HUMA - NASDAQ

Good morning, ladies and gentlemen, and welcome to the Humacyte First Quarter 2024 Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'll now turn the call over to Tom Johnson 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 law. 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 on our Form 10-Q, which, after filing, may be accessible from the Investor 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; Dr. Heather Prichard, Chief Operating Officer. Dr. Niklason will provide a summary of the company's progress during the year and recent weeks, and Dale will review the company's financial results for the quarter ended March 31, 2024. Following their prepared remarks, the management team will be available for your questions. I will now turn over the call to Dr. Niklason.

Thank you, Tom. Good morning, everyone, and thank you for joining us for our first quarter 2024 financial results and business update call. The start of 2024 has been highly productive for Humacyte. Notably, the FDA accepted our Biologics License Application for the HAV in the vascular trauma indication in February of this year. The HAV was granted Priority Review by the FDA with a PDUFA date set for August 10, 2024. The entire Humacyte team has been actively engaged in commercial readiness activities to support our anticipated U.S. market launch. In addition, the HAV continues to be featured in a variety of medical and scientific presentations, highlighting its significant promise across our broader HAV pipeline, including in dialysis access, type 1 diabetes using the BioVascular Pancreas and in cardiac bypass surgery using a small-caliber version of the HAV. Finally, we strengthened our balance sheet with a $43 million equity raise in February of 2024 and $20 million in funding under our arrangement with Oberland Capital, enabling us to continue executing on our corporate strategy. During today's call, I'll review these developments 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 up for your questions. I'll begin with our HAV program in vascular trauma. You'll recall that in December of 2023, we submitted our BLA to the FDA. During our last quarterly call, we discussed in detail the robust data package supporting our submission, which included positive results from our V005 Phase II/III clinical trial as well as real-world evidence from the treatment of wartime injuries in Ukraine under the humanitarian aid program that was supported by the FDA. In February of 2024. the FDA accepted our BLA in vascular trauma, granting Priority Review and establishing a PDUFA goal date for action of August 10. The FDA has completed its pre-licensing inspection of our manufacturing facilities in Durham, North Carolina as part of the BLA review process. We remain on track with our BLA review and commercial launch preparations, and we remain confident in the approvability of the HAV in vascular trauma. Building upon the positive clinical results and the Priority Review grant by the FDA, we've implemented a company-wide multidisciplinary program that's designed to ensure U.S. launch readiness upon the anticipated approval of the HAV. Among the major recent accomplishments is the completion of a budget impact model, which illustrates the potential economic value of the HAV as compared to the current standard of care in vascular trauma. Presentations of clinical results and the budget impact model are planned at upcoming medical meetings and in publications throughout the remainder of 2024. In addition, our medical affairs team is continuing to build awareness through demonstrations of the HAV at medical and military conferences and at meetings conducted across the U.S. at trauma medical centers. We're also having productive discussions with payers, and we're in the process of achieving an ICD-10 code for HAV implantation procedures with the Centers for Medicare & Medicaid Services, or CMS. Lastly, we've commenced the recruiting of a high-quality sales team to support the planned market launch. Humacyte is pleased to announce that we've hired Morgan Rankin as Vice President of Sales, joining Humacyte after 12 years at Teleflex Medical. Morgan most recently served as the Vice President of Sales, Trauma and Emergency Medicine at Teleflex, where she led a team of approximately 100 sales professionals who were focused on vascular access and hemorrhage control. We are on the cusp of being able to provide an innovative regenerative medicine product for patients who are suffering from traumatic vascular injury. Based on the strength of our BLA data package, combined with our Priority Review and the RMAT designation from the FDA, we're looking forward to the PDUFA date. Turning now to our program in dialysis access. In March of 2024, we hosted a key opinion leader webinar entitled Hemodialysis Care: A Crossroads of Care (sic) [ Hemodialysis Access: A Crossroads of Care ], which featured the HAV as a potential solution for arteriovenous access in patients with end-stage kidney disease requiring hemodialysis. A replay of that webinar can be found on the Investors section of the Humacyte website. Dr. Timmy Lee, Dr. Prabir Roy-Chaudhury and Dr. Michael Curi provided a thorough picture of the unmet need in dialysis access and discussed real-world patient examples of the gaps in hemodialysis access care. We also presented results from a study that we conducted with our corporate partner, Fresenius Medical Care, and its subsidiary, Frenova Renal Research. In that study, we reviewed outcomes of nearly 180,000 adult patients who received in-center dialysis at Fresenius Kidney Care dialysis centers. The objective of the study was to further define the patient subgroups who could most benefit from the HAV in hemodialysis. Strikingly, the study revealed that women, particularly those who are obese or diabetic, are much more likely to have higher dialysis access complication rates. These complications of dialysis access include infections, access removals, thrombosis and access failures. The cost of maintaining dialysis access in patients, including the cost of infections and fistula failures, can average approximately $22,000 to $55,000 per year for these high-cost, high-complication patient groups. In addition, data indicate that vascular access costs in the upper quintile of patients exceeded approximately $91,000 per year. Based on these results, we believe that female patients could benefit from more reliable AV access by avoiding infections and other complications that are associated with the current standard of care. To that end, we've initiated a study that will collect comprehensive data on the outcomes and complications in women receiving the HAV for dialysis access as compared to those receiving autogenous fistula. The study, named the V012 study, is not only designed to evaluate the efficacy and safety of the HAV as compared to fistula in women but will also capture important information on access complications and resulting health economic data. This study is the first is kind, and it will help to quantify the potential health economic benefits of the HAV and should provide additional support for reimbursement in women. We're very excited about this study, and we'll provide you with updates as it progresses. Results from our V007 Phase III trial of the HAV in patients with end-stage renal disease remain on track to be reported in the third quarter of 2024. As a reminder, we completed enrollment of 242 patients in this trial in April of 2023. The trial is designed to evaluate the usability of the HAV for dialysis during the first 12 months, and participants will be followed for 24 months after implantation. We look forward to sharing these results when they become available. On the diabetes front, results from our studies with the HAV in our earlier-stage programs are slated to be featured in several upcoming medical meetings. Results from ongoing preclinical studies support the potential of our BioVascular Pancreas, or BVP, which is a product candidate to enable the delivery and survival of insulin-producing islets as a potential treatment for type 1 diabetes. In 3-month studies conducted in nonhuman primates, researchers observed that insulin-producing cells in the BVP survived after implantation for 3 months and continue to make insulin. In addition, we have advanced the manufacturing of islets from human stem cells and have shown that these human stem cell-derived islets can arrest diabetes in rodent models. These and other preclinical results will be presented at the American Diabetes Association Annual Meeting being held in June in Orlando, Florida. We'll also be presenting results from studies of our small 3.5 millimeter diameter HAV in cardiac bypass graft surgery, or CABG. Preclinical 6-month studies have been conducted in nonhuman primates to support the planned advancement of the small diameter HAV into human clinical trials in CABG. We have observed remodeling of the HAV to a diameter that closely matches that of the native coronary vessels in the nonhuman primates, which is an outcome that has not been observed with any other conduit. These promising results of HAV patency and remodeling will be presented at the Tissue Engineering and Regenerative Medicine Conference in June. And with that, I'll now turn it over to Dale for a review of our financial results and other business developments.

