Humacyte, Inc. (NASDAQ:HUMA) Q3 2023 Earnings Call Transcript

Humacyte, Inc. (NASDAQ:HUMA) Q3 2023 Earnings Call Transcript November 10, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to the Humacyte Third Quarter 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.

Lauren Marek: 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 afternoon and in our Form 10-Q, which after filing 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 ended September 30, 2023. Following their prepared remarks, the management team will be available for your questions. I will now turn the call over to Dr. Niklason.

Laura Niklason: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us for our third quarter 2023 financial results and business update call. Our third quarter was a highly productive period for Humacyte, during which we achieved significant milestones in the advancement of our universally implantable bioengineered human tissue product candidate the Human Acellular Vessel, or HAV, and we’ve worked on this in multiple indications. This was led by our announcement in September of positive top line results from our Phase 2/3 clinical trial in vascular trauma repair, which positions us to submit our BLA filing for approval in this indication during the current quarter. We’re also pleased that potential of our HAV pipeline has been shown in other clinical studies this quarter, including the presentation of Phase 2 results in severe Peripheral Artery Disease, or PAD.

In addition, we recently published preclinical results of our small caliber HAV in a juvenile heart disease model. During today’s call, I’ll review these recent highlights in more detail before turning the call over to Dale for a review of our financial results, then we’ll be happy to open the call to your questions. I’ll begin with our HAV program in vascular trauma and the positive top line results that we announced from our V005 Phase 2/3 clinical trial of the HAV in trauma repair. In this clinical trial, the HAV had higher rates of patency and lower rates of amputation and infection as compared to historical published benchmarks of synthetic graft function in trauma patients. A total of 69 patients were enrolled in the V005 trial, and 51 of these had vascular injury of the extremities and comprise the primary evaluation group for the study.

The 30-day patency or presence of blood flow for the HAV in the clinical trial was 90% as compared to approximately 81% historically reported for synthetic graphs. Importantly, the HAV also demonstrated lower amputation rate with a rate of 9.8% for the HAV as compared to over 20% being reported historically for synthetic graft. This means that for a vascular trauma patient receiving the HAV, the chances of amputation are less than half of the chances associated with receiving a synthetic graft. It’s also important to note that in the V005 trial, there were no amputations that occurred because of failure of HAV. All of the amputations occurred because of severe injuries to the limb and not due to loss of blood flow from the HAV implant. The HAV also demonstrated lower rates of infection, with an infection rate of 2% compared to over 8% historically reported for synthetic graft.

In other words, patients receiving the HAV in this trial were less than half is likely to suffer an amputation, and one-fourth is likely to have an infection of their graft as patients who historically got synthetic graphs for their injuries. Building on the momentum of these positive results, we plan to submit a Biologics Licensing Application, or BLA, with the FDA during this quarter. In May of this year, Humacyte received a Regenerative Medicine Advanced Therapy, or RMAT, designation from the FDA, which will allow us to request a priority review of our BLA filing. Since we’ve also received priority designation from the Department of Defense, we believe that we’ll have a high potential for priority review of our planned BLA filing in the trauma indication.

Further buttressing the real-world utility of the HAV in treating injured patients, Humacyte’s vessels have been used in Ukraine under humanitarian aid program. During the one-year humanitarian effort, 19 vascular trauma patients received the HAV in Ukraine. Results will also be highlighted from these patients in our BLA filing with the FDA. Outcomes from these 19 patients were described in a presentation at the 2023 Military Health System Research Symposium in August, with clinicians reporting a very high success rate in treating these patients with the HAV to date. In war wounded patients in Ukraine, who suffered blast and shrapnel injuries that were often severe, both a 30-day limb salvage and 30-day patient survival were 100%. 30-day patency or blood flow was 95%, and there were no reported instances of infection of the HAV.

We believe that these remarkable results are an important addition to our BLA filing, and we’re proud to be able to help our Ukrainian surgeon colleagues, save life and limb in this wartime setting. Humacyte and our collaborators expect to make multiple presentations at the VEITH Symposium, which is a major vascular surgery meeting in New York next week. These include an expanded presentation of the results of our V005 vascular trauma trial. And also the outcome of research, which seeks to identify which dialysis patients experience the most difficulties with their dialysis access and which patients may benefit from an access that is both durable and resistant infection. In September, clinical results were also presented on an FDA-regulated investigator-sponsored clinical study at the Mayo Clinic.

