如附註8進一步披露，2024年9月24日，公司與林肯公園資本基金（Lincoln Park Capital Fund, LLC）簽訂了一份普通股購買協議（「普通股購買協議」），以進行股權融資。普通股購買協議規定，依據其中的條款和條件，公司有唯一的權利但沒有義務向林肯公園出售面值爲$的公司普通股股份（「普通股」）。0.0001 該普通股股份的總價值最高可達$百萬（「購買股份」），爲期爲一個50.0 月。公司自行決定控制根據普通股購買協議向林肯公園出售購買股份的時間和數量。截止2024年9月30日，公司在普通股購買協議下還有$百萬的普通股銷售餘量。 24截至2024年9月30日，公司已完成在普通股購買協議下出售股份的交易，這筆交易提供了$百萬的總收益，且根據附註13進一步披露，從2024年9月30日至2024年11月8日期間，公司向林肯公園完成了股份銷售，獲得了$百萬的額外總收益。49.01.01.5
We are initially using our proprietary, scientific technology platform to engineer and manufacture ATEVs. Our investigational ATEVs are designed to be easily implanted into any patient without inducing a foreign body response or leading to immune rejection. We are developing a portfolio, or “cabinet”, of ATEVs with varying diameters and lengths. The ATEV cabinet would initially target the vascular repair, reconstruction and replacement market, including use in vascular trauma; arteriovenous (“AV”) access for hemodialysis and peripheral artery disease (“PAD”). We are also developing the ATEV for coronary artery bypass grafting (“CABG”) and pediatric heart surgery. Over the longer term, we are developing our ATEV for the delivery of cellular therapies, including pancreatic islet cell transplantation to treat Type 1 diabetes (our BioVascular Pancreas or “BVPTM”). We will continue to explore the application of our technology across a broad range of markets and indications, including the development of urinary conduit, trachea, esophagus and other novel cell delivery systems.
For the ATEV, we believe there is substantial clinical demand for safe and effective vascular conduits to replace and repair blood vessels throughout the body. Vascular injuries resulting from trauma are common in civilian and military populations, frequently resulting in the loss of either life or limb. Existing treatment options in the vascular repair, reconstruction and replacement market include the use of autologous vessels and synthetic grafts, which we believe suffer from significant limitations. For example, the use of autologous veins to repair traumatic vascular injuries can lead to significant morbidity associated with the surgical wounds created for vein harvest and prolonged times to restore blood flow to injured limbs, leading to an increased risk of complications such as amputation and reperfusion injury. In addition, in many instances of vascular trauma the patient may not have adequate vein available, or the time between injury and treatment is too long, to make autologous graft repair feasible. Synthetic grafts are often contraindicated in the setting of vascular trauma due to higher infection risk that can lead to prolonged hospitalization and limb loss. Given the competitive advantages our ATEVs are designed to have over existing vascular substitutes, we believe that ATEVs have the potential to become the standard of care and lead to improved patient outcomes and lower healthcare costs.
We and our collaborators are currently conducting Phase 3 and Phase 2 trials of our 6 millimeter ATEV across three therapeutic indications: vascular trauma, AV access for hemodialysis, and PAD. We were granted Fast Track designation by the FDA for our 6 millimeter ATEV for use in AV access for hemodialysis in 2014. We also received the first Regenerative Medicine Advanced Therapy (“RMAT”) designation from the FDA, for the creation of vascular access for performing hemodialysis, in March 2017. In May 2023, we were granted the RMAT designation for the ATEV for urgent arterial repair following extremity vascular trauma, and in June 2024, we were granted the RMAT designation for the ATEV for patients with advanced PAD. In addition, in 2018 our ATEV product candidate was assigned a priority designation by the Secretary of Defense under Public Law 115-92, enacted to expedite the FDA’s review of products that are intended to diagnose, treat or prevent serious or life-threatening conditions facing American military personnel.
In September 2023, we announced positive topline results from our V005 Phase 2/3 trial in vascular trauma, and in December 2023, we filed a BLA for urgent arterial repair following extremity vascular trauma when synthetic graft is not indicated, and when autologous vein use is not feasible. In February 2024, the FDA accepted the BLA filing and granted priority review and set a Prescription Drug User Fee Act date of August 10, 2024. On August 9, 2024, the FDA informed us that it required additional time to complete its review of the BLA for the vascular trauma indication.
In April 2023, we announced completion of enrollment of our V007 Phase 3 trial of the ATEV for use in AV access for hemodialysis. In July 2024, we announced positive topline results from our V007 Phase 3 trial in which the ATEV met the primary endpoints in the study. We expect to discuss a potential market authorization pathway for the ATEV with the FDA for an indication in AV access for hemodialysis.
We have generated no product revenue and incurred operating losses and negative cash flows from operations in each year since our inception in 2004. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $665.1 million and $537.3 million, respectively, and working capital of $2.1 million and $64.8 million, respectively. Our operating losses were approximately $30.2 million and $86.3 million for the three and nine months ended September 30, 2024, respectively, and $24.6 million and $73.9 million for the three and nine months ended September 30, 2023, respectively.
Net cash flows used in operating activities were $71.5 million and $54.3 million during the nine months ended September 30, 2024 and 2023, respectively. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to incur substantial operating losses and negative cash flows from operations for the foreseeable future as we advance our product candidates.
As of September 30, 2024, we had cash and cash equivalents of $20.6 million and restricted cash of $50.4 million. Subsequent to September 30, 2024, we received an additional $29.6 million in net proceeds from the Registered Direct Offering and sales of shares to Lincoln Park under the Common Stock Purchase Agreement. The extension of time required by the FDA to review our vascular trauma BLA, and the delay in potential approval, has delayed, among other items, our ability to draw an additional $40.0 million in Purchase Agreement proceeds. Accordingly, we do not believe our available cash and cash equivalents on hand will be sufficient to fund operations, including clinical trial expenses and capital expenditure requirements, for at least one year from the date of this Quarterly Report without achieving approval of the ATEV for vascular trauma and generating sufficient cash flows from commercial sales on a timely basis and/or obtaining additional capital. See Note 1 — Organization and Description of Business in the notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding this assessment.