Thank you, Laura. As of March 31, 2024, we had cash and cash equivalents of $115.5 million. Total net cash provided was $35.1 million for the first 3 months of 2024 compared to net cash used of $20.2 million for the first 3 months of 2023. The increase in net cash provided resulted primarily from $43 million in net proceeds from a public offering of Humacyte's common stock in March 2024 and $20 million in proceeds from an additional draw under our funding arrangement with Oberland Capital Management. We believe that our cash and cash equivalents will be adequate to finance operations for at least 12 months from the date of this financial report, well past the currently anticipated timelines for FDA approval and commercialization of the HAV in the vascular trauma indication. There were no revenues for either the first quarter of 2024 or the first quarter of 2023. I will run through the normal year-to-year comparison of expenses, but first I wanted to highlight that our overall expense run rate for the first quarter of 2024 is virtually identical to the fourth quarter of 2023. Total operating expenses, which include noncash expenses, were $26.6 million for the first quarter of 2024, largely unchanged compared to the $26.2 million incurred in the fourth quarter of 2023. Regarding the year-over-year comparisons, research and development expenses were $21.3 million for the first quarter of 2024 compared to $17.3 million for the first quarter of 2023. The current year increase resulted primarily from increased materials and personnel expenses to support expanded research and development initiatives and our clinical trials, including the ongoing clinical development of the HAV for use in AV access for hemodialysis. General and administrative expenses were $5.3 million for the first quarter of 2024 compared to $5.2 million for the first quarter of 2023. The slight increase during the 3 months ended March 31, 2024, compared to the prior year period resulted primarily from increased professional fees and external service costs. Other net expense was $5.3 million for the first quarter of 2024 compared to net expense of $14.5 million for the first quarter of 2023. The decrease in other net expense from the first quarter of 2024 compared to 2023 resulted primarily from the noncash remeasurement of the contingent earnout liability associated with the August 2021 merger with Alpha Healthcare Acquisition Corp. Net loss was $31.9 million for the first quarter of 2024 compared to $37.0 million for the first quarter of 2023. The current period decrease in net loss resulted primarily from the noncash remeasurement of the contingent earnout liability described previously. I will now turn it back to Laura for concluding remarks.

