Q1 2023 Humacyte Inc Earnings Call

Speaker 1: MUSIC you

Speaker 1: I.

Speaker 2: Good morning ladies and gentlemen and welcome to the HumaSite first quarter results conference call. Currently all participants are in listen only mode.

Speaker 2: Later we'll conduct a question and answer session and instructions will follow at that time.

Speaker 2: As a reminder, this conference call is being recorded.

Speaker 2: I'll now turn the call over to Lauren Marrick with LifeSci Advisors. Please go ahead.

Speaker 3: 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 law. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.

Speaker 3: 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 thereof and the company undertakes no obligation to update or revise the forward-looking statements except as required by law.

Speaker 3: and Chief Executive Officer, Dale Sander, Chief Financial Officer and Chief Corporate Development Officer, and Dr. Heather Pritchard, Chief Operating Officer. Dr. Nicholson will provide a summary of the company's progress during the quarter in recent weeks, and Dale will review the company's financial results for the quarter ended March 31st.

Speaker 3: quarter 2023 financial results and business update call.

Speaker 3: This quarter was highly productive for Humacyte as we continued to advance our universally implantable bioengineered human tissue product candidate or the human acellular vessel or HAV in multiple indications.

Speaker 4: We completed enrollment of our Phase III HAV trial and arteriovenous access in late March, and we're very close to completing enrollment of our Phase III trial in vascular trauma.

Speaker 4: We also recently received the Regenerative Medicine Advanced Therapy designation from the FDA for the HAV in arterial repair following extremity vascular trauma. This makes the second indication for which the HAV has received the RMAT designation from the FDA.

Speaker 4: In addition, we continue to add to the growing body of scientific publications highlighting the clinical potential of the HAV. And lastly, we recently announced our collaboration with the Juvenile Diabetes Research Foundation, or JDRF, to advance our Biovascular Pancreas product candidate.

Speaker 4: During this call, I'll review these recent highlights in more detail before turning the call over to Dale for a review of our financial results.

Speaker 4: Then we'll be happy to open up the call for your questions.

Speaker 4: I'll begin with our HAV program in vascular trauma.

Speaker 4: We're excited to have recently received the FDA's Regenerative Medicine Advanced Therapy, or RMAT, designation for the HAV for urgent arterial repair following extremity vascular trauma.

Speaker 4: This is Humacyte second RMAT designation for the HAV, the first being for arteriovenous access for hemodialysis.

Speaker 4: With the RMAT designation in extremity vascular trauma, as well as our previously received priority designation from the Defense Department, we anticipate a higher potential for priority review of our planned BLA filing in the trauma indication. Regarding our Phase 2-3 VO5 trial in...

Speaker 4: trauma of an extremity, either the arm or the leg.

Speaker 4: To date, we currently have a total of 66 patients who have received the HAV in the V-05 trial. 49 of which comprise the primary endpoint population of extremity injuries.

Speaker 4: We plan to file a BLA with the FDA later in 2023 after we have enrolled 50 or more patients with extremity injuries.

Speaker 4: This BLA will be for the treatment of extremity vascular trauma when synthetic graft is not indicated and when autologous vein is not feasible.

Speaker 4: We believe that our plans for the BLA filing, including the primary efficacy analysis in extremity patients,

Speaker 4: are consistent with the pre-BLA meeting and with other discussions that we've had with the FDA over the past several months.

Speaker 4: The potential of the HAV and vascular trauma was further highlighted in two recent peer-reviewed publications. The HAV and vascular trauma was further highlighted in two recent peer-reviewed publications.

Speaker 4: In April of 2023, a preclinical study of the HAV compared ePTFE grafts, which are Teflon grafts, in vascular repair following arterial trauma in a porcine model that was published in the Journal of Trauma and Acute Care Surgery.

Speaker 4: Results from this study suggested that the HAV is potentially superior to PTFE across multiple metrics, including recovery of limb function after prolonged ischemia, conduit patency and host resilularization.