Our need for additional capital will depend in part on the scope and costs of our development and commercial manufacturing activities, and the results of our planned upcoming commercial sales efforts. To date, we have not generated any revenue from the sale of commercialized products. Our ability to generate product revenue will depend on the successful development and eventual commercialization of one or more of our product candidates. Until such time, if ever, we expect to finance our operations through the use of existing cash and cash equivalents, the sale of equity or debt, proceeds from the Purchase Agreement, borrowings under credit facilities, or through potential collaborations, other strategic transactions or government and other grants. Adequate capital may not be available to us when needed or on acceptable terms. If we are unable to raise capital, we could be forced to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition. See “Risk Factors” for additional information.
We expect to continue to incur significant expenses and to increase operating losses for at least the next several years. We anticipate that our expenses will increase substantially as we seek to:
•obtain marketing approval for our 6 millimeter ATEV for vascular repair, reconstruction and replacement including for indications in vascular trauma and AV access for hemodialysis;
•commercialize the ATEV via U.S. market launch for indications in vascular trauma and hemodialysis AV access, if approved;
•scale out our manufacturing facility to the extent required to satisfy potential market demand following receipt of any regulatory approval;
•continue our preclinical and clinical development efforts;
•maintain, expand and protect our intellectual property portfolio;
•add operational, financial and management information systems and personnel to support, among other things, our product development and commercialization efforts and operations; and
•continue operating as a public company, which includes higher costs associated with hiring additional personnel, director and officer insurance premiums, audit and legal fees and expenses for compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.
Components of Results of Operations
Revenue
To date, we have not generated revenue from the sale of any products. All of our revenue has been derived from government and other grants. From inception through September 30, 2024 we have been awarded grants, including grants from the California Institute of Regenerative Medicine (“CIRM”), the National Institutes of Health (“NIH”), and the Department of Defense, to support our development, production scaling and clinical trials of our product candidates. We may generate revenue in the future from government and other grants, payments from future license or collaboration agreements and, if any of our product candidates receive marketing approval, from product sales. We expect that any revenue we generate will fluctuate from quarter to quarter. If we fail to complete the development of, or obtain marketing approval for, our product candidates in a timely manner, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Research and Development Expenses
Since our inception, we have focused our resources on our research and development activities, including conducting preclinical studies and clinical trials, developing and refining our manufacturing process and activities related to regulatory filings for our product candidates. We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:
•salaries and related overhead expenses for personnel in research and development functions, including stock-based compensation and benefits;
•fees paid to clinical research organizations (“CROs”) and consultants, including in connection with our clinical trials, and other related clinical trial fees, such as for clinical site fees and investigator grants related to patient screening and treatment, conduct of clinical trials, laboratory work and statistical compilation and analysis;
•allocation of facility lease and maintenance costs;
•depreciation of leasehold improvements, laboratory equipment and computers;
•costs related to purchasing raw materials and producing our product candidates for clinical trials;
•costs related to compliance with regulatory requirements;
•costs related to our manufacturing development and expanded-capabilities initiatives; and
•license fees related to in-licensed technologies.
The majority of our research and development resources are currently focused on our Phase 2 and 3 clinical trials for our 6 millimeter ATEV and other work needed to obtain marketing approval for our 6 millimeter ATEV for use for vascular repair, reconstruction and replacement, including indications in vascular trauma and AV access in hemodialysis in the United States. We have incurred and expect to continue to incur significant expenses in connection with these and our other clinical development efforts, including expenses related to regulatory filings, trial enrollment and conduct, data analysis, patient follow up and study report generation for our Phase 2 and Phase 3 clinical trials.
Direct expenses for our vascular trauma, AV Access and PAD indications include costs related to our clinical trials, including fees paid to CROs, consultants, clinical sites and investigators. Costs related to development activities which broadly support multiple programs using our technology platform, including personnel, materials and supplies, external services costs, and other internal expenses, such as facilities and overhead costs, are not allocated to individual research and development programs. Other research and development expenses reported in the table below include direct costs not identifiable with a specific product candidate, including costs associated with our research and development platform used across programs, process development, manufacturing analytics and preclinical research and development for prospective product candidates and new technologies.
The successful development of our preclinical and clinical product candidates is highly uncertain. At this time, we cannot estimate with any reasonable certainty the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our preclinical or clinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with the development of our product candidates, including:
•the scope, rate of progress, expense and results of our preclinical development activities, our ongoing clinical trials and any additional clinical trials that we may conduct, and other research and development activities;
•successful patient enrollment in and the initiation and completion of clinical trials;
•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S. regulators;
•the extent of any required post-marketing approval commitments to applicable regulatory authorities;
•development and refinement of clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that it or its third-party manufacturers are able to successfully manufacture our product;
•obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights;
•significant and changing government regulations;
•launching commercial sales of our product candidates, if approved, whether alone or in collaboration with others;
•the degree of market acceptance of any product candidates that obtain marketing approval; and
•maintaining a continued acceptable safety profile following approval, if any, of our product candidates.
A change in the outcome of any of these variables could lead to significant changes in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate being required to conduct in order to complete the clinical development of any of our product candidates, or if we experience significant delays in the enrollment or the conduct of any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance, human resources, commercialization, and administrative support functions, which also include stock-based compensation expenses and benefits for such employees. Other significant general and administrative expenses include facilities costs, professional fees for accounting and legal services and expenses associated with obtaining and maintaining patents.
We expect our general and administrative expenses will continue to increase for the foreseeable future to support our expanded infrastructure and increased costs of operating as a public company and as we prepare for our anticipated commercial launch of the ATEV. These increases are expected to include increased employee-related expenses, increased sales and marketing expenses, and increased director and officer insurance premiums, audit and legal fees, and expenses for compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC, as well as Nasdaq rules.
