to date. As highlighted in the webinar, results demonstrated excellent 30-day patency with zero cases of infection in all the patients treated. A replay of the webinar can be found on the Investors page of the Humacyte website. In addition to the webinar, our Ukrainian colleagues also presented patient outcomes at two vascular conferences in December of last year, The Congress of Vascular Surgeons, Phlebologists and Angiologists in Ukraine, and the Munich Vascular Conference in 2022. We extend our sincere gratitude to our colleagues for joining us for this webinar and sharing their positive experiences using the HAV for the medical community. Similar to our vascular trauma trial, our Phase 3 V007 trial of the HAV for arteriovenous access in hemodialysis patients is also nearing completion. As a reminder, the V007 trial is designed to assess the usability of the HAV for hemodialysis in comparison to autogenous fistulas. This will be done in up to 240 patients with end-stage renal disease. We're pleased to report that as of today, 238 patients have been enrolled in this trial, meaning that we are on track to complete enrollment with the remaining two patients very shortly. Top line results are anticipated about one year after enrollment completion, based on the one-year follow-up period that's built into the study. If successful, results from this trial will support a BLA filing for a secondary indication in dialysis access. Turning to our earlier-stage programs, we're happy to provide updates on our recent progress, particularly in peripheral arterial disease, coronary artery bypass grafting and type 1 diabetes. Results from our Phase 2 trial in Peripheral Arterial Disease, or PAD, were recently published in the Journal of Vascular Surgery, Vascular Science. This publication describes the six-year analysis of the Phase 2 study. Researchers observed that HAVs provide long-term blood flow to patients with critical limb ischemia with a secondary patency rate of 60% at six years. Importantly, there was no evidence of graft rejection or infection over this follow-up period, and no patients underwent amputation of the treated limb. We're pleased that these results highlight the long-term durability of the HAV in a relevant and clinically complex patient population. We also continue to make progress in our preclinical coronary artery bypass grafting, or CABG program. In November of 2022, Dr. Alan Kypson of UNC Rex Hospital presented a six-month patency update of the HAV in a baboon CABG model at an oral presentation at the Annual American Heart Association Scientific Sessions meeting. In his presentation, Dr. Kypson highlighted that the HAV maintains structural integrity and patency for up to six months post-implantation as a heart bypass graft, and also showed evidence of robust host cell repopulation and remodeling. We're thrilled about the promising results of our small diameter HAVs in preclinical CABG models and we look forward to providing additional updates on this exciting program as it continues to advance into IND enabling preclinical study. In addition, Humacyte is happy to announce a recently funded award from the Juvenile Diabetes Research Foundation, or JDRF. JDRF is the world's largest nonprofit funder of Type 1 diabetes research. Humacyte and the JDRF will collaborate on the development of Humacyte's product candidate, the BioVascular Pancreas, which is directed at the treatment of patients with Type 1 diabetes. With that, I'll turn it over to Dale now for a review of our financial results and other business developments.