Speaker 4: Importantly, the HAV showed no evidence of infection, degradation, aneurysm, or mechanical failure in this study. In this study, the HAV showed no evidence of infection, degradation, aneurysm, or mechanical

Speaker 4: In addition, as announced earlier this week, a letter describing the use of the HAV to treat battlefield and other vascular trauma injuries in Ukraine was published in the Lancet Regional Health Europe .

Speaker 4: This publication describes how Ukrainian surgeons are using the HAV to save life and limb in a wartime setting.

Speaker 4: and also reports clinical outcomes of the first nine patients treated with the HIV in Ukraine.

Speaker 4: Since June of 2022, a total of 19 patients have been treated with the HAV under our Humanitarian Program with most patients sustaining vascular injuries from blasts and shrapnel and with overall excellent outcomes to date.

Speaker 4: We continue to be grateful to our Ukrainian colleagues and to all of those involved in the humanitarian program for their support and we're proud to help these medical professionals save lives during this conflict.

Speaker 4: Turning now to our trial of the HAV in arteriovenous access in hemodialysis patients.

Speaker 4: We recently announced completion of enrollment of our Phase III V07 trial.

Speaker 4: We're pleased to have reached this milestone that brings us closer to a planned BLA filing in this indication.

Speaker 4: As a reminder, the V07 trial is designed to compare the HAV to an arteriovenous fistula in 240 hemodialysis patients suffering from end-stage renal disease.

Speaker 4: This trial will evaluate the usability of the conduit for dialysis during the first year with top line results that are anticipated to be available in 2024.

Speaker 4: Finally, we're happy to announce our collaboration with the Juvenile Diabetes Research Foundation or JDRF, which is the world's largest nonprofit funder of Type 1 diabetes research.

Speaker 4: Humacyte and the JDRF will collaborate on the development of Humacyte's Biovascular Pancreas, or BVP, which is our product candidate for the treatment of patients with type 1 diabetes.

Speaker 4: The BVP is designed to enable the delivery and survival of insulin-producing islets using the HAV as the carrier for delivery into the patient.

Speaker 4: We believe that the BVP has the potential to transform the treatment of type 1 diabetes, and we're thrilled to have JDRF support in advancing this technology.

Speaker 4: And with that, I'll now turn it over to Dale for a review of our financial results and other business developments.

Speaker 4: I'll now turn it over to Dale for a review of our financial results and other business developments. Thank you, Laura.

Speaker 2: As of March 31, 2023, we reported cash, cash equivalents, and short-term investments of 131.7 million.

Speaker 2: We are pleased to report the completion of an up to 160 million funding arrangement with Overland Capital, the details of which were in today's press release.

Speaker 2: The agreement allows us to extend our cash runway while ensuring adequate resources for the planned commercial launch of the HAV in vascular trauma.

Speaker 2: We believe that our cash, cash equivalents and short-term investments, and planned funding from the agreement are adequate to fund operations well past our expected timelines for potential approval of the HAV and vascular trauma.

Speaker 2: Regarding the quarterly financial results, there was no revenue for the first quarter of 2023 compared to 0.2 million for the first quarter of 2022.

Speaker 2: Revenue for 2022 was related to a grant supporting development of the HAV. Research and development expenses were $17.3 million for the first quarter of 2023, compared to $16.3 million for the first quarter of 2022.

Speaker 2: The current period increase resulted primarily from increased personal expenses to support our expanded research and development initiatives and support of clinical trials.

Speaker 2: General and administrative expenses were 5.2 million for the first quarter of 2023.

Speaker 2: compared to 5.7 million for the first quarter of 2022.

Speaker 2: The current year decrease resulted primarily from reduced professional fees in 2023.

Speaker 2: Other net expense told 14.5 million for the first quarter of 2023.