Other Income (Expense), Net
Total other income (expense), net consists of (i) the change in fair value of the Contingent Earnout Liability that was accounted for as a liability as of the date of the Merger, and is remeasured to fair value at each reporting period, resulting in a non-cash gain or loss, (ii) interest income earned on our cash and cash equivalents and short-term investments, (iii) interest expense incurred on the Purchase Agreement (defined above), finance leases, and our former loan agreement with SVB, during the periods each were outstanding, (iv) the change in fair value of our derivative liabilities and asset including the private placement Common Stock warrant liabilities related to the Private Placement Warrants, which we assumed in connection with the Merger; the contingent derivative liability related to the Purchase Agreement; a liability related to the Option Agreement; a derivative liability related to our agreement with JDRF; and a derivate asset related to our Common Stock Purchase Agreement, all of which are subject to remeasurement to fair value at each balance sheet date resulting in a non-cash gain or loss, (v) a loss on debt extinguishment related to the prepayment of our loan agreement with SVB in May 2023, and (vi) an employee retention credit we recognized in June 2023.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023
Three Months Ended September 30,
Change
($ in thousands)
2024
2023
$
%
Revenue
$
—
$
—
$
—
—
%
Operating expenses:
Research and development
22,926
18,552
4,374
24
%
General and administrative
7,307
6,070
1,237
20
%
Total operating expenses
30,233
24,622
5,611
23
%
Loss from operations
(30,233)
(24,622)
(5,611)
23
%
Other income (expense), net
Interest income
911
1,369
(458)
(33)
%
Change in fair value of Contingent Earnout Liability
The following table discloses the breakdown of research and development expenses for the periods indicated:
Three Months Ended September 30,
Change
($ in thousands)
2024
2023
$
%
Direct Expenses
Vascular Trauma
$
439
$
941
$
(502)
(53)
%
AV Access
1,927
2,248
(321)
(14)
%
PAD
22
88
(66)
(75)
%
Total
2,388
3,277
(889)
(27)
%
Unallocated Expenses
External services
1,915
1,008
907
90
%
Materials and supplies
5,451
3,301
2,150
65
%
Payroll and personnel expenses
9,621
7,665
1,956
26
%
Other research and development expenses
3,551
3,301
250
8
%
Total
20,538
15,275
5,263
34
%
Total research and development expenses
$
22,926
$
18,552
$
4,374
24
%
Research and development expenses were $22.9 million for the three months ended September 30, 2024, representing an increase of $4.4 million, or 24%, from $18.6 million for the three months ended September 30, 2023. The increase was primarily driven by expenses incurred to support our expanded research and development initiatives, including increased product manufacturing and development and support of the FDA review of the BLA in vascular trauma. Expense increases were primarily comprised of a $2.2 million increase in the purchase of materials and supplies and $2.0 million in additional payroll and personnel expenses.
General and Administrative Expenses
General and administrative expenses were $7.3 million and $6.1 million for the three months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses during this period of $1.2 million, or 20%, was primarily driven by preparation for the planned commercial launch of the ATEV in vascular trauma. Major changes in expenses included a $1.1 million increase in salaries and benefits and a $0.8 million increase in external services, partially offset by a $0.5 million decrease in non-cash stock compensation expense and a $0.4 million decrease in insurance expense.
Total Other Income (Expense), net
Total other expense, net was $9.0 million for the three months ended September 30, 2024 compared to $1.4 million for the three months ended September 30, 2023. The increase in net expense of $7.6 million during the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily resulted from a $7.3 million increase in the non-cash loss resulting from the remeasurement of the Contingent Earnout Liability during each period.
Comparison of the Nine Months Ended September 30, 2024 and 2023
Nine Months Ended September 30,
Change
($ in thousands)
2024
2023
$
%
Revenue
$
—
$
—
—
—
%
Operating expenses:
Research and development
67,943
56,370
11,573
21
%
General and administrative
18,367
17,495
872
5
%
Total operating expenses
86,310
73,865
12,445
17
%
Loss from operations
(86,310)
(73,865)
(12,445)
17
%
Other income (expense), net:
Interest income
3,252
4,323
(1,071)
(25)
%
Change in fair value of Contingent Earnout Liability
(38,653)
(11,708)
(26,945)
230
%
Interest expense
(6,769)
(4,872)
(1,897)
39
%
Change in fair value of derivatives
719
(234)
953
(407)
%
Employee retention credit
—
3,107
(3,107)
(100)
%
Loss on extinguishment of debt
—
(2,421)
2,421
(100)
%
Total other expense, net
(41,451)
(11,805)
(29,646)
251
%
Net loss
$
(127,761)
$
(85,670)
$
(42,091)
49
%
Research and Development Expenses
The following table discloses the breakdown of research and development expenses for the periods indicated:
Nine Months Ended September 30,
Change
($ in thousands)
2024
2023
$
%
Direct Expenses
Vascular Trauma
$
1,904
$
3,030
$
(1,126)
(37)
%
AV Access
4,952
7,653
(2,701)
(35)
%
PAD
161
230
(69)
(30)
%
Total
7,017
10,913
(3,896)
(36)
%
Unallocated Expenses
External services
5,340
3,669
1,671
46
%
Materials and supplies
17,470
9,053
8,417
93
%
Payroll and personnel expenses
27,763
22,804
4,959
22
%
Other research and development expenses
10,353
9,931
422
4
%
Total
$
60,926
$
45,457
$
15,469
34
%
Total research and development expenses
$
67,943
$
56,370
$
11,573
21
%
Research and development expenses were $67.9 million for the nine months ended September 30, 2024, representing an increase of $11.6 million, or 21%, from $56.4 million for the nine months ended September 30, 2023. The increase was primarily driven by expenses incurred to support our expanded research and development initiatives, including increased product manufacturing and development and support of the FDA review of the BLA in vascular trauma. Expense increases were primarily comprised of a $8.4 million increase in the purchase of materials and supplies and $5.0 million in additional payroll and personnel expenses.