Thank you, Laura. As of December 31, 2022, we had cash, cash equivalents, and short-term investments of $151.9 million, compared to $225.5 million as of December 31, 2021. The $73.6 million net use of cash, cash equivalents, and short-term investments for the year ended December 31, 2022, resulted from spending related to net operating activities for the period, including clinical and earlier stage research and development programs and preparation for our anticipated commercial launch. We have been prudent with our expenditures and our use of cash for 2022 was approximately $8 million less than we had budgeted. We will continue to monitor our rate of expenditure, and we believe that our cash, cash equivalents, and short-term investments are adequate to fund operations through the end of 2024, past our current expected timelines for potential approval of the HAV in vascular trauma. There was no revenue for the fourth quarter of 2022, compared to $177,000 of revenue for the fourth quarter of 2021, and revenue was $1.6 million for the year ended December 31, 2022, compared to $1.3 million for the year ended December 31, 2021. Revenue in all periods related to grants supporting the development of HAV. Research and development expenses were $15 million for the fourth quarter of 2022, compared to $16.3 million for the fourth quarter of 2021, and they were $63.3 million for the year ended December 31, 2022, compared to $61.3 million for the year ended December 31, 2021. The decrease for the quarter ended December 31, 2022, compared to the prior year quarter resulted primarily from a decrease in non-cash stock-based compensation expenses. The increase during the year ended December 31, 2022, compared to the prior year resulted primarily from increased personnel and materials expenses designed to support expanded clinical and research initiatives in support of our clinical studies. General and administrative expenses were $5.8 million for the fourth quarter of 2022, compared to $5.6 million for the fourth quarter of 2021, and were $22.9 million for the year ended December 31, 2022, compared to $21.1 million for the year ended December 31, 2021. The smaller current year increases resulted primarily from the transition to being a public company and preparations for the anticipated U.S. commercial launch of the HAV, including increased personnel costs, external services, and insurance costs. Other net income was $17.1 million for the fourth quarter of 2022, compared to $64.2 million for the fourth quarter of 2021, and was $72.6 million for the year ended December 31, 2022, compared to $54.7 million for the year ended December 31, 2021. The reduction in other net income for the fourth quarter of 2022, and the increase in other net income for the year ended December 31, 2022, resulted primarily from non-cash gains related to the remeasurement of the contingent earn-out liability associated with the August 2021 merger with Alpha Healthcare Acquisition Corp. Net loss was $3.7 million for the fourth quarter of 2022 and compared to net income of $42.6 million for the fourth quarter of 2021. And net loss was $12 million for the year ended December 31, 2022, compared to net loss of $26.5 million for the year ended December 31, 2021. The increase in net loss for the current year fourth quarter, compared to 2021 resulted from a decrease in other net income described previously. The decrease in net loss during the year ended December 31, 2022, compared to the prior year resulted from the increase in other net income described above, partially offset by operating expense increases also described previously. With that, I will turn it back to Laura for concluding remarks.

Thank you, Dale. To conclude, we've made significant progress throughout 2022 in both our clinical and our preclinical programs. We're excited to move closer to our BLA filing in vascular trauma, and we will be pleased to close the enrollment soon in our AV access trial, the V007 trial. 2023 is shaping up to be a significant year for Humacyte, and we are poised to build on our momentum from the past year, and we look forward to providing further updates as we approach clinical and regulatory milestones. Operator, we're now ready to take questions.

Thank you. Our first question comes from Ryan Zimmerman with BTIG. Please go ahead with your question.

Good morning. Thanks for taking the questions, Laura and Dale. I appreciate it. I want to talk about the V005 trial a little bit. It sounds like the FDA maybe had some feedback for you guys in terms of how you think about usage of the HAV in trauma? Or I was wondering if you could speak to that specifically and how that impacts both utilization going forward and commercialization once you get that product to the market?

Yes. So we're really happy that we've gotten clarity and direction from the FDA as far as the number of patients and the analysis in V005, as well as the targeted indication statement. The indication statement is really based on the fact that our V005 trial has always been designed for patients who do not have autologous vein or saphenous vein for treatment of their vascular injuries. The contraindication for saphenous vein and for synthetic graft really falls out of both the V005 trial design, but also the fact that most traumatic injuries actually are not deemed suitable for synthetic grafts. So for example, penetrating injuries, but also many blunt injuries that have contaminated wounds are all known to be at high risk for infection. And so if you speak with most vascular or trauma surgeons, they will indicate that a synthetic graft is really not suitable in many or most cases of trauma. So the limitation as far as the indication really speaks to patients who do not have available saphenous vein, which is the enrollment criteria in the V005 trial. Something that we didn't speak to in our comments earlier is the fact that, with an accelerated approval, the FDA also asked that we perform a confirmatory study after we gain approval in the trauma indication. And we're currently designing that Phase 4 confirmatory study with the FDA right now. Our anticipation is that the design of the confirmatory study would broaden the patient population, and completion of that study would allow us to broaden the indication. But that said, we do not believe the indication statement is very narrowing from the standpoint that having something that's immediately available that doesn't require the harvesting of saphenous vein and that resists infection is going to be highly sought after for surgeons who are treating acute traumatic injury.

Okay. Just to clarify, is the HAV limited to extremity injuries? I appreciate that you are including some other injuries in the safety data, but I want to be clear about where you think the HAV can or cannot be used after the BLA.

