Humacyte, Inc.
Q1 2022 Earnings Call Transcript

Published: 13 May 2022

[Operator:]

Good morning, ladies and gentlemen and welcome to the Humacyte First Quarter 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 be given at that time. [Operator Instructions] 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. Any 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-Q which will be filed today and maybe 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 before turning it over to Dale for a review of the company’s financial results. 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 morning, everyone and thank you for joining us. We appreciate your attendance today. I will just briefly summarize our recent highlights before turning the call over to Dale for a review of the financials for our first quarter. Then we will be happy to open up the call to your questions. I am pleased to report that we had a productive first quarter marked by continued progress advancing our universally implantable bioengineered human tissue platform. We believe our lead candidate, the HAV is uniquely suited for scenarios in which the current standard of care is either unavailable or is inadequate. This week, we were proud to announce a new initiative in which we are providing our HAV to frontline hospitals in Ukraine for the treatment of military and civilian vascular trauma injuries that are resulting from the crisis in the region. During the quarter, we also strengthened our team with the appointment of Dr. Shamik Parikh as our Chief Medical Officer. Dr. Parikh joins us at a pivotal time as we look forward to anticipated completion of our late stage clinical trials in vascular trauma and arteriovenous access for hemodialysis and if approved, as we endeavor to bring the HAV to market for our initial indications. I will first begin with our announcement earlier this week of a new initiative to provide our HAVs to multiple hospitals in Ukraine for the treatment of wounded civilians and soldiers who are suffering from vascular traumatic injuries. This initiative began as a request from one Ukrainian surgeon who was familiar with our technology and requests from the Ukraine quickly grew to include other surgeons and hospitals around the country. 6 hospitals in Kyiv, Kharkiv and other cities will be the recipients of our initial shipment. We continue to receive requests from local surgeons for the product candidate and we plan to coordinate shipments to additional hospital sites as soon as possible. In launching this initiative, Humacyte worked with the Office of International Programs within the U.S. Food and Drug Administration as well as with the Ukraine Ministry of Health to coordinate the export and import of our investigational HAV for humanitarian use. While this humanitarian effort is outside the scope of the company’s ongoing trauma trial, we expect that this program will provide additional real world evidence of the potential impact of the HAV in the treatment of vascular traumatic injuries. As a company, Humacyte is very proud to contribute to the ongoing medical relief efforts in Ukraine and to support the patients and the brave medical practitioners on the ground during this humanitarian crisis. I am immensely grateful to the Humacyte team for their tireless work seeing us through as well as to the surgeons in Poland and in the U.S. who have extensive experience with the HAV and who have volunteered to assist in training the Ukrainian surgeons and the use of the product candidate. Moving on to our broader platform for HAV and vascular trauma, our Phase 2/3 clinical trial is continuing to progress. As a reminder, this trial is a single arm non-randomized open label study, evaluating the use of HAVs for vascular repair, reconstruction and replacement in traumatic injury settings. We are pleased with the results from the study to-date showing low rates of infection at approximately 2%. We have also had no reports of limb amputation that occurred as a result of HAV malfunction. And we have observed very high patency of the conduit to-date. Results from the trial are expected later this year. And we believe these results will support our planned BLA filing with the FDA, which we intend to submit by the end of 2022 or early 2023. We continue to progress in our discussions with the FDA about the trial design and the required number of subjects to be enrolled. You will recall that the FDA has granted accelerated approval pathway for HAVs in this indication. The HAV was the subject of multiple presentations at scientific conferences and journal publications during the first quarter. Results from a case study of a patient who received the HAV as a replacement for a synthetic infected iliofemoral bypass graft were published in the Journal of Vascular Surgery

[Dale Sander:]