In this study, patients with severe peripheral arterial disease, who face possible limb amputation and who had no vein of their own for bypass surgery, were treated with the HAV to restore blood flow to their limbs. In the presentation at the Midwestern Vascular Conference, Mayo researchers observed that the HAV was a safe, resilient and effective conduit for arterial bypass and limb salvage. This is an important result since approximately 40% of patients requiring lower extremity bypass do not have saphenous vein available. In the future, the HAV may represent a promising alternative for preserving limbs in patients with advanced peripheral artery disease. With regard to publications, in October of 2023, a publication in the Journal of Thoracic and Cardiovascular Surgery described a preclinical study showing the potential for the investigational small diameter HAV to treat Tetralogy of Fallot, which is a heart condition that affects one in every 2,000 babies born each year.

In this large animal study, Humacyte collaborated with researchers from Nationwide Children’s Hospital in Columbus, Ohio to implant 3.5-millimeter HAVs into a juvenile model of pediatric heart surgery. The 3.5-millimeter HAVs remained patent for up to six months and showed evidence of repopulation by host cells, which was similar to what’s been observed in human patients. This study also demonstrated the extension of Humacyte manufacturing platform, adding production of 3.5-millimeter vessels in the same platform that is used to produce Humacyte 6-millimeter HAVs, which are the ones that are in current clinical use. In July, results from a preclinical study on the ability of the HAV to resist infection were published in the Journal of Vascular Surgery-Vascular Science.

This study provides a scientific basis for the low rates of infection that we have observed in clinical trials of the HAV to date. Researchers found that compared to synthetic grafts, the HAV had a significantly lower bacterial infection rate. This infection resistance of the HAV may be due to the native-like biocompatibility of the HAV material, which supports the survival and function of human immune cells that are the key to fighting bacterial infection. These results have broad implications for all of our intended clinical indications and further support the potential of the HAV as an excellent alternative to synthetic graphs in a wide range of medical conditions. And with that, I’ll now turn it over to Dale for a review of our financial results and other business developments.

Dale Sander: Thank you, Laura. As of September 30, 2023, we had cash and cash equivalents of $100 million. In May 2023, we reported the completion of a funding arrangement with Oberland Capital of up to $160 million, of which we have received $40 million to date. Total net cash used was $49.4 million for the first nine months of 2023, compared to $53.8 million for the first nine months of 2022. We believe that our cash and cash equivalents and expected funding from the Oberland funding arrangement are adequate finance operations passed the currently anticipated timelines for FDA approval and commercialization of HIV in the vascular trauma indication. There was no revenue for the third quarter of 2023 and nine months ended September 30, 2023.

Revenues were $31,000 for the third quarter of 2022 and $1.6 million for the nine months ended September 30, 2022. Revenue from 2022 was related to a grant supporting the development of HAV. Research and development expenses were $18.6 million for the third quarter of 2023 compared to $17.3 million for the third quarter of 2022, and were $56.4 million for the nine months ended September 30, 2023 compared to $48.3 million for the nine months ended September 30, 2022. The current period increases resulted primarily from increased personnel and external services to support expanded research and development initiatives and our clinical trials, including preparation for the HAV trauma clinical trial and completion and planned BLA filing for the vascular trauma indication and expansion of clinical development of HAV in AV access for hemodialysis.

General and administrative expenses were $6.1 million for the third quarter of 2023 compared to $6.2 million for the third quarter of 2022, and were $17.5 million for the nine months ended September 30, 2023, compared to $17.1 million for the nine months ended September 30, 2022. The increase during the 9 months ended September 30, 2020, compared to the prior-year period resulted primarily from increased personnel costs, largely driven by preparation for the planned U.S. commercial launch of HAV in the vascular trauma indication. The slight decrease during the third quarter of 2023 compared to 2022 resulted primarily from a reduction in external services and professional fees, partially offset by an increase in personnel expenses. Other net income or expense was a net expense of $1.4 million for the third quarter of 2023 compared to a net expense of $1.8 million for the third quarter of 2022.

And other net expense was $11.8 million for the nine months ended September 30, 2023, compared to other net income of $55.5 million for the nine months ended September 30, 2022. The decrease in other net expenses for the third quarter of 2023 compared to 2022 resulted primarily from an increase in interest income due to rate increases. The increase in other net expense for the nine months ending September 30, 2023 compared to 2022 resulted primarily from the non-cash remeasurement of the contingent earnout liability associated with the 2021 merger with Alpha Healthcare Acquisition Corp. Net loss was $26.0 million for the third quarter of 2023 compared to $25.3 million for the third quarter of 2022. And net loss was $85.7 million for the nine months ended September 30, 2023 compared to $8.2 million for the nine months ended September 30, 2022.