Speaker 2: compared to other net income of 1.9 million for the first quarter of 2022. The current period of increase in other net expense resulted primarily from the remeshirement of the contingent or not liability associated with our August 2021 merger with the Alpha Healthcare Acquisition Corps. Net loss was 37 million for the first quarter of 2020.

Speaker 2: 18.8 million for the first quarter of 2022.

Speaker 2: Total net cash used was $20.2 million for the first quarter of 2023 compared to $19.3 million for the first quarter of 2022, with a current year increase related to purchases of property and equipment to prepare for the planned commercial launch of the HAB.

Speaker 4: With that, I'll turn it back over to Laura for concluding remarks. Thank you, Dale. To conclude, we've already made significant progress in 2023 in our late-stage Hav program in Vascular Trauma NAV Access.

Speaker 4: We're excited to be moving closer to BLA filings in both indications, all while continuing to make progress in our earlier stage HAV programs like the BVP.

Speaker 4: We look forward to continued momentum throughout the remainder of the year, and I'll keep you apprised to further updates as we approach clinical and regulatory milestones.

Speaker 4: We look forward to continued momentum throughout the remainder of the year, and I'll keep you apprised to further updates as we approach clinical and regulatory milestones. Operator, we are ready to take questions.

Speaker 5: Thank you. Well now we can do the question and answer session.

Speaker 5: using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, so we pull for questions. Thank you.

Speaker 5: Thank you. Our first question comes from the line of Matthew O'Brien with Piper Sandler. Please receive your questions. Hey, this is Phil on from Matt. Happy Friday and thanks for taking our questions.

Speaker 5: In Graffsland, the recent financing, I was just curious on the mechanics as it relates to the future royalties of the HIV. These royalties, you know, for all indications, they're just trauma and it's at a flat rate or, you know, per HIV or percentage of revenues.

Speaker 2: Yeah, I'm all happy to answer that. The full details or more details of the arrangement will be in our 10Q filing that comes out later today. But essentially it's a royalty on revenues during the period of the repayment.

Speaker 2: Yeah, I think it's a single digit royalty that, you know.

Speaker 2: When we compared it to debt arrangements that were available to us, it's very similar from a net present value, but tends to shift the payments to those periods where we can best repay what is essentially a debt arrangement by matching our revenues with the repayment obligation. Better…

Speaker 2: The four mechanics will be outlined in the 10Q today.

Speaker 5: Okay, great, helpful. And then just one on the O-05 enrollment. I just wanted to confirm if 52 extremity patients is still the goal here, given you one to enroll six more patients during the last quarterly call. And I was just wondering if you were still tracking to about one patient per month, and is there any update on that?

Speaker 4: had an uptick in enrollment. We enrolled three patients in April and we had been tracking around one patient per month. So we have had a recent uptick. You know, we're still aiming to go perhaps one or two patients past 50, as we had said earlier, in order just to give us a little cushion. But right now we're at 49.

Speaker 5: Great. Thanks for taking our questions. The next question is from the line of Ryan Zimmerman with BTIG. Please proceed with your questions.

Speaker 2: Good morning. Thanks for taking the questions and congrats on all the progress, Laura and Dale. It's nice to see. On the recent financing agreement, and this is more directed for Laura, but with the additional capital, understand that the vascular trauma and the AV access trials are enrolling and those...

Speaker 4: Mal zones are on track. Do you anticipate pulling forward any of your other pipeline programs with the additional capital now? Yeah, Ryan, that's an interesting question Right now our pipeline programs as far as the BVP and our CABG program are proceeding on track

Speaker 4: Because these are still preclinical programs, even though we're in primates, the actual spend there is really pretty minor, certainly less than 10% of our budget. So I don't see huge changes in those long-term programs over the next couple years. Although, you know, depends on what we find in terms of...

Speaker 6: how you think about your commercial strategy or any impact related to your existing agreements with Sprazonius. Just curious kind of how this dynamic may shift your thinking commercial.