Thank you, Laura. As of March 31, 2022, we had cash, cash equivalents and short-term investments of $206.2 million compared to $225.5 million at December 31, 2021. The $19.3 million net use of cash, cash equivalents and short-term investments for the first quarter of 2022 resulted from spending related to net operating activities for the quarter, including our clinical and earlier stage R&D programs in preparation for our anticipated commercial launch. We believe that our current cash position is adequate to fund operations through the end of 2024 past our current expected timelines for potential approvals of the HAV in vascular trauma and AV access for hemodialysis. Revenue for the first quarter of 2022 was $233,000 compared to $155,000 for the first quarter of 2021. Revenue for both periods was related to grants supporting the development of the HAV. Research and development expenses were $16.3 million for the first quarter of 2022 compared to $15.1 million for the first quarter of 2021. The current quarter increase resulted primarily from increased personnel and material expenses designed to support expanded research and development initiatives in the support of our clinical trials. General and administrative expenses were $5.7 million for the first quarter of 2022 compared to $4.8 million for the first quarter of 2021. The current quarter increase resulted primarily from the transition to being a public company in preparation for the planned U.S. commercial launch of the HAV if approved, including increased personnel costs, professional fees, and insurance costs. Other net income was $1.9 million for the first quarter of 2022 compared to net expense of $0.5 million for the first quarter of 2021. The current year increase in other net income resulted primarily from non-cash gains related to the remeasurement of the contingent earn-out liability associated with August 2021 merger with Alpha Healthcare Acquisition Corp. These gains were partially offset by an increase in the interest expense related to our loan facility with Silicon Valley Bank. Net loss was $19.8 million for the first quarter of 2022 compared to a net loss of $20.3 million for the first quarter of 2021. The current quarter decrease in net loss resulted from the increase in other income described earlier partially offset by expense increases also described earlier. With that, I will turn it back over to Laura for concluding remarks.

[Laura Niklason:]

Thank you, Dale. To conclude, 2022 is off to an exciting start. We launched an important new initiative to assist the humanitarian crisis in Ukraine with our HAV technology. And we have continued to advance our HAV platform in both clinical and preclinical programs. We also strengthened our leadership team with the appointment of Dr. Shamik Parikh as our new CMO. And we have a strong balance sheet with anticipated cash runway to carry us through significant value inflection points. Operator, we are ready to take questions.

[Operator:]

Thank you. [Operator Instructions] Our first question is coming from the line of Ryan Zimmerman with BTIG. Please proceed with questions.

[Ryan Zimmerman:]

Good morning. Thanks for taking the questions. Hope you are doing well and congrats on the progress. I want to start with both the V005 trial and the V007 trial. I think last quarter, the V005 trial was sitting at 50 plus patients enrolled. I believe you only need 40. And so I want to just understand kind of what you need to officially complete enrollment there before submitting? And then I think AV access, the V007 trial, I think again, you were at 210 last quarter you need 240, so kind of where are you standing there? And if we were to hone in on enrollment for those two trials in terms of timing, that would be helpful? Thank you.

[Laura Niklason:]

Ryan, this is Laura Niklason. Thanks very much for those questions. So with regard to V005, which is our single arm trauma trial, we have continued to enroll at the rate of a couple of patients per month, 1 or 2 patients per month, which has been sort of our standard. We are obviously efforting increased enrollment rate. Currently, I think we sit around 54 patients, although I am not completely sure, but I think that’s roughly the right number. With regard to the 40 number that you mentioned earlier, the guidance that we have given to the Street so far is that we anticipate needing roughly 70 or 75 patients in total to have a sufficient number of evaluable patients for the FDA to accept the BLA. We are continuing discussions with the FDA and we are actually making progress on those discussions and nailing down this number. So, we continue to feel confident that the timelines that we have been communicating so far as far as having enough patients and completing enrollment by the end of this year, we continue to give that guidance, but I can’t give you anymore specific numbers at this time. With respect to dialysis access, you are right, I think maybe at the last call, we were around 210, I can’t remember. I think right now we are around 220 patients. Enrollment is picking up a little bit, now that COVID restrictions have been pulled back over the last month or two in many locations. So again, we continue to give the same guidance that we anticipate completing enrollment later this year and then would have top line results sometime perhaps mid to third quarter of 2023.

[Ryan Zimmerman:]

Got it. Very helpful, Laura. Thank you. And then yes, I must have mistaken on the 40, on the immunogenicity data, what should we be looking for?

[Laura Niklason:]

So as we have given guidance to our analysts and our investors previously, we have to-date we have seen no evidence of immunogenicity, clinical immunogenicity in any patient that we have studied. However, we have never reported these results in terms of specific blood work outcomes and really, more nitty-gritty clinical details. And so the focus of the talk that we will give in June at the American Transplant Congress really is providing the scientific underpinning and the blood work details around those data. The overall message is going to remain the same, but I can’t share anymore details now in advance of the presentation.