Thank you, Dale. This is a very exciting time for Humacyte and for all of our stakeholders. I'd like to take a moment again to thank the Humacyte team as well as all of our partners for their continued commitment to our programs. Our team's dedication has been instrumental in reaching this crucial and exciting stage in our company's development. Not only are we nearing our first anticipated regulatory approval but we're also making meaningful progress across our broader pipeline, bringing us closer to delivering a potential solution to patients with a variety of vascular diseases and complications. We look forward to keeping you updated with our progress, and thank you all for joining us today. Operator, we're now ready to take questions.

[Operator Instructions] Our first question comes from the line of Ryan

Well, congrats on all the progress, getting closer to PDUFA here. Laura, can you talk about the facility inspection with FDA? Any observations? Anything that you guys had to correct? How clean was that? And just help us know that we're kind of checking those boxes before PDUFA.

So I'm going to ask our COO, Heather Prichard. She and our Head of Quality really oversaw that inspection. I'm going to ask her to take this question.

Ryan, yes, as Laura stated, we completed our pre-license inspection of our manufacturing facility and had a very successful outcome. And based on the outcome of inspection and all of the other FDA interactions on the whole, we remain very confident in approval of the HAV in vascular trauma. And we won't necessarily comment on any single interaction or the details, but we do feel very confident. It was a very successful interaction that we have with the FDA, and we feel like it concluded very successfully.

Okay. I appreciate that. And then Dale, your SG&A costs were running a little lower than we expected, at least this quarter. They were, as you noted, in line with last quarter. Just help us understand kind of when that step-up occurs as you prepare for commercializations. We've talked in the past about needing a smallish kind of modest sales force for the vascular trauma indication. When do we think about that increase in cash and those needs? And I guess, help us understand what you're doing today in terms of preparing for commercialization.

Yes. Yes, certainly, Ryan. And so SG&A expenses are where we expected. Keep in mind that even though we're feverishly preparing for the commercial launch, we have had a core commercial team, which is primarily on the marketing side that has been in place for some time, which is why the SG&A expenses are somewhat level because a number of the activities that we've been undertaking to prepare for launch, including preparation of the budget impact model that demonstrates the potential savings of use of the HAV in vascular trauma versus standard of care and other longer-time items like that, such as working with payors and working with CMS to get the coding that we need, have been underway for quite some time. In terms of the actual ramp-up associated with the sales force, as indicated in the press release, we're pleased that we brought our Vice President of Sales, Morgan Rankin, onboard. The actual sales team itself, which as we've discussed in the past, will be relatively small because the vascular trauma market is very concentrated with only about 200 level 1 trauma centers in the United States. That will be brought on closer to the time of approval. So you don't see those expenses in place right now. In terms of the sizing of that sales force, we haven't given absolute guidance other than to point out that based on the level 200 trauma centers in the U.S., that sales force will be somewhat less than 20 representatives, most likely.

Okay. Very helpful, and congrats on all the progress.

Our next question comes from the line of Kristen Kluska with Cantor Fitzgerald.