General and administrative expenses were $18.4 million and $17.5 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in general and administrative expenses during this period of $0.9 million, or 5%, was primarily driven by preparation for the planned commercial launch of the ATEV in vascular trauma. Major changes in expenses included (i) a $1.5 million increase in salaries and benefits expense, (ii) a $0.9 million increase in external services and (iii) a $0.9 million increase in professional fees, partially offset by a $1.8 million decrease in non-cash stock compensation expense and a $0.6 million decrease in insurance expense.
Total Other Income (Expense), net
Total other expense, net was $41.5 million for the nine months ended September 30, 2024, compared to expense of $11.8 million for the nine months ended September 30, 2023. The increase in net expense of $29.6 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily resulted from a $26.9 million increase in the non-cash loss resulting from the remeasurement of the Contingent Earnout Liability during each period.
Liquidity and Capital Resources
Sources of Liquidity
We have historically financed our operations primarily through the sale of equity securities and convertible debt, including pursuant to the Offering, proceeds from the Merger and related PIPE Financing, borrowings under loan facilities, the Purchase Agreement, and, to a lesser extent, through grants from governmental and other agencies. Since our inception, we have incurred significant operating losses and negative cash flows. As of September 30, 2024 and December 31, 2023, we had an accumulated deficit of $665.1 million and $537.3 million, respectively.
As of September 30, 2024 and December 31, 2023, we had working capital of $2.1 million and $64.8 million, respectively. As of September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $20.6 million and $80.4 million, respectively, and restricted cash of $50.4 million and $0.4 million, respectively. We are required to evaluate whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for at least one year from the issuance date of our financial statements. We funded the restricted cash account on August 14, 2024, in accordance with our amended Purchase Agreement, of which $50.0 million is not subject to our unilateral control.
As disclosed in Note 13 — Subsequent Events to our accompanying unaudited condensed consolidated financial statements, on October 7, 2024, we received net proceeds of approximately $28.1 million in connection with the closing of the Registered Direct Offering. From September 30, 2024 through November 8 2024, we sold 300,000 shares to Lincoln Park under our Common Stock Purchase Agreement for aggregate gross proceeds of $1.5 million. As of November 8 2024, we had $47.5 million in remaining availability for sales of Common Stock under our Common Stock Purchase Agreement with Lincoln Park.
Based on current plans and assumptions, which excludes the $50.0 million of restricted cash and the potential approval of the BLA from our forecasted liquidity, we will not have sufficient cash and cash equivalents to fund our operations beyond one year from the issuance of these financial statements if we are unable to achieve approval of the ATEV and generate sufficient cash flows from commercial sales on a timely basis and/or obtain additional capital. These factors raise substantial doubt about our ability to continue as a going concern. We will, over the course of the next year, require additional financing to continue our operations. Adequate additional capital may not be available to us when needed or on acceptable terms. If we are unable to raise sufficient capital when required, we may be required to reduce or discontinue our operations, sell assets, or cease all operations. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern. See Note 1 — Organization and Description of Business to our accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding our assessment. We believe that our longer-term working capital, planned research and development, capital expenditures and other general corporate funding requirements may be satisfied through the sale of equity, debt, borrowings under credit facilities or through potential
collaborations with other companies, other strategic transactions or government or other grants. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the sections entitled “Forward-Looking Statements” and “Risk Factors” in this Quarterly Report and our Annual Report. If we are unable to raise sufficient capital, we could be forced to further delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition.
On May 12, 2023, we entered into the Purchase Agreement with the Purchasers and another affiliate of Oberland Capital Management LLC, as agent for the Purchasers, to obtain financing in respect to the further development and commercialization of our ATEV, to repay the Loan Agreement, and for other general corporate purposes. Pursuant to the Purchase Agreement and subject to customary closing conditions, the Purchasers have agreed to pay us an aggregate investment amount of up to $150.0 million. Under the terms of the Purchase Agreement, $40.0 million of the Investment Amount, less certain transaction expenses, was funded on May 12, 2023, which was used to repay in full and retire our indebtedness under the Loan Agreement, with the remaining proceeds funded to the Company. On March 11, 2024, $20.0 million of the Investment Amount was funded to the Company. See Note 6 — Revenue Interest Purchase Agreement to the condensed consolidated financial statements for additional details about this financing transaction.
On February 18, 2024, we agreed with the Purchasers and the Agent, to waive certain breaches related to, and extend the deadline for certain post-closing obligations under, the Purchase Agreement, including the requirement for us to deliver a leasehold mortgage in favor of the Agent over our headquarters. On May 8, 2024, we reached an agreement with the Purchasers to amend the Purchase Agreement to remove requirements related to the leasehold mortgage. In exchange for the removal of this requirement, on August 14, 2024 we funded an account in the amount of $54.0 million, over which the Agent will have certain consent and other rights to $50.0 million of the funds. See Note 6 for further information.
On February 29, 2024, we entered into the Underwriting Agreement in connection with the Offering. The net proceeds to us from the Offering were approximately $43.0 million, after deducting underwriting discounts and commissions and Offering expenses. The Offering closed on March 5, 2024.
On September 24, 2024, we entered into the Common Stock Purchase Agreement with Lincoln Park for an equity line financing, which provides that, subject to the terms and conditions set forth in the Common Stock Purchase Agreement, we have the sole right, but not the obligation, to sell to Lincoln Park shares of Common Stock having an aggregate value of up to $50.0 million over a 24-month period. We control the timing and amount of any sales to Lincoln Park. As of September 30, 2024, we had completed sales of shares under the Common Stock Purchase Agreement that provided $1.0 million in gross proceeds, and as further disclosed in Note 13 — Subsequent Events, from September 30, 2024 through November 8 2024, we completed sales of shares that provided $1.5 million in additional gross proceeds. As of November 8 2024, we had $47.5 million in remaining availability for sales of our Common Stock under our Common Stock Purchase Agreement with Lincoln Park.
On October 4, 2024, we entered into a securities purchase agreement with an institutional investor pursuant to which the investor purchased approximately $30.0 million worth of Common Stock and Registered Direct Warrants in the Registered Direct Offering. The net proceeds to us from the Registered Direct Offering were approximately $28.1 million, after deducting placement agent’s fees and offering expenses of approximately $1.9 million. The Registered Direct Offering closed on October 7, 2024.