[Ryan Zimmerman:]

Understood. Thanks for taking the questions.

[Operator:]

Thank you. Our next question is coming from the line of Suraj Kalia with Oppenheimer. Please proceed with your questions.

[Suraj Kalia:]

Good morning, Laura. Dale, can you hear me alright?

[Dale Sander:]

Yes.

[Suraj Kalia:]

Perfect. Hey, so Laura, in terms of the 005 and 007 trials, just the length of the trials given COVID and everything should we anticipate any sort of confounders when the enrollment is done and the data is presented?

[Laura Niklason:]

So, Suraj, I think I understand your question. I think you are asking whether just the increased duration and enrollment because of slowdown due to COVID whether that’s going to impact outcomes? Again, it’s a little hard to answer that question, because we don’t have the alternative hypothesis, which is if we had rolled quickly then what would that trials look like. So, it’s a little speculative on my part. But I will say that in dialysis, it’s well known that COVID when it infects dialysis patients is particularly lethal. The fatality rate is 20% to 30% in dialysis patients. And we know we have had a number of COVID infections. So, I think that the number of deaths that we may see in the dialysis population maybe a little bit higher. But I don’t think that’s going to otherwise impact the efficacy of the HAV per se.

[Suraj Kalia:]

Got it. Laura, in terms of the vascular trauma trial, I know the discussions with the FDA have been ongoing for some time. Is this something specifically that is, I shouldn’t see a point of contention, but a point of negotiation so to speak in the endpoints in the design or anything, any additional color would be greatly appreciated?

[Laura Niklason:]

Yes, I think – so, you are right, these conversations have been going on for a while. I would say that we are advancing them well now. And I am pleased with the progress. But the points of discussion are really more around total body of data, both pre-BLA and then potentially post-approval. So as we have mentioned, the FDA has offered an accelerated approval pathway for the product. And so combined with that, with any accelerated approval pathway is also a post-approval commitment or requirement. And because the trauma population is so diverse, there has been a lot of discussions about the amount of data that the FDA would like to see pre-approval and then post-approval. So, that’s really kind of one of the major foci of our discussions.

[Suraj Kalia:]

Okay, that makes a lot of sense. Agreed. Hey, Dale, you mentioned getting roughly $200 million on hand till year end ‘24 everything should be closer. So if I use the $25 million or close thereof burn this quarter, straight line, I get it. Dale, if you could just drilldown one more layer, when should the clinical spend start relatively tailing off and when should the SG&A start ramping up, still to effectuate a $25 million per quarter burn? And Laura if I may just throw in one more, remind me the baboons in BVP. Have you decided on the number of baboons? Folks, thank you for taking my questions.

[Laura Niklason:]

So Dale, if you don’t mind, I will just answer the baboons.

[Dale Sander:]

Yes. Go ahead.

[Laura Niklason:]

We have not begun baboon work yet in the BVP work. And it’s too premature for me to talk about how many animals we would implant. It’s just too early.

[Dale Sander:]

Yes. Suraj, with regards to cash burn, I think if you were to take our current year financials and back out to non-cash expenses, I think we indicated the burn for the quarter is about $19 million. So, you are right, there is a trail off of the current clinical study expenses that we would expect would occur in 2023. I mean clearly, there is a ramp on the commercialization side that will offset from those declines. In part of that decision, which is the timing of those expenses is strategic. We already have our Chief Commercial Officer onboard. We have brought in resources in the areas of health economics and in payroll management, which is – long lead time items, is critical. So, certainly, as we further define the timelines for expected approval in 2023, we will bring on – start bringing on the infrastructure associated with the commercial group. The decision in terms of field sales reps, in terms of exactly when they come on is, is kind of a discretionary thought in terms of how far in advance or do you want to especially them at approval. But thinking about them coming on at about the time of approval is probably the best way to think about it.

[Suraj Kalia:]

Thank you.

[Operator:]

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

[Matthew O'Brien:]

Good morning. Thanks for taking the questions. Laura, can you just start with Ukraine and the number of HAVs you are expecting to be deploying over there? And are you able to charge for those, or is it just – are you just giving them to the government there just based on the situation?