So the indication statement is focused on extremity injury because the data subset that we're analyzing in the trauma trial focuses on patients who have at least one anastomosis in an extremity. Some of these patients have an anastomosis also in the pelvis or the thorax, but at least one anastomosis is in the extremity. This is what the FDA asked us to do because traumatic injury is very heterogeneous. And the focus on extremity injury was a way of focusing on a slightly more homogeneous group of patients, although these patients still have a wide variety of injuries. The reality is that the current 6 millimeter diameter of the HAV is suitable for the anatomies that I've talked about. But if you talk about, for example, aortic traumatic injury, the HAV is really not suitable there because the diameter isn't a good match. So we believe that the extremity focus in the indication really doesn't change functionally where the HAV will be used very much.

Yes. Now that makes sense. Okay, and then just last question for me and then I'll hop back in queue. In terms of timing, I think we're kind of thinking middle of this year previously in terms of getting enrollment complete. I know you're bringing up some sites in Israel and Ukraine. Do you think the timing for the HAV V005 trial and still maintain completion around mid-‘23? Or do you think you're maybe push it back a little bit just because of the nature of the patients you're targeting?

Well, it's always hard to predict enrollment in a trauma trial. Certainly, we're going to work as hard as possible to get the remaining six patients enrolled. We're targeting six. Technically, we need a minimum of four more enrollments. So I will say that our prior enrollment rate of one per month has picked up a little bit recently with the addition of the Israeli sites. If we're able to bring up the Ukrainian sites, I would expect that the enrollment would tick up above one per month because frankly, the Ukrainian sites by themselves enroll one per month or more. So again, hard to predict, but I would hope that in the next couple of months that we'll complete enrollment and then about 120 days after that, we would file.

Okay. Thank you for taking the questions, Laura.

Thank you. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Please proceed with your question.

Hey, this is Phil on for Matt. Thanks for taking our questions. I guess just to piggyback off Ryan's question there. For the V005 trial, that 63 patient number is current and not at the end of 2022, which would imply you're adding, what, 7 over, call it a 1.5 quarters, almost two quarters. Can you just speak to the current pace of additions here for that remaining six? And then can you just touch on the delta between needing only four more, but you guys are going to go for six there?

Sure. Well, as I mentioned, the historical pace of enrollment in V005 has been negatively impacted by COVID, as with every other trial in North America. We’ve been around one patient per month. That has picked up a little bit in the last couple of months with the addition of these sites. So again, all I can say is that we think it will take a few months to enroll the four to six patients. The reason we're saying six right now is because with each of these patients having very heterogeneous injuries, our strategy is to provide a bit of a buffer or cushion slightly above the targeted patient number of 50 discussed with the FDA. But the reality is that we currently have 46 patients that fall into the category the FDA would like us to focus on. At a minimum, we would need four more patients to hit that target number of 50. One thing I want to emphasize is that we've really been able to partner well in recent months with the FDA and had a very active dialogue with them. Getting clarity on the patient subset they were most focused on and the types of analyses they would like us to do and the patient number has allowed us to provide much more clarity on our glide path for filing.

That's helpful. Thank you. And then just shifting gears really quickly. Are you preparing in any way for commercial activities? What's going on, on that front as you prepare for this stage and eventually making it to market for trauma?

Well, I'll answer that a little bit, and then I'll ask Dale and also Heather to weigh in a little bit more. But essentially, as you may recall, we began filling out our commercial team even in the latter part of 2021. Currently, we have staff in place to lead the commercialization effort with really a focus on health economics and market access and reimbursement, although we are bringing on a VP of Marketing in the next few weeks. The groundwork that we're laying now is really around the cost-benefit analysis and the health economic analysis that we'll bring to payers and to health care providers around the benefits the HAV can provide to patients into the system. But I'll let Dale speak to staffing up for commercialization. I'll also ask our COO, Heather Prichard, to speak to our commercial manufacturing readiness.

Yes. Thanks, Lauren. Certainly, beyond W. J. Scheessele, our Chief Commercial Officer, we did have a core marketing team in place currently. In addition to the budget impact model that Laura described, much of the emphasis is on longer lead time items that need to be prepared for in advance of launch. This includes preparing for the NTAP, pass-through reimbursement from CMS, which we think will be important to us. Also, seemingly mundane tasks like naming the product are long lead time items that work is underway right now, which requires going through both trademark issues as well as the FDA. There's certainly a great deal of effort going on to prepare from a manufacturing point of view.

