Humacyte Inc

Current report

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.

Current report

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:

Current report

•a lack of acceptance of our ATEVs by physicians, patients, third-party payors and other members of the medical community;

Current report

•our limited experience in marketing, selling and distributing our ATEVs or any other product;

Current report

•our limited experience in the commercial manufacturing of our ATEVs or any other product;

Current report

•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;

Current report

•changed or increased regulatory restrictions in the United States, EU and other foreign territories; and

Current report

•a lack of adequate financial or other resources to commercialize our ATEVs successfully.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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:

Current report

•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;

Current report

•the prices we charge for our products, if approved;

Current report

•the willingness of the target patient population to try new products and methods and of physicians to use these products and methods;

Current report

•the quality of our relationships with patient advocacy groups;

Current report

•the strength of marketing and distribution support;

Current report

•the availability of the product and our ability to meet market demand;

Current report

•any restrictions on the use of our ATEVs or our other products, if approved.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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.

Current report

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:

Current report

•decreased demand for our ATEVs or any other product candidates that we develop or sell, leading to loss of revenue;

Current report

•withdrawal, or slower enrollment, of clinical trial participants;

Current report

•significant costs to defend the related litigation and reduced resources of our management to pursue our business strategy;

Current report

•substantial monetary awards to trial participants or patients; and

Current report

•inability to further develop or commercialize our ATEVs or our other product candidates.