[Laura Niklason:]

So, thanks, Matt. Those are good questions. So, we have no specific commitment going forward. We sent an initial batch of HAVs to six hospitals. And our intention is to look at the utilization and to understand what the clinical need is, as we make plans to make further shipments, so we don’t have anything committed. That’s hard and firm. But we are committed to trying to help Ukrainian civilians and military who are suffering in this humanitarian crisis. As far as – oh gosh, I am not sure I remember the second part of your question.

[Matthew O'Brien:]

Just do you get to charge for the HAVs, if they are going to pay…?

[Laura Niklason:]

Yes. We are not. We have – this product is not approved in the U.S. or in Europe. And we felt that it would not be appropriate to charge the Ukrainian government for this humanitarian assistance.

[Matthew O'Brien:]

Okay. It makes sense. And then I may just follow -up on Suraj’s question. Now that Omicron is kind of falling away, well, somewhat anyway, the R&D spend for the remainder of the year, how much should it ramp up? And then maybe I will ask my last question up front here. Just is the arrangement with Fresenius and the economic studies that you are doing? Can you just talk a little bit more about those? Thanks.

[Heather Prichard:]

Yes. Certainly, from R&D expenditure point of view with – we expect that to be relatively constant throughout the year. We are seeing some wind down on some of the clinical programs [ph], that’s been offset by a much more meaningful effort and activities that are underway this year with some of the preclinical efforts and in the CABG and BVP. So, we end up with a relatively constant R&D spend for this year. Obviously, from quarter-to-quarter, month-to-month, it can bounce around a little bit. I think the first quarter is pretty indicative of where we are going to end up. With regards to the work being done with Frenova, which is a subsidiary of Fresenius. With any of these markets, it’s really a matter of identifying those patients that can do – have the biggest unmet need. They are not satisfied by the current standard of care. And therefore can get the best improvement in outcome in theory by using HAV versus current standard of care. And we certainly see that in trauma where the patient has saphenous vein or there is some time or just use of saphenous vein harvested from the patient has been appropriate. There is a great deal of benefit from our product and we see that translate into, we believe into less amputations, less length of stay in the hospital due to infections and other outcomes that not only improve the life of the patient, but also have an economic benefit to whoever is covering the costs and his trauma – trauma center or the hospital. In the case of AV access with Frenova again, it’s the same thing. There is – thinking about just the U.S. market, that is close to 0.5 million patients undergoing dialysis at any one point in time. During the course of the year, there is probably about 200,000 AV access procedures that are done each year. So, the question is what is the subset of patients that makes the most sense for us to target when we undertake our anticipated launches, which are the ones that are most underserved today? And so part of that effort was and we learned part of that in our clinical studies, but part of that is taking advantage of the great database of patients on a non-name basis that’s available through the Fresenius network, and trying to identify those patients that have the biggest unmet needs. And therefore have the best clinical and economic benefit of using HAV. Because, our stand is not volume, we are not here to be providing, attempting to target every patient at a low cost or intensives. Identify those patients who have the greatest need, therefore, resolving and then that need and hopefully providing economics to ourselves that make more sense, based on targeting those patients.

[Laura Niklason:]

Yes. I totally agree. And I will just jump in here a little bit. The other thing that I think is important to point out is that this is one of the many really important interactions between Humacyte and Fresenius. We have a number of programs that are ongoing, but again, many, or most companies at our stage of development really don’t have access to this kind of very granular data around cost of care and issues with care for patients who are in one of our target therapeutic areas. So, our partnership with Fresenius is really something that we are leveraging, I think very effectively, to help us both be more successful.

[Matthew O'Brien:]

Understood. Thank you.

[Operator:]

Thank you. Our next questions come from the line of Bruce Jackson with The Benchmark Company. Please proceed with your questions.

[Bruce Jackson:]

Hi, good morning. And thank you for taking my questions. Just to follow-up on the CABG program, you showed some very promising animal data with good patency revascularization. Can you tell us about the next step in that program? So, more animal studies, I believe are anticipated? What are the things that you are going to be testing? And when do you think you might kick off the next leg of the development program?