Speaker 4: Well, certainly we had always felt and we have communicated previously that the cash that we had on hand even before this financing was certainly sufficient to do the commercial launch and get us into the market in Vascular Trauma. We see this, this debt facility.

Speaker 4: which is really an optional facility. Most of this debt we can pull down sort of at our option. This really gives us optionality going forward, especially in the out years, like 2025 and 2026. It also, in our mind, removes any concern in the near term about having to raise equity.

Speaker 4: are still in place and not really changed. But Dale, I'd like you to comment as well.

Speaker 2: No, Ryan, I think this compliments the strategy that was already in place. Our intent has been to market directly in the United States, the HAB, particularly in its initial indications and really all indications that are planned for right now. So it certainly doesn't impact the relationship we have with Fizzinius, where...

Speaker 2: know they have rights to market the HAV outside the United States and then they cooperate with our efforts for various AV access within the United States.

Speaker 6: Okay. And then just last one for me, I'll hop back in queue. The existing debt from SVB, anything – are you paying that back with these – Yeah, that debt gets paid back and then we benefit from not having the interest in principal.

Speaker 2: payments associated with that going forward. But yeah, the SVB debt no longer exists and our relationship. And technically, this is a royalty purchase arrangement with Oberland. We're very pleased to be working with Oberland. It's a great team. And so this is our only.

Speaker 2: You know?

Speaker 2: hybrid debt instrument associated with the company going forward.

Speaker 6: Okay, thank you guys, you guys can order progress.

Speaker 1: Thank you.

Speaker 6: The next questions coming from the line of Joshua Jennings with TD Cowan. Please receive any questions.

Speaker 7: Good morning, Lauren D'Alt, thanks for taking the questions. Wanted to just follow up on the first sentence of medical.

Speaker 7: agreement and partnership. I think it's my understanding, thinking of your findings, you talked about how Fristhenius will adopt HIV and standard care for their patients if it's supported by clinical results and health economic analyses. He is, is the clinical results should we just be thinking about if you guys hit the primary ban points are ????icene.

Speaker 4: That's a very timely question. So yes, it would be a combination of hitting the endpoints for the broad population and also looking at endpoints for specific subsets in the dialysis population that we know are at higher risk for official failure. So that might be women, that might be elderly diabetics, whatever.

Speaker 4: But we have been undertaking and continue to work on a very strategic partnership with Fracinius, where we're diving into their data on cost of care. As you may know, Fracinius in addition to providing dialysis service.

Speaker 4: services also provide sort of comprehensive care to a fraction of dialysis patients in the US and through some of their subsidiaries are able to track the total spend for these patients for different complications including access complications. So we're drilling into that database right now. In fact, we had a call with the facenias.

Speaker 7: Excellent. And then just with Fresenius having, you guys have an agreement for them to go to run with HIV in some international markets, and have they started any work to move forward there to open up those international regions, or is that TBD?

Speaker 4: Well, as part of our agreement with Frisennius, and again, I'd like to ale to comment further on this if I'm missing anything. But as part of that agreement, Humocyte is responsible for obtaining regulatory approval, for example, in the European geographies. And we would work with Frisennius on that, and then they would follow with commercialization efforts.

Speaker 4: So I would say that Humacyte has been over the past year kind of laser focused in the US as far as our regulatory strategy and our efforts have been focused there. However in 2023 we are going to begin additional conversations in Europe .

Speaker 4: about some of these early indications, including trauma and dialysis access. And based on the outcomes of those conversations, we would expect to work with Friseneus to begin the appropriate commercial preparedness.

Speaker 2: And Josh, the only thing I would add is that at the stage, and Pousinius has been undertaking kind of the normal.

Speaker 2: planning activities, third-party market research and other activities not only in Europe but in certain other regions of the world that you would expect to be going on at this stage of a product's life cycle.