Material Cash Requirements
Our known material cash requirements include: (1) the purchase of supplies and services that are primarily for research and development; (2) repayments pursuant to the Purchase Agreement; (3) employee wages, benefits, and incentives; (4) financing and operating lease payments (for additional information see below), and (5) payments under our JDRF Agreement (see Note 11 — Commitments and Contingencies to our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report). We have also entered into contracts with CROs primarily for clinical trials. These contracts generally provide for termination upon limited notice, and therefore we believe that our non-cancellable obligations under these agreements are not material. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, for example, legal contingencies, uncertain tax positions, and other matters.
As of September 30, 2024, we had non-cancellable purchase commitments of $23.0 million for supplies and services that are primarily for research and development. We have existing license agreements with Duke University and Yale University, a distribution agreement with Fresenius Medical Care and our JDRF Agreement. The amount and timing of any potential milestone payments, license fee payments, royalties and other payments that we may be required to make under these agreements are unknown or uncertain at September 30, 2024. For additional information regarding our agreement with Fresenius Medical Care, see Note 12 — Related Party Transactions to our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report. For additional information regarding our agreements with Duke University, Yale University and JDRF, see Note 11 — Commitments and Contingencies to our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Revenue Interest Purchase Agreement
On May 12, 2023, we entered into the Purchase Agreement and repaid in full all of the outstanding obligations under our Loan Agreement with SVB and SVB Innovation Credit Fund VIII, L.P. Under the Purchase Agreement, as of September 30, 2024, we had $62.1 million recorded as a revenue interest liability on our condensed consolidated financial statements. For additional information regarding repayment, see Note 6 — Revenue Interest Purchase Agreement to our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Leases
Our finance leases relate to our headquarters facility containing our manufacturing, research and development and general and administrative functions, which was substantially completed in June 2018 and is being leased through May 2033, and our operating lease relates to the land lease associated with our headquarters. Our future contractual obligations under our lease agreements as of September 30, 2024 are as follows:
($ in thousands)
Total
Less than 1 year
1 – 3 years
3 – 5 years
More than 5 years
Finance leases
$
22,465
$
4,186
$
7,524
$
4,414
$
6,341
Operating lease
810
105
210
210
285
ATM Facility
On September 1, 2022, we entered into an agreement for the sale from time to time up to $80.0 million of shares of Common Stock pursuant to a sales agreement (the “ATM Facility”). As of September 30, 2024, we have not conducted any sales of Common Stock under the ATM Facility.
Future Funding Requirements
We expect to incur significant expenses in connection with our ongoing activities as we seek to (i) continue clinical development of our 6 millimeter ATEV for use in vascular trauma and hemodialysis AV access and submit a BLA for FDA approval of an indication in hemodialysis AV access, (ii) to launch and commercialize our ATEVs for vascular repair and hemodialysis AV access, if marketing approval is obtained, in the U.S. market, as well as subsequent launches in key international markets, (iii) advance our pipeline in major markets, including PAD Phase 3 trials and continue preclinical development and advance to planned clinical studies in CABG and BVP for diabetes, and (iv) scale out our manufacturing facility as required to satisfy market demand. We will need additional funding in connection with these activities.
Our future funding requirements, both short-term and long-term, will depend on many factors, including:
•the progress and results of our clinical trials and interpretation of those results by the FDA and other regulatory authorities;
•the cost, timing and outcome of regulatory review of our product candidates, particularly for marketing approval of our ATEVs in the United States;
•the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our additional product candidates;
•the cost and timing of our future commercialization activities, including product manufacturing, marketing and distribution for our ATEVs if approved by the FDA, and any other product candidate for which we receive marketing approval in the future;
•the amount and timing of revenues, if any, that we receive from commercial sales of any product candidates for which we receive marketing approval;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
•the costs of operating as a public company, including hiring additional personnel as well as increased director and officer insurance premiums, audit and legal fees, and expenses for compliance with public company reporting requirements under the Exchange Act and rules implemented by the SEC and Nasdaq.
Until such time, if ever, as we are able to successfully develop and commercialize one or more of our product candidates, we expect to continue financing our operations through the sale of equity, debt, borrowings under credit facilities or through potential collaborations with other companies, other strategic transactions or government or other grants. Adequate capital may not be available to us when needed or on acceptable terms. Other than the Purchase Agreement, we do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures. Debt financing would also result in fixed payment obligations. If we are unable to raise capital, we could be forced to delay, reduce, suspend or cease our research and development programs or any future commercialization efforts, which would have a negative impact on our business, prospects, operating results and financial condition.
Our principal use of cash in recent periods has been primarily to fund our operations, including the clinical and preclinical development of our product candidates. Our future capital requirements, both short-term and long-term, will depend on many factors, including the progress and results of our clinical trials and preclinical development, timing and extent of spending to support development efforts, cost and timing of future commercialization activities, and the amount and timing of revenues, if any, that we receive from commercial sales.
See the section of this Quarterly Report entitled “Risk Factors” for additional risks associated with our substantial capital requirements.
The following table shows a summary of our cash flows for each of the periods shown below:
Nine Months Ended September 30,
($ in thousands)
2024
2023
Net loss
$
(127,761)
$
(85,670)
Non-cash adjustments to reconcile net loss to net cash used in operating activities(1):
53,404
27,979
Changes in operating assets and liabilities:
2,812
3,440
Net cash used in operating activities
(71,545)
(54,251)
Net cash used in investing activities
(1,509)
(23)
Net cash provided by financing activities
63,177
4,842
Net decrease in cash, cash equivalents and restricted cash
$
(9,877)
$
(49,432)
Cash, cash equivalents and restricted cash at the beginning of the period
$
80,801
$
149,772
Cash, cash equivalents and restricted cash at the end of the period
$
70,924
$
100,340
___________________________
(1) Primarily includes depreciation, amortization related to our leases and our debt discount, stock-based compensation expense, non-cash interest expense related to our revenue interest liability and our JDRF Award liability, and the changes in fair value of our Contingent Earnout Liability and our derivative liabilities and asset, and in 2023 includes a loss on extinguishment of debt and an immaterial amount of loss on disposal of property and equipment.