[Laura Niklason:]

Bruce, thanks for that. So, we are continuing very active CABG work in baboons and large non-human primates throughout 2022. This continues to be a very active program for us. Our outputs from this will be patency and function and durability and remodeling of the HAV in this non-human setting in the chest as a revascularization conduit for the heart. In general, as you are developing significant preclinical data in this way, the typical sequence of events is to submit a pre-IND package and then to get agreement with the FDA regarding the types of preclinical data that they are going to want to see and then to go out and execute on that and then to submit the IND package for clearance for a Phase 1 study. So, I don’t want to give dates here, but I can say that we are absolutely marching along that path. And I continue to be very encouraged and excited about this program.

[Bruce Jackson:]

Okay, great. And then speaking of the BVP program, when you think you might have your first implant and do you have your trial material ready to go?

[Laura Niklason:]

Well, for the BVP implant, arguably we are not as far down the line with the biovascular pancreas as we are with CABG, because we have been in baboons with our CABG graft since 2021. And we haven’t yet done our first baboon implants or primate implants with the BVP. So, it’s a little bit early for me to project on first in man. Again, I think the BVP concept utilizes in some ways, a clinically lower risk approach because our concept is that we will perform arteriovenous grafting with the HAV exactly analogous to what we have been doing in patients for years. But then coating that HAV with eyelids and looking at eyelid function. So, in terms of the patient risk profile for this type of product, you might say that it’s a little lower than for CABG, although, I mean that remains to be discussed with the FDA. But that’s a lot of talking. But to be honest, I really can’t give you dates yet. It’s just too early.

[Bruce Jackson:]

Okay, fair enough. Thank you very much.

[Operator:]

Thank you. Our next questions come from the line of Josh Jennings with Cowen. Please proceed with your questions.

[Unidentified Analyst:]

Hi, this is Eric on for Josh. Thanks for taking the question. Maybe starting on DoD? Is there any update on the finalization of the Phase 3 trial? In this indication what sort of discussions have you had with the FDA around the design and just wondering any timeline that you are able to share…?

[Laura Niklason:]

So, yes, so we are still in the process of designing that trial. I think as I mentioned on our last call, we are engaging with experts in the U.S. and in Europe, because we see this as a program, that might have real applicability in both geographies. We have not begun discussions with the FDA yet around the specific trial design. Again, we are trying to take a very thoughtful approach to this and really identify the sets of patients with peripheral arterial disease, who are going to most benefit from the product where we have the greatest clinical need. And so that thought process is something that we are taking very seriously. And we are undertaking with thought leaders actually in the U.S. and in Europe. So, when we have more specifics, we will provide them.

[Unidentified Analyst:]

Understood. That makes sense. And if you could update on Ukraine, I am just wondering, have been any HAV using cases so far or they have just been shipped at this time. I just want to make sure am I correct. And then you also just talked a little bit more about how you plan on training surgeons over there that will be using HAVs.

[Laura Niklason:]

So, as far as the training of surgeons, who will be using the HAV, we have a large number of training materials that we have developed over the past several years, because as you know, the HAV has been implanted in more than 60 sites around the world by over 100 surgeons. So, we have a tremendous amount of written material, but also video instruction material, that we have actually translated into Ukrainian and to Russian, to make it more accessible to surgeons in the Ukraine. In addition, we have undertaken structured training, with – aided by surgeons in the U.S. and surgeons in Poland who have used the product to really give sort of live virtual training to surgeons who will be implanting the HAV and then taking care of patients thereafter. So, we have taken this part very seriously. I think surgical training is very important, particularly in this type of humanitarian situation. And I am sorry, could you repeat the first part of your question again?

[Unidentified Analyst:]

Sure. Yes. I was just asking if any of the HAVs is shipped to Ukraine has actually been used in cases or it may be too early, a recent update, I was just curious.

[Laura Niklason:]

Yes, not yet. The HAVs actually left our building seven days ago. And I think they are still in transit to some of the various medical centers. So, it is a little too early. But we are obviously maintaining close contact with the surgeons who will be receiving these products. And we have also instituted reporting mechanisms that are simple and easy to use for these people in this wartime situation. But we are doing our best to collect adverse events and positive clinical outcomes from any patients who receive the HAV. But as of yet, no one has received it.

[Unidentified Analyst:]

Okay. Excellent. Thank you for the questions.

[Operator:]

Thank you. I am showing no further questions in the queue at this time. This does conclude the Humacyte fourth [ph] quarter and year end results conference call. Thank you all for participating.