The current period increase in net loss resulted from the non-cash measurement of the contingent earnout liability and increased operating expenses described with that. With that, I’ll turn it back over to Laura for concluding remarks.

Laura Niklason: Thank you, Dale. This is a very exciting time for Humacyte and for all of our stakeholders. As we move closer to our planned regulatory filing in our first HAV indication, I’d like to take a moment to thank the entire Humacyte team as well as our partners for their continued commitments to our programs. The entire team has worked incredibly hard to reach this point, and we are approaching what could be a transformational time not only for the company, but for patients who are suffering from a variety of vascular diseases. Across our clinical programs, the HAV has already accumulated more than 1,200 patient years of experience, including in vascular trauma, vascular access and hemodialysis and peripheral artery disease.

We’re also continuing to study the HAV in our earlier-stage programs in order to maximize the full potential of the HAV’s value for our patients and for our investors. We look forward to keeping you updated on our progress, and thank you all for joining us today. Operator, we’re now ready to take questions.

Operator: [Operator Instructions] Our first question comes from Suraj Kalia of Oppenheimer. Your line is open.

Suraj Kalia: Hi, Laura, Dale. Can you hear me all right?

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Q&A Session

Laura Niklason: Yes, we can.

Suraj Kalia: Perfect. Congrats on all the progress. Laura at VEITH, what additional data on V005 should we expect?

Laura Niklason: At the VEITH meeting, we’re going to share, in addition to the efficacy results, we’re going to share some of the safety outcomes. That’s during a podium presentation that will occur during the meeting on Wednesday. In addition, on Thursday evening, we have a dinner symposium session where we will talk about the V005 outcomes and also the outcomes from Ukraine and look at the combination of those outcomes and as they compare to our benchmarks in synthetic graft treatment for vascular trauma.

Suraj Kalia: Got it. Laura, assuming nine months post BLA filing for a vascular trauma indication, how should we start thinking about — my understanding is the label would be sort of not indicated for synthetic grafts. So, can you size up the market and also the low-hanging fruit post approval?

Laura Niklason: So, I think in terms of the size of the market, as we’ve shared in earlier presentations, there’s approximately 70,000 vascular injuries in the U.S. that occur every year that require some sort of repair, and tens of thousands of those probably require grafting or active surgical repair. So, of those, about 12% or 15% are done with synthetic grafts. But if you talk to trauma surgeons and if you look at the literature, essentially all traumatic injuries are viewed as being contaminated or potentially contaminated and infected. So, if you — again, if you talk to trauma practitioners, they will tell you that synthetic grafts are essentially never indicated in patients with traumatic injury. In addition, we believe that in many cases, the extra hour that it takes to harvest vein is going to make many patients who might have otherwise gotten a vein be more suitable for an HAV, because the extra hour that it takes to harvest the vein puts the injured limb at increased risk of amputation.

So, we believe that we will take a sizable fraction of certainly the synthetic graft use, but also we believe we’ll eat into vein use as well in the traumatic injury indication.

Dale Sander: And Suraj, some of the data that may will be presented at VEITH will be the outcome from the study in terms of why surgeons use the HAV in those particular patients and that may provide some further evidence to support what Laura just said about the likely uses and why they would choose to use it in certain instances over synthetic or saphenous vein?

Suraj Kalia: Got it. Appreciate the additional color. Dale, one final question for you. Dale, the contingent earnout in revenue interest liability caught my attention. Love some additional color. I’m assuming the revenue interest liability is the $40 million from Oberland, but I might be wrong, if you could just walk us through that? Thank you.

Dale Sander: Yeah, you’re exactly right. The — what we call the RIP, or the Revenue Interest Liability, is essentially the debt instrument with Oberland. And so, that will accrue up over time as interest is accrued. But right now, the face amount of that debt is $40 million. The contingent earnout liabilities associated with our going public transaction, the legacy holders of Humacyte are potentially due shares if the stock price hits certain levels. And so, every quarter, if the price goes down, that liability increases and there’s a non-cash expense recorded and if the stock goes down that quarter, there’s a non-cash gain and the liability goes down.