Speaker 7: Excellent. I understand you have a lot in front of you in the US. I'll get a little bit ahead of myself there. Last question. Just on the Department of Defense, they provided funding for HIV and in a lot of support over the years.

Speaker 7: I just wanted to, in prior to review status, can you just tell us think about the combination of DOD, for priority review, as well as ARMAT for vascular trauma. And then also, is there a potential supply agreement that could kick in upon approval with the DOD? Thanks for taking on the questions.

Speaker 4: Dale, you want to talk about supply and then maybe I'll touch on regulatory?

Speaker 4: Dale, you want to talk about supply and then maybe I'll touch on regulatory? Yeah, yeah, Josh.

Speaker 2: You know Laura certainly happy to do that. Yeah, Josh. We'd certainly expect a customer for the HAV You know would include Department of Defense other agencies even other international agencies I think certainly the work that's been done in Ukraine with the 19

Speaker 2: Patients treated with HIV that were injured in that conflict are highly supportive. I can tell you that as of today there is no contract in place with any government agency to purchase HIV. But certainly as we move closer to market, we have been undertaking those conversations. There has obviously been a great deal of interest.

Speaker 2: expressed in the HAV the Department of Defense had.

Speaker 2: selected this as one of their top five priority products that they indicated to the FDA that they wanted approved and so we fully expect that government procurement of this for forward deployment in the event of future conflicts will be part of our commercial picture going forward.

Speaker 4: And with respect to the regulatory trajectory, you're right, we have a priority designation and now we have the RMAT designation in trauma. As you'll remember, we are regulated as a biologic through the Center for Biologics, and so our regulatory path is a BLA filing. Using both the priority designation and the RMAT.

Speaker 4: We believe makes it more likely that we'll receive a priority review from the FDA, which will likely speed up our timelines. Again, it's the FDA's decision to grant the priority review, as always, but having these two designation certainly helps with that.

Speaker 1: Thanks so much.

Speaker 6: Thank you. As a reminder, you may first start one to ask a question at this time.

Speaker 6: The next question, through the line of Siraj Kalia with Oppenheimer & Company. Please proceed with your question.

Speaker 5: Good morning, Laura Dale. Can you hear me all right? Yes. Yes, we can. Perfect. So congrats on all the progress. Dale, your comments about the Oberlin deal? Forgive me, I'm still a little confused.

Speaker 8: So do you classify this as a debt deal or as a royalty sharing agreement? And the reason I ask is, you know, let's say you do a 5% royalty on total revenues, right? But this is still structured as a debt.

Speaker 8: Well, you know, we're talking about a pretty, you know, the math becomes pretty dense in terms of paying back all this debt. Maybe if you could just kind of, we'll wait for the 10Q, but if you could kindly articulate...

Speaker 2: You know, some of the, I couldn't follow your comments about the debt deal as well as a Royalty sharing agreement. Yeah, so I would have happy to address. So technically, you know, what the arrangement is, is the purchase of a Royalty interest by Oberland.

Speaker 2: We have to think about the overall potential funding here in segments. A hundred million of this is provided through the anticipated approval of the product. Other parts of the arrangement are sales-based milestones down the road, which we will see at that point in time whether the company would elect to take those down, but they are available under the arrangement. From a purely financial reporting point of view, the expense associated with this flows through as interest expense, as NAMA operating income. In terms of the repayment of this over time, certainly there are.

Speaker 2: as you'll see in the details of the footnotes, there are ultimately down the road deadlines by which the funding repayment has to be completed through royalty or other payments.

Speaker 2: But I think when you look at the overall cash flow over time associated with this, it's a very favorable arrangement. Humasight's profile I think is very attractive right now. We had a number of pure debt proposals that had been submitted to us. We strongly felt that the Oberlin proposal and arrangement better fit our needs where we were and was strategically much better for us.

Speaker 2: But, you know, the primary obligation or message of repayment of this or return to Oberlin from this is essentially through a Royalty Arrangement with, you know, future deadlines that are.