Cash Flow from Operating Activities
The increase in net cash used in operating activities from the nine months ended September 30, 2023 to the nine months ended September 30, 2024 was primarily due to increased spending on pre-clinical, clinical and pre-commercial activities as well as payroll and personnel expenses, expansion of clinical development of the ATEV for use in AV access, and preparation for the planned commercial launch of the ATEV for an indication in vascular trauma, if approved by the FDA.
Cash Flow from Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2024 consisted of purchases of property and equipment. Net cash used in investing activities for the nine months ended September 30, 2023 consisted of purchases of property and equipment, which fully offset proceeds from the maturity of our short-term investments (certificates of deposit).
Cash Flow from Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2024 consisted primarily of $43.0 million of net proceeds from our Offering and $19.5 million of net proceeds from our Purchase Agreement. Net cash provided by financing activities for the nine months ended September 30, 2023 consisted primarily of $37.9 million of net proceeds from our Purchase Agreement, partially offset by $31.8 million of cash payments related to the repayment of our Loan Agreement.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in SEC rules and regulations.
Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our unaudited condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and disclosure of contingent liabilities. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates based on different assumptions, judgments, or conditions.
An accounting estimate or assumption is considered critical if both (a) the nature of the estimate or assumption involves a significant level of estimation uncertainty, and (b) the impact within a reasonable range of outcomes of the estimate and assumption is material to our financial condition. There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022, included in our Annual Report.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies until it is no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. We expect to use the extended transition period and, therefore, while we are an emerging growth company we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not emerging growth companies, unless we choose to early adopt a new or revised accounting standard. This may make it difficult or impossible to compare our financial results with the financial results of another public company because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the Exchange Act (“Regulation S-K”). Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company if (1) the market value of Common Stock held by non-affiliates is less than $250 million as of the last business day of the second fiscal quarter, or (2) our annual revenues in our most recent fiscal year completed before the last business day of its second fiscal quarter are less than $100 million and the market value of Common Stock held by non-affiliates is less than $700 million as of the last business day of the second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We qualify as a smaller reporting company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As of September 30, 2024, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.
The Company currently is not aware of any legal proceedings or claims that management believes will have, individually or in the aggregate, a material adverse effect on the Company’s business, financial condition, results of operations, or cash flows.
Item 1A. Risk Factors
Our risk factors are disclosed in Part I, Item 1A of our Annual Report. Except as set forth below, there have been no material changes during the nine months ended September 30, 2024 from or updates to the risk factors discussed in Part I, Item 1A, Risk Factors of our Annual Report.
We have concluded that a substantial doubt is deemed to exist concerning our ability to continue as a going concern.
As further discussed in Note 1 — Organization and Description of Business in the notes to our unaudited condensed consolidated financial statements, substantial doubt is deemed to exist about the company’s ability to continue as a going concern through November 8, 2025. Our financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern will require us to generate positive cash flow from operations, obtain additional financing, enter into strategic alliances, or sell assets. Our cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital, enter into strategic alliances on a timely basis or at all. If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.
Our near-term prospects are dependent on the commercial success of our product candidates, if approved, and if we are unable to successfully commercialize them, our business, operating results and financial condition will be materially harmed.
Our business currently depends heavily on our ability to successfully commercialize our ATEVs in the United States and in other jurisdictions where we may obtain marketing approval. We may never be able to successfully commercialize our ATEVs or meet our expectations with respect to revenues for a number of reasons, including:
•a lack of acceptance of our ATEVs by physicians, patients, third-party payors and other members of the medical community;
•our limited experience in marketing, selling and distributing our ATEVs or any other product;
•our limited experience in the commercial manufacturing of our ATEVs or any other product;
•reimbursement and coverage policies of government and private payors such as Medicare, Medicaid, group purchasing organizations, insurance companies, health maintenance organizations and other plan administrators;
•changed or increased regulatory restrictions in the United States, EU and other foreign territories; and
•a lack of adequate financial or other resources to commercialize our ATEVs successfully.
There is no guarantee that the infrastructure, systems, processes, policies, relationships, and materials we have built for the launch and commercialization of our approved product in the United States will be sufficient for us to achieve success at the levels we expect. If we are not able to commercialize our ATEVs successfully for these or other reasons, our ability to generate revenue from product sales and achieve profitability will be adversely affected and the market price of our common stock could decline significantly.
The manufacture of our product candidates is complex, we have limited experience manufacturing commercial product, and we have in the past and may in the future encounter batch failures and difficulties in production. If we or any third-party supplier encounter such difficulties, our ability to supply our product candidates for clinical trials or, if approved, for commercial sale could be delayed or halted entirely.
The process of manufacturing our ATEVs is complex, highly regulated and subject to multiple risks. The manufacture of biologics such as our ATEVs has been, and continues to be, susceptible to product loss and batch failures due to a range of factors including raw material and other component deficiencies, contamination, equipment failure, temporary power outages, improper installation or operation of equipment, damage to facilities, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes has resulted, and could in the future result, in reduced production yields, batch failures, product defects and other supply disruptions. For example, from time to time we have had multiple batch failures in succession. We believe we have identified the root cause of those failures and have implemented appropriate corrective actions. However, if our corrective actions are not successful, or if the FDA disagrees with our root cause analysis or our corrective actions, it may delay or disrupt our manufacturing operations or delay or prevent the filing or approval of marketing applications for our ATEVs, including our pending BLA. If microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, manufacturing may be delayed or disrupted for an extended period of time to investigate and remedy the contamination, which would harm our business, operating results and financial condition as well as our reputation. We depend on cell banks in our manufacturing process, and the loss or alteration of our master cell banks would result in significant disruptions to that process.