Suraj Kalia: Got it. Thank you so much for taking my questions.

Operator: Our next question comes from Josh Jennings of TD Cowen. Your line is open.

Unidentified Analyst: Hi. This is Eric on for Josh. Thanks for taking the question. On the RMAT designation that you have in vascular trauma, I was wondering if you could share with us when you will know whether or not you received priority review for your BLA filing. And secondly, if you do receive prior to review, could you specify what that entitles you to throughout the BLA review process? Thank you.

Laura Niklason: So as part of the BLA filing, we are going to apply for priority review, which, as you may know, would entitle us to a six-months review period in PDUFA date as opposed to a standard 10-months, which is more typical for biologics. So, it’s my understanding that once we file that within 60 days, the agency comes back to us with the acceptance of the file and also with a determination at that time as whether or not they’ve granted priority review. So, I would expect 60 days after we file, we’ll know if we have a priority pathway. Again, I would hope and expect that we do because of the RMAT and also because of the priority designation from the Defense Department. The priority review provides a speedier review process.

I’m not sure that it really changes the amount of interaction you have with the agency. Certainly, once you file a BLA, the amount of interaction and the back and forth and the discussion is always really robust. So, I think it’s more about speed.

Unidentified Analyst: Understood. That’s great. And then sticking with vascular trauma, with the target you have here submitting the BLA in 4Q, could you tell us what steps remain for the process before you actually make that submission?

Laura Niklason: Well, without providing too much detail that we haven’t provided already in a public forum, I can say that a BLA is thousands of pages and that it’s a complex document. But I can say that much of the BLA has actually been largely ready for some time. Our Module 3, which is really the description of the manufacturing pieces, has been in a fairly final form for many months now because we transitioned to our commercial stage manufacturing actually in 2021. Also, our preclinical work is essentially — has been done for years practically. And that’s Module 4. So, there are really five modules to the BLA. I would submit that two of them have been done or mostly done for a while, and it’s really about wrapping up the clinical modules and some of the labeling. So, we do not anticipate that there will be any difficulties filing this quarter. We see ourselves as completely on track.

Unidentified Analyst: Understood. Thank you for that, and thank you for taking the questions.

Operator: Our next question comes from Matthew O’Brien of Piper Sandler. Your line is open.

Unidentified Analyst: Hi. This is Samantha on for Matt. We just have a couple of questions for you. I guess, first off, we were wondering if you thought about providing humanitarian efforts during the Gaza conflict like you have in the past?

Laura Niklason: Yes. That’s a very interesting question. I think it’s an excellent question. It is a topic that’s come up amongst our leadership. In the Ukraine conflict, we had surgeons reach out to us and ask for access to the HAVs as part of treating patients who were injured in the conflict. To date, we have not yet received any request from surgeons in Israel along these same lines. I think it may be that the Israeli healthcare system is perhaps better equipped to handle the casualties that they’re seeing. I honestly don’t know. Certainly, if we had requests come in inbound from surgeons in Israel, we would certainly consider them and work with our regulatory and clinical teams and work with the FDA to consider those requests.

Unidentified Analyst: That’s great. Thank you. And then, I guess, on another note, maybe you could talk a little bit about launch preparations that are ongoing for the HAV, maybe in terms of hiring sales reps and how you anticipate launching this product?

Laura Niklason: Well, I’ll let Dale handle the sales force and part of the launch, but I will say that an ongoing focus for Humacyte and one where we’ve made tremendous progress is really speaking to the health economics and the budget impact modeling of the vessel in the care of trauma patients. It’s been incredibly useful that our clinical trial results have shown a real decrease in amputation and in infection as compared to patients who were historically treated with synthetic grafts. That really provides us excellent hard data to make strong economic arguments around the utility of the HAV not just for improving patient outcomes, but also for improving the total expenditures for hospitals and for insurers. So, we’re working closely now with our colleagues and health economics that we’ve brought on a whole team here at Humacyte, really mapping out those arguments, and also putting together dossiers that we’re going to bring forward to insurers even in advance of approval to outline for them the size of the clinical problem and the benefits that we think the HAV can bring to patients into the healthcare system.

So that’s really in terms of we’re doing work with healthy economics, reimbursement and also in coding, and that’s all very active work streams. But I’ll let Dale speak to the sales force and the timing on that.