Speaker 2: quite a few years in the future that would require supplemental payments if the royalties were not adequate by that point in time to give Oberlin the return that's anticipated under the arrangement. So hopefully that clarifies it for you. And Dale, forgive me for belaboring this. There would be a deferred.

Speaker 8: a period, presumably a deferred period till revenues kick in, right? To whatever extent they are. And are there any minimums?

Speaker 2: There are no minimums other than down the road by certain dates, certain repayments have to be made. And you'll see the details in the 10Q, but the first minimum date that kicks in is December 31st, 2028, so quite some years down the road.

Speaker 2: There are no minimums other than down the road by certain dates, certain repayments have to be made. And you'll see the details in the 10Q, but the first minimum date that kicks in is December 31st, 2028, so quite some years down the road. All right.

Speaker 8: But the royalty payments would start on day one of revenue. Fair enough. And Laura, one question for you. I'll hop back and queue. For the US, you know, you're at the doorstep of getting the regulatory approvals.

Speaker 8: Is the plan still to go direct or are you looking at partners and how does this deal with Oberlin?

Speaker 8: mesh with any potential distribution or strategic partnership that you all might seek, because presumably the partner would also need to get a cut of the action. Thank you for taking my questions.

Speaker 4: Sure, Siraj. I think that's a good question. So again, I want to emphasize something that Dale said, is that with regard to the Oberlin facility, we have no repayment obligations until we start to bring in revenue. So there's no early interest payments that go along with that.

Speaker 4: which in our view makes it much more favorable as compared to a standard debt arrangement. With regard to how we're going to bring the HAV to the market, as we've said before, and this is still our plan in our first indication in trauma, where we're going to be marketing to...

Speaker 4: to level one trauma centers, but also importantly, vascular and trauma surgeons, we're going to take that indication to the market ourselves. We're building out our commercial and health economic and reimbursement teams right now. Again, because there are...

Speaker 4: 200 level one trauma centers in the US that handle the vast majority of severe vascular trauma. It really makes it a very targetable and tractable set of call points for a very reasonable size sales force, ultimately 15 to 20 reps, for example.

Speaker 4: Again, one of the advantages of starting with trauma and then being at these high profile centers is that the users of the HAV, both in terms of the hospital and the surgeons, are all the same people. So that when we hopefully get a second indication in dialysis or whatever.

Speaker 4: you know, these same surgeons and these same centers are already going to be using the HIV and having it on their shelves. And so from a subsequent launch, it's more about, for example, partnering with Fersenius and dialysis and going out to some of the more distributed smaller outpatient centers to look at expanding our reach.

Speaker 4: So we believe that the combination of the partnership with Fresenius and the initial launch in trauma means that, you know, we do not have plans currently to partner with another distribution firm in the U.S. which would then, you know, potentially take a royalty off the top. So that's not part of our strategy right now.

Speaker 8: Thank you. The next question is from the line of Bruce Jackson. It's a benchmark company. Please receive your questions. Hi. Good morning and thanks for taking my question. With regard to the JDRF funding for the BVP...

Speaker 4: Well, Humacyte is always trying to be opportunistic about non-dilutive funding, not just for our pipeline but frankly even for our more advanced programs. So yes, absolutely. You know, we're excited about this initial partnership with the JDRF. But you know, JDRF, like many foundations, does tend to identify...

Speaker 4: partners who they believe in and then kind of stick with those partners. So yes, pending encouraging results, I would expect to continue to try to work with them to obtain additional dilute of funding on the BVP project.

Speaker 4: But that said, I think there's also potential non-dilutive sources for some of our other even clinical programs as well that we're looking at. All right. Thank you. That's it for me. Thank you.

Speaker 8: I'm showing no further questions in the queue at this time. This concludes the human site first quarter 2020 three results conference call. Thank you all for participating. Thank you very much.