We currently manufacture the 6 millimeter ATEVs for our clinical trials and for planned initial commercial distribution, at our manufacturing facility in Durham, North Carolina, where we have created a scalable modular manufacturing process, which we refer to as the LUNA200 system, that we believe will enable us to manufacture our ATEVs, if approved, in commercial quantities in compliance with current good manufacturing practices (“cGMPs”). Our efforts to scale out our manufacturing operations may not succeed. Scaling out a biologic manufacturing process is a difficult task, as there are risks including, among others, cost overruns, process reproducibility, stability issues, lot consistency and timely availability of raw materials. We have limited years of experience manufacturing our ATEVs in-house with the LUNA200 system, and no experience manufacturing the volume of ATEVs that we anticipate will be required to supply all of our clinical trials or to achieve planned levels of commercial sales following marketing approval, if received. Additionally, our manufacturing process has evolved over time and we may not have the experience, resources, or facility capacity to handle adoption of future changes or expansion of capacity. The forecasts of demand we plan to use to determine order quantities and lead times for components from outside suppliers may be incorrect, and we may be unable to obtain such components when needed and at a reasonable cost. We also have experienced interruptions in the supply of the raw materials required to manufacture our product candidates, and increased costs due to supply chain disruptions or inflation in the cost of goods, services or other operating inputs. Likewise, supply chain interruptions could affect the transport of clinical trial materials, such as our ATEVs and other supplies used in our clinical trials, which would negatively impact our ability to conduct our clinical trials. In addition, we may not be able to develop and implement efficient manufacturing capabilities and processes to manufacture our ATEVs in sufficient volumes that also satisfy the legal, regulatory, quality, price, durability, engineering, design and production standards required to commercialize our ATEVs successfully.
If we are unable to produce sufficient quantities of our ATEVs for our clinical trial needs or commercialization, we may need to make additional changes to our manufacturing processes and procedures. Such changes to our manufacturing platform could trigger the need to conduct additional bridging studies between our prior clinical supply and that of any new manufacturing processes and procedures. Should we experience delays or be unable to produce sufficient quantities of our ATEVs utilizing our current or a modified version of our manufacturing system, we expect that our development and commercialization efforts would be impaired as a result, which would likely materially adversely affect our business, prospects, operating results and financial condition.
The sizes of the market opportunities for our product candidates has not been established with precision and are estimates that management believes to be reasonable. If these market opportunities are smaller than we estimate, or if any approval that we obtain is based on a narrower definition of the relevant patient population, our revenue and ability to achieve profitability might be materially and adversely affected.
Our estimates of the market opportunity for our ATEVs, if approved, and certain of our other product candidates are based on a number of internal and third-party estimates. While we believe our assumptions and the data underlying these estimates are reasonable, they may be inaccurate or based on imprecise data. In addition, the assumptions and conditions underlying the estimates may change at any time. For example, the number of patients who ultimately use our product candidates, if approved by regulatory authorities, and our total market opportunities for such product candidates, will depend on, among other things, pricing and reimbursement, market acceptance of those product candidates and patient access, and may be lower than we estimate. Additionally, any approval we receive for our product candidates may be based on a narrower definition of the relevant patient population than we have estimated. Either of these circumstances could materially harm our business, financial condition, results of operations and prospects.
Our product candidates, if approved, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
The commercial success of our ATEVs will depend, in part, on the acceptance of physicians, patients and health care payors as medically necessary, cost-effective and safe. Our ATEVs and any other product that we commercialize may not gain acceptance by physicians, patients, health care payors and others in the medical community due to ethical, social, medical and legal concerns. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable.
The degree of market acceptance of our ATEVs or any of our other product candidates that receives marketing approval will depend on a number of factors, including:
•the efficacy and potential advantages of our ATEVs or our other product candidates compared with alternative products or methods, including convenience and ease of administration;
•the prices we charge for our products, if approved;
•the availability of third-party coverage and adequate reimbursement;
•the willingness of the target patient population to try new products and methods and of physicians to use these products and methods;
•the quality of our relationships with patient advocacy groups;
•the strength of marketing and distribution support;
•the availability of the product and our ability to meet market demand;
•the prevalence and severity of any side effects; and
•any restrictions on the use of our ATEVs or our other products, if approved.
There is uncertainty with respect to third-party coverage and reimbursement of our ATEVs, if approved, and our other product candidates. They may also be subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, any of which could harm our business, prospects, operating results and financial condition.
There is uncertainty around third-party coverage and reimbursement of newly approved regenerative medicine type products. In the United States, third-party payors, including government payors such as the Medicare and Medicaid programs, play an important role in determining the extent to which medical products and biologics will be covered and reimbursed. The Medicare and Medicaid programs increasingly are used as models for how private payors and government payors develop their coverage and reimbursement policies. Currently, no RMAT tissue engineered product has established coverage and reimbursement by the CMS. It is difficult to predict what CMS or any comparable foreign regulatory agency will decide with respect to coverage and reimbursement for novel products such as our ATEVs and our other product candidates, as there is no body of established practices and precedents for these types of products.
The healthcare industry is acutely focused on cost containment, both in the United States and elsewhere. Government authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement. These payors may not view our ATEVs and our other products, if approved, as cost-effective, and coverage and reimbursement may not be available to our customers or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. Cost control initiatives could also cause us to decrease any price we might establish for products, if approved, which could result in lower than anticipated product revenue. Moreover, eligibility for reimbursement does not imply that any such product will be paid for in all cases or at a rate that covers our costs, including our costs related to research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the product, if approved, and the clinical setting in which it is used. If the prices for our products, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our business, prospects, operating results and financial condition will suffer, perhaps materially.