Dale Sander: Yes. Thanks, Laura. And Samantha, as Laura said, much of the effort of the core commercial team right now is geared towards those longer lead time items, as she mentioned, the budget impact model and coding and reimbursement and market access. In terms of the sales force itself, certainly, there is planning going on in terms of sizing that for us and how we would divide up territories and strategies like that. But the actual sales force itself will be brought on — will be recruited, but brought on closer to market launch. So there’s certainly not a need to bring them on so far in advance of the 2024 launch. But certainly, the planning is underway right now. As a reminder, this is a very concentrated market. We’ve talked about before where 80%-plus of the patients tend to be treated at level one trauma centers, and there’s approximately 200 of those centers.

So, this will be a highly qualified sales force geared towards surgical type products within the trauma setting, but it will not be a huge sales force.

Unidentified Analyst: Great. Thank you.

Operator: [Operator Instructions] And our next question comes from Kristen Kluska of Cantor Fitzgerald. Your line is open.

Unidentified Analyst: Hi. This is Jason on for Kristen. Thanks for taking our questions. Two from us. Is the surgeon base, who’s — how open are they to trying new procedures and options, is the first question. And then, the second is just some insight on your plans, if any, to collect real-world evidence and stats that could help the launch in further years out? And I’ll take the answers offline.

Laura Niklason: So yes, those are excellent questions. In the trauma indication, the end users are really going to be a combination of vascular surgeons and trauma surgeons. From the standpoint of both of these types of surgeons, it’s true that there hasn’t been an important new advance in conduits for vascular restoration and replacement in probably 30 years. So, for these practitioners who feel like they’ve been stuck with the same tools for a very long time, having a new biologic that has as much experience as we now have with over 1,200 patient years, I think both vascular surgeons and trauma surgeons find this very exciting. And we are getting just spontaneous questions and comments whenever we’re at the podium about when can I get my hands on this?

When will it be on the shelf? How fast can I use this? So, I think there’s a lot of anticipation out there in the vascular surgical market. I would also say that for trauma surgeons, in particular, they’re more trained as general surgeons and not as vascular surgeons per se. And so, trauma surgeons, by and large, would rather not spend time harvesting vein. It’s not something that’s really in their wheelhouse. So, for trauma surgeons, in particular, having a biologic that’s going to resist infection that they can pull off the shelf is, I think, going to be very attractive. As far as real-world evidence, certainly, we’re making progress on our coding so that we can capture cases that are done with the HAV and various trauma scenarios after we’re on the market.

And we certainly plan on continuing to follow that data. I also anticipate that we’ll work with some of our key opinion leaders who are — who have already been part of our Phase 2/3 V005 trial and look at post launch studies of either specific types of injuries or specific geographies and look at usage and outcomes. So, I definitely want to take advantage of that after we’re on the market.

Unidentified Analyst: Great. Thanks a lot.

Operator: Our next question comes from Bruce Jackson from The Benchmark Company. Your line is open.

Bruce Jackson: Hi, congratulations on all of the progress. Most of my questions have been answered. I just — you got the VEITH Symposium coming up here shortly. Are there any particular presentations that you’re excited about?

Laura Niklason: I’m excited about Humacyte’s presentations. But I’m also excited about a couple of other things that we haven’t mentioned. I will say that there’s a surgeon from the Mayo Clinic, who’s been doing peripheral artery disease work that he’s doing an investigator-sponsored study with the HAV in patients with critical limb ischemia who are facing potential amputation. So, he’s going to talk about those results, which are very encouraging. We also have a joint presentation with Fresenius, where we’re presenting some early results of a data dive that we’re doing to look into the types of patients who have problems with their access, either access failures or frequent access infections to really hone in on which dialysis patients may benefit from the HAV in the long term.

Bruce Jackson: All right. That’s it for me. Thank you.

Operator: I’m seeing no further questions. I’ll turn the call back over to our host.

Laura Niklason: Well, thank you very much for everyone for your time and attention. It’s been an exciting quarter. And everybody at Humacyte is working hard to continue to meet our milestones. As I’ve said, since we went public, we have been delivering on what we said we would deliver on the timelines on which we said we would deliver it, and we’re just continuing to do that. And I’m just so proud of our team and all the hard work that they’ve done, and also all of our collaborators, whether it’s collaborating surgeons or our corporate partners. So, I just want to give a big shout out to everybody who’s helped us get this far.

Operator: That concludes today’s conference call. Thank you for joining, and have a pleasant day.