Thank you, Dale and Laura. From a manufacturing standpoint, we are on track, as you know, to be able to produce our product for commercialization. We don't anticipate any complications, but we continue to prepare for our preapproval inspection and also update our modules for our BLA filing.

Thank you. Our next question comes from the line of Josh Jennings with TD Cowen. Please proceed with your question.

Hi, good morning. Thanks for taking the questions. Sorry to bring trauma indication up again, but just wanted to make sure that the total addressable market hasn't changed, has it? And just with this update from the FDA, I assume no, but just wanted to get clarity there. And also, any incremental thoughts on the ultimate pricing of the HAV once you get BLA approval.

Yes. We don't see the total addressable market really being materially impacted by this initial indication statement. The HAV at 6 millimeters in diameter is most suited for injuries in the upper and lower extremities. As I mentioned earlier, aortic injury was never anything that we really contemplated in any of our financial models. So I think that the TAM really isn't impacted here. Although Humacyte would never advocate or market the product for any off-label use, the reality is that in trauma centers, the HAV will likely be used in instances where surgeons feel it's best for the patient, independent of the letter of the indication statement. So I don't think the TAM is really affected by these clarifications. I'll let Dale speak to product pricing.

Yes, Josh. Good to talk to you. As you know, the pricing is a complex decision that generally isn't announced until the time of launch. If you were to dig back to our earliest SEC filings where we were required to put placeholders in there, there is commentary about potential price ranges that at that time suggested something in the $25,000 per HAV range. Decisions around pricing will be made at the time of launch. That being said, the work we've done to date in terms of looking at the budgetary impact of using the HAV versus standard of care or other treatments, and our discussions with hospital administrators suggest that the price placeholder we originally had is certainly acceptable, and the pricing could be somewhat higher than that, particularly within the vascular trauma market. This is based on the major cost savings associated with avoiding amputation, infections, and the impact those have on length of stay in the hospital and other costs.

Excellent. And thanks for that. I want to just follow up on the pace of enrollment for V005. Our understanding is that these patients are very hard to consent. Once you have approval, that total addressable market you laid out is realistic. But just wanted to get your thoughts on the pace of enrollment and how that translates into the total addressable market and some of the hurdles that your investigator sites face enrolling these patients.

Yes, Josh, that's an excellent question. The number of vascular injuries in the U.S. is tens of thousands per year even in peace time. The hurdles and difficulties we've encountered enrolling in V005 highlight the reason that extremely few interventional trials have been conducted in this type of traumatic injury. By definition, if a patient is injured enough that they require acute repair of an artery that is big enough to be treated by the HAV, that means they are essentially bleeding to death. Typically, these events occur off-hours in the middle of the night. By definition, if a patient is bleeding that much, they're not able to provide consent. Targeting patients with injuries severe enough to require acute repair, but finding patients who are not sedated or who are conscious and able to give consent or have a family member standing next to them who can give consent becomes a vanishingly small pool. The realities of human clinical research are that we have to abide by all regulations and consent every patient. But for this type of trial, it places enormous hurdles on enrollment. Humacyte continues to believe that the realities of the marketplace are very different from the tightly constrained limitations we've had to deal with in this trial.

I appreciate that. And just lastly, in terms of the pipeline and the different indications you're pursuing for HAV, is there any way to think about the prioritization or how you're going to allocate investment dollars to each of those pipeline projects?

The pipeline products we're focused on most intensely are the coronary artery bypass graft, the small-caliber vessel and the bio-vascular pancreas. Both of those product candidates are in large animal trials. We're pushing forward with large animal implantations in the CABG application and filling out the preclinical database for that indication. Same thing is true for the bio-vascular pancreas. That said, the total dollars, even for primate work, because the numbers of primates aren't in the hundreds, it's in the single digits or low double digits, so that's on the order of several million dollars for those programs, which is really a small fraction of our total spend. With active Phase III clinical programs in a couple of different areas and fully scaled manufacturing, the majority of the spend is still going there. We've made strategic decisions to continue to push forward on incredibly important programs for building the value in the company. The total spend for 2023 on these pipelines as a fraction of the total budget is actually pretty small, but we think there's outsized value there.