On August 16, 2022, President Biden signed the Inflation Reduction Act (“IRA”) into law, which sets forth meaningful changes to drug product reimbursement by Medicare. Among other actions, the IRA permits the Department of Health and Human Services (“HHS”) to engage in price-capped negotiation to set the price of certain drugs and biologics reimbursed under Medicare Part B and Part D. The IRA contains statutory exclusions to the negotiation program, including for certain orphan designated drugs for which the only approved indication (or indications) is for the orphan disease or condition. Should our product candidates be approved and covered by Medicare Part B or Part D, and fail to fall within a statutory exclusion, such as that for an orphan drug, those products could, after a period of time, be selected for negotiation and become subject to prices representing a significant discount from average prices to wholesalers and direct purchasers. The IRA also establishes a rebate obligation for drug manufacturers that increase prices of Medicare Part B and Part D covered drugs at a rate greater than the rate of inflation. The inflation rebates may require us to pay rebates if we increased the cost of a covered Medicare Part B or Part D approved product faster than the rate of inflation. In addition, the law eliminates the “donut hole” under Medicare Part D beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket maximum and 20% once the out-of-pocket maximum has been reached. Our cost-sharing responsibility for any approved product covered by Medicare Part D could be significantly greater under the newly designed Part D benefit structure compared to the pre-IRA benefit design. Additionally, manufacturers that fail to comply with certain provisions of the IRA may be subject to penalties, including civil monetary penalties. The IRA is anticipated to have significant effects on the pharmaceutical industry and may reduce the prices we can charge and reimbursement we can receive for our products, among other effects.
Any reduction in reimbursement from Medicare resulting from the IRA or other legislative or policy changes, or from other government programs may result in a similar reduction in payments from private payers. These healthcare reforms and the implementation of any future cost containment measures or other reforms may prevent us from being able to generate sufficient revenue, attain and/or maintain profitability or commercialize our drug candidates. We cannot be sure whether additional legislative changes will be enacted, or the effect of forthcoming guidance implementing the IRA, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on our product candidates or the marketing approvals of our product candidates, if any, may be.
In some countries, particularly in Europe, the pricing of our product may be subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products, if approved, is unavailable or more limited in scope or amount than we anticipate, or if pricing is set at even lower levels than we anticipate, our business could be harmed, possibly materially.
Lack of experience by investigators and surgeons with our ATEVs can lead to incorrect implantation or follow-up procedures which could harm the results of our clinical trials and market acceptance of our ATEVs, if approved.
Until approved by the FDA, our ATEVs are currently in various stages of preclinical and clinical testing. We do not have the personnel capacity to directly conduct or manage solely with our own personnel all of the clinical trials that are necessary for the development of our ATEVs. Therefore, we rely, and will continue to rely, on third parties to assist us in managing, monitoring and conducting our clinical trials. Some of the investigators in our clinical trials have not been, and, if our ATEVs receive marketing approval, surgeons may not be, previously exposed to the implantation and follow-up procedures related to their use. As a result, our ATEVs may be, and have been in the past, incorrectly implanted and follow-up procedures may be performed incorrectly, resulting in increased interventions or failure of the ATEV, and complicating interpretation of clinical trial results. Our efforts to educate investigators, surgeons and interventionalists regarding the proper techniques for use of our ATEVs both during clinical trials and following potential commercialization may be costly, prove unsuccessful and could materially harm our ability to continue the clinical trials or commence marketing of our ATEVs. Regulatory authorities may also seek to impose restrictive labeling or proactive communication obligations on any marketing approval granted for use of our ATEVs as a result, which could reduce market acceptance of any of our ATEVs that receive marketing approval.
Product liability lawsuits against us could cause us to incur substantial liabilities that may not be covered by our limited product liability insurance and may limit the development, approval and commercialization of our ATEVs and any other product candidates that we develop in the future.
We face an inherent risk of product liability exposure related to the testing of our ATEVs and our other product candidates in human clinical trials and will face an even greater risk, when we commercially sell our ATEVs and any other product candidates. If we cannot successfully defend ourselves against claims that our ATEVs or our other product candidates caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:
•decreased demand for our ATEVs or any other product candidates that we develop or sell, leading to loss of revenue;
•injury to our reputation and significant negative media attention;
•withdrawal, or slower enrollment, of clinical trial participants;
•significant costs to defend the related litigation and reduced resources of our management to pursue our business strategy;
•substantial monetary awards to trial participants or patients; and
•inability to further develop or commercialize our ATEVs or our other product candidates.
We currently hold limited product liability insurance coverage, and it may not be adequate to cover all liabilities that we may incur. We also may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 16, 2024, Shamik Parikh, the Company’s Chief Medical Officer, adopted a trading arrangement for the sale of Common Stock that is intended to satisfy the affirmative defense conditions provided by Rule 10b5-1(c) under the Exchange Act. (the “Parikh 10b5-1 Plan”). The Parikh 10b5-1 Plan provides for a first possible trade date of November 21, 2024 and terminates automatically on the earlier of the execution of all trades contemplated by the Parikh 10b5-1 Plan, or August 25, 2025. The Parikh 10b5-1 Plan provides for the sale of up to 181,512 shares of Common Stock pursuant to its terms.
On September 13, 2024, Dale Sander, the Company’s Chief Financial Officer, adopted a trading arrangement for the sale of Common Stock that is intended to satisfy the affirmative defense conditions provided by Rule 10b5-1(c) under the Exchange Act. (the “Sander 10b5-1 Plan”). The Sander 10b5-1 Plan provides for a first possible trade date of December 12, 2024 and terminates automatically on the earlier of the execution of all trades contemplated by the Sander 10b5-1 Plan, or September 12, 2025. The Sander 10b5-1 Plan provides for the sale of up to 189,860 shares of Common Stock pursuant to its terms.
Other than as disclosed above, during the three months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
The following materials from Humacyte, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited), (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited), (iv) Condensed Consolidated Statements of Cash Flows (unaudited), (v) Notes to Condensed Consolidated Financial Statements (unaudited), and (vi) Cover Page.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.
** This exhibit is being furnished rather than filed, and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 8th day of November, 2024.
HUMACYTE, INC.
Date: November 8, 2024
By:
/s/ Laura E. Niklason, M.D., Ph.D.
Name:
Laura E. Niklason, M.D., Ph.D.
Title:
President and Chief Executive Officer
By:
/s/ Dale A. Sander
Name:
Dale A. Sander
Title:
Chief Financial Officer, Chief Corporate Development Officer and Treasurer