Let me also add my congratulation on all the progress the team is making 3 months now into the PDUFA. Maybe for me, I'll start with the question on AV access. It's exciting top line results a quarter away here. So can you -- maybe in light of all of these findings that you presented for us at your KOL event, can you talk to us about how you're going to present the data as a whole, but then also maybe look at some of these subset analyses, in particular, where you've highlighted maybe the greatest unmet medical need and how that's going to ultimately play into future conversations with the agency?

Kristen, this is Laura, and that's a great set of questions. And our partnership with Fresenius is really what has allowed us to leverage their enormous database, that's really worldwide, on dialysis access complications and which demographics fare well and which fare poorly. And so I just want to give a shout-out to our team members at Fresenius. We could not have done this research without them. But you're right, Kristen, it is clear that not all dialysis patients are created equal. And there's clear quantitative evidence now that female patients, diabetics, obese patients all have more trouble with their access and are more expensive to care for than our male patients, particularly male patients who aren't burdened with those other disease processes. So you're right. We're going to look at the V07 data in -- through the lens of all patients writ large, but also through the lens of these different demographic subsets. Because again, the benefits that accrue to some of these patients, particularly perhaps women or the elderly or diabetics, those relative benefits as compared to fistula may be even greater. And so we anticipate that this will be part of our discussions with the agency, both for the V07 trial, but then also, obviously, for the V012 trial, which is our women-only trial, once we start to get those data in hand.

Okay. And then moving on to vascular trauma. You've clearly also done a lot of work with the community here and educating them about the benefits of this product. But I know it's going to require a relatively small sales force to bring this out. But do you think that this is going to be a product where word of mouth is going to be essential and not initially yield target surgeons that are more open to trying new therapies and then they'll essentially tell their colleagues at conferences, events, et cetera? And then have you gated from the surgeons that participated in the trial that they would be open to using it in a commercial setting as well?

So I'll take the second question first. Some of our -- while many of our surgeons in the trauma trial, particularly our highest enrolling surgeons at the busiest centers, so for example, surgeons at Denver trauma center, at Baltimore Shock Trauma, at Johns Hopkins and at Grady medical center in Atlanta, these surgeons have expressed a lot of enthusiasm for the vessel and really see the enormous clinical benefits of having something that can be immediately available, both for vascular surgeons, for trauma surgeons, quite frankly, in the care of vascular injuries. I do think it's important to point out that while vascular surgeons are obviously very experienced at harvesting vein, trauma surgeons who take care of a large fraction of these patients, that's not really part of their training. And so for a trauma surgeon to have at their fingertips a conduit that is immediately available, that they don't have to dig out of the patient and that will resist infection, I think that, that will have enormous appeal for many of these surgical caregivers. That said, you're correct. We're going to have to work in medical center by medical center, surgeon by surgeon and in these major centers in metropolitan areas around the country. And in fact, as we mentioned earlier on the call, our medical affairs team is already doing that. We're already essentially doing road shows that are educational because we're not marketing the product, but we are educating surgeons about biological conduits and their usefulness in trauma. And we're targeting major medical centers, but also just specific geographies. And there is, within geographies, if the leading academic center in a particular metropolitan area, if that center adopts the HAV, then there is word of mouth even within the local geography that we think will help spur adoption.

Our next question comes from the line of Bruce Jackson with The Benchmark Company.

Most of my questions have been answered. If maybe you could just give us a little bit of a flavor of the interaction with the FDA. What types of questions are they asking? And how close do you think you're getting to concluding the BLA?

Well, as with any BLA filing, part of the standard procedure is that after you file and after they accept the file, there is a lot of back and forth that they ask for clarifying. They ask clarifying questions. They ask for additional information. And that's been going on, frankly, since January. And those interactions have been going very smoothly, and we've been able to address all of the questions that they've been asking. There are also specific meetings that are part of the normal process, there's what's called a mid-cycle meeting, which we've already completed. So I think that -- and as we mentioned, we've already completed the inspection of our facility. So things are tracking along exactly as we would have expected, given the timelines for a Priority Review. So again, we see no reason that the PDUFA date will shift. Of course, what -- exactly what the FDA does is always out of our control, but we have no indication that we're not on track. Everything just seems to be progressing along as we would've expected.

Okay. That's great. Congratulations again on all the progress.