Good morning, Laura and Dale. Can you hear me all right?

Yes.

Yes. Perfect. Congrats on all the progress. So Laura, just following up on V005, forgive me if I got my numbers wrong. Wasn't the trial originally supposed to enroll 75? During your discussions with the FDA, were there any questions about efficacy in non-extremities, which led to the 50 number? Just trying to understand this new number and the difference in adjudication for efficacy versus safety, if at all.

Yes. Suraj, those are very good questions. The guidance that we've been providing, really since the summer of 2021, has been that we expected to enroll approximately 75 patients in V005 before we could file. That was an estimate based on ongoing discussions with the FDA about which patient subset we would focus on and the total number of patients required. Currently, we're at 63 total patients. But the 50 number, as a subset, again, was really an effort by the FDA to focus on a set of patients that was more homogeneous. The number of torso injuries we have in the trial is actually pretty small. It's only five patients. The extent of the injury in those patients is really different because if you have significant vascular disruptions in your torso, your survival and mortality is a very different thing than if you have a limb vascular injury. The FDA wanted to focus on a more homogeneous set of patients and that’s why they had us exclude the iatrogenic patients. So that left the majority of patients in the middle with limb injuries. Vascular injuries in the limb are the majority of vascular injuries that occur in both civilian and military settings. So again, this focuses on the majority but tries to get a slightly more homogeneous population.

Fair enough. Laura, regarding V007, there are two additional patients left to enroll. Since this is an open label study, I'm curious about the implications of what happened in V005. Why do we still need to reach 240? I'm trying to understand the difference between the FDA's approach here.

Well, certainly the V007 trial is open-label, but I just want to emphasize that Humacyte is not privy to the results. This is a prospective randomized trial that is open label to the investigators, but Humacyte and Humacyte staff are blinded. We're just following the trial protocol that we agreed to with the FDA a number of years ago. The target patient number of 240 was based on the power calculations we performed at the outset of the trial. So we've just been trying to adhere to what we agreed to with the FDA. These patients are obviously dialysis patients and are not as acute as trauma patients. These surgeries are elective, and the enrollment rate really was negatively impacted during COVID. We're just pleased to be finally wrapping up this trial and getting to the enrollment target we agreed to with the agency.

Fair enough. And Laura, finally from my side, I'll hop back in queue. With JDRF, congratulations on that partnership. The BVP, is that going to involve, I shouldn't say plain vanilla iPSCs, but are you all going to edit in any genes, knock out any genes, any timelines? Any additional color would be greatly appreciated.

Yes. So we are focusing on stem cell-derived islets. We're taking a multiplexed approach. We're looking at using cadaveric native islets as part of the BVP program, but we're also looking closely at stem cell-derived islets because that brings in manufacturability and control of islet supply, which is important in any commercial setting. We are certainly looking at immune-privileged iPS cells. I do not believe we've yet shared with the broader investment community what exact types of immune privilege we're looking at. But as a general rule, overexpressing genes and adding in new stuff into a cell line that's going to be therapeutic for a patient is generally harder from a regulatory standpoint than just removing genes that might be immunogenic. We anticipate an easier path forward by removing genes rather than overexpressing new proteins, which might add more regulatory hurdles.

Hi, good morning, and thank you for taking my questions. Quick follow-up on the pre-approval net inspection for manufacturing, is that scheduled yet?

No, Bruce. I'll go ahead. The pre-approval inspection will be scheduled by the FDA after they get our BLA filing.

Okay, great. And then one quick follow-up on the earlier stage programs. Will there be any publications, presentations, etc., on the CABG program or the BVP program this year?

Yes. We expect that. We have made submissions to various national, international meetings on the BVP program, and we expect to continue to present on the CABG program. I'm not in a position to let you know which meetings we're presenting at, but these are both active primate level programs. We'll continue to keep the market appraised.

I'm showing no further questions in the queue at this time. This concludes Humacyte fourth quarter and year-end 2022 results conference call. Thank you all for participating. You may now disconnect your lines.