Our next question comes from the line of Josh Jennings with TD Cowen.

I was hoping that just with the -- assuming that this August PDUFA date is held up by the FDA and BLA is approved, was just hoping you could walk us through the steps from there, just in terms of the initial commercialization effort. I mean, maybe talk about back approvals we've heard from some other device companies, that, that process is taking a little bit longer. And ultimately, what I'm trying to get at is, I mean, should we be expecting initial revenues in 4Q or should you think we should take a more conservative approach in our modeling and think about 1Q 2024? And then I just have one follow-up regarding 2025 season.

Dale, would you like to take that question?

Yes, absolutely. Thanks, Josh. And you're right. We are a biologic. But I think in terms of the process of getting through hospitals, it will not be too dissimilar from the med tech world and devices. But in terms of launch, as you would expect, I mean, typically, the timeline post launch is driven a little bit by the magnitude of changes to package inserts and labeling and just some of the logistics of getting, if required, new packaging done and things like that to get the launch out there. So typically, there is the approval. There's some period of time, which could be a few weeks, to implement any packaging or packaging sort of changes. And then typically, there's a soft launch where the company is positioned to start responding to orders and filling orders and then shortly thereafter, a full promotional effort, which is the major formal launch of the product. We would certainly expect that for most hospitals, there'll be some type of a value analysis committee program. I guess with launches I've been associated with in the past, you get surprised. Sometimes there's hospitals that order on day 1, either avoiding the process or just ordering in parallel while the process is going on. And there's other hospitals that routinely go through the full VAC process which, as you know, historically has averaged about 6 months to get through -- to get to a hospital and get to that process. The feedback we've gotten from a number of trauma surgeons and vascular surgeons who have been real advocates within hospitals for the product is they feel pretty confident that they have a great deal -- ability to influence that process and then -- particularly in the area of trauma and vascular trauma because the ends are not so great in terms of the number of patients necessarily being seen on a week-to-week basis within a hospital. But they feel like they've had a pretty high success rate and would expect, in their words, high success rate of getting the HAV through the process on an expeditious manner.

That's super helpful. And just -- I know it's been a little while since you hosted us at your headquarters and gave us the tour of the manufacturing facility. But just wanted to get a reminder of where manufacturing capacity sits today, what steps you needed to take -- the team needs to take to kind of ramp up capacity in these early days as the vascular trauma indication is opened up with this BLA approval on tap.

I'm going to ask Heather, our COO, to take that question.

Thanks, Laura. So Josh, as our manufacturing capacity stands now, as you know, at about 8,000 HAVs growth per year. And as far as scaling that out with the LUNA system that we have that manufactures our product, that is just a case of putting in more LUNA lines. Our facility is already ready in a shelled out space that's already plumbed for electrical and gases and utilities for us to add additional units LUNAs up to about 40,000 HAV per year annual gross yield. So we're prepared, and we're prepared for a launch to be able to produce enough vessels in the first few years. And then we're also prepared and have begun planning for that expansion within the space. So as demand grows, we can produce enough HAVs for the market.

[Operator Instructions] Our next question is a follow-up from the line of Ryan

Sorry, I just had one follow-up I want to ask. You did talk about ICD-10s for Humacyte -- for the HAV, excuse me. And I'm just wondering if you could speak a little bit to kind of how you're thinking about that process, any timing that you think you could -- you want to put out there in terms of potentially getting a code for implantation of the HAV, be it vascular trauma or AV access or so forth.

Yes, Ryan. So we submitted the application with CMS for the ICD-10 code in trauma because the ICD-10 code in this case is going to be indication-specific. So we submitted the application in December, and we had a public forum meeting on the ICD-10 code application in March. And this is in the public domain. The CMS recommendation at the time was that the HAV be granted its own ICD-10 code for the implantation of a bioengineered vessel in the upper or lower extremities. CMS doesn't execute on the final decision on that, I don't think, until June. But based on the CMS recommendation, which is already in the public domain, we expect that to go through and to have that in hand before approval. And just as a side note, also with respect to CMS, we are planning to apply for a new technology add-on payment with CMS after our projected approval date. So you can apply for an NTAP once per year, that the application date is typically around October 1, and we plan on hitting that allocation date and applying this year.