HilleVax(HLVX) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section covers unaudited financial statements, management's analysis, market risk, and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with their accompanying notes, for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total assets | $174,914 | $192,690 | $(17,776) | | Cash and cash equivalents | $58,677 | $154,467 | $(95,790) | | Marketable securities | $100,870 | $16,965 | $83,905 | | Total liabilities | $27,095 | $38,204 | $(11,109) | | Total stockholders' equity | $147,819 | $154,486 | $(6,667) | Condensed Consolidated Statements of Operations and Comprehensive Loss - Net loss significantly decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to reduced operating expenses and the absence of impairment charges[12] | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Research and development | $1,328 | $26,601 | $3,311 | $52,579 | | In-process research and development | $0 | $0 | $0 | $15,325 | | General and administrative | $5,657 | $8,127 | $11,278 | $16,621 | | Impairment charges | $0 | $8,235 | $0 | $8,235 | | Total operating expenses | $6,985 | $42,963 | $14,589 | $92,760 | | Net loss | $(5,266) | $(40,668) | $(11,327) | $(87,497) | | Net loss per share, basic and diluted | $(0.11) | $(0.83) | $(0.23) | $(1.79) | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $154.486 million at December 31, 2024, to $147.819 million at June 30, 2025, primarily due to net loss[16] - Stock-based compensation contributed $4.759 million to additional paid-in capital for the six months ended June 30, 2025[16] | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :-------------------- | :---------------------- | :----------------------- | | Total Stockholders' Equity | $154,486 | $147,819 | | Additional Paid-in Capital | $691,447 | $696,206 | | Accumulated Deficit | $(535,826) | $(547,153) | | Net Loss (6 months) | N/A | $(11,327) | | Stock-based compensation (6 months) | N/A | $4,759 | Condensed Consolidated Statements of Cash Flows - Net cash used in operating activities significantly decreased from $62.781 million in H1 2024 to $13.507 million in H1 2025[19] - Net cash used in investing activities increased from $61.130 million in H1 2024 to $82.283 million in H1 2025, driven by increased marketable securities purchases[19] - No cash was provided by financing activities in H1 2025, compared to $15.677 million in H1 2024[19] | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(13,507) | $(62,781) | | Net cash used in investing activities | $(82,283) | $(61,130) | | Net cash provided by financing activities | $0 | $15,677 | | Net decrease in cash, cash equivalents and restricted cash | $(95,790) | $(108,234) | | Cash, cash equivalents and restricted cash—end of period | $60,308 | $110,075 | Notes to Condensed Consolidated Financial Statements 1. Organization - HilleVax, Inc. is a biopharmaceutical company focused on developing and commercializing novel vaccines, incorporated in Delaware in March 2020[22] - The company has incurred net losses and negative cash flows from operating activities since inception and has never generated revenue[23] - Management believes it has sufficient working capital to fund operations for at least the next twelve months[24] 2. Summary of Significant Accounting Policies - Financial statements are prepared in accordance with SEC rules and U.S. GAAP for interim financial statements, with all intercompany transactions eliminated[26][27] - The company is an emerging growth company and has elected to delay adopting new or revised accounting standards until they apply to private companies[56][57] - Significant estimates primarily relate to accruals for research and development expenses[28] 3. Fair Value Measurements - The company's cash, cash equivalents, marketable securities, and restricted cash are carried at fair value, primarily using Level 1 (quoted prices in active markets) and Level 2 (observable inputs) inputs[61][62][64] | Asset (in thousands) | Total Fair Value at June 30, 2025 | | :------------------- | :-------------------------------- | | Cash equivalents (Money market funds) | $52,536 | | Marketable securities (U.S. treasury notes) | $65,410 | | Marketable securities (U.S government agency bonds) | $35,460 | | Total | $153,406 | 4. Marketable Securities - Marketable securities consist of U.S. Treasury notes and U.S. government agency bonds, all with contractual maturities of less than one year[66] - As of June 30, 2025, the fair value of marketable securities was $100.870 million, up from $16.965 million at December 31, 2024[66] - The company determined no portion of unrealized losses related to a credit loss and no impairments occurred during the periods presented[67] 5. Other Balance Sheet Details - Property and equipment, net, decreased from $5.222 million at December 31, 2024, to $4.026 million at June 30, 2025[68] - Accrued expenses significantly decreased from $9.648 million at December 31, 2024, to $2.404 million at June 30, 2025, primarily due to reductions in accrued employee termination benefits and contract termination costs[69] - Cash, cash equivalents, and restricted cash totaled $60.308 million at June 30, 2025[70] 6. Leases - The company has operating leases for facilities in Switzerland and Boston, Massachusetts, with the Boston lease commencing in April 2022 and ending in December 2032[71][72] - Operating lease expense for the three months ended June 30, 2025, was $0.666 million, down from $0.783 million in the prior year period[73] - Future minimum noncancelable operating lease payments total $30.600 million as of June 30, 2025[76] 7. Related Party Transactions - Frazier Life Sciences X, L.P. and Takeda Vaccines, Inc. are related party stockholders with board representation[77][78] - The company incurred immaterial research and development expenses for Takeda's services under a Transitional Services Agreement for the three and six months ended June 30, 2025 and 2024[78] 8. Commitments and Contingencies - The company holds an exclusive license from Takeda for HIL-214 products (excluding Japan), with potential milestone payments up to $150.0 million and tiered royalties[79][80] - In January 2024, the company entered into an exclusive license agreement with Kangh for HIL-216, paying an upfront amount of $15.0 million and potential future milestone payments up to $255.5 million[84][85][86] - No material contingent liabilities existed as of June 30, 2025[88] 9. Long-Term Debt - The company had a Loan and Security Agreement with Hercules Capital, Inc. for term loans up to $75.0 million, collateralized by substantially all assets[89][92] - On July 19, 2024, the company fully repaid the outstanding $26.2 million principal and interest, including a $2.3 million final payment and prepayment fee, terminating the loan agreement[95] 10. Stockholders' Equity - The company completed an IPO in May 2022 ($209.5 million net proceeds), an underwritten public offering in September 2023 ($107.8 million net proceeds), and an at-the-market offering ($14.9 million net proceeds as of June 30, 2025)[96][97][98] - Stock-based compensation expense for the six months ended June 30, 2025, was $4.759 million, down from $11.255 million in the prior year period[108] - As of June 30, 2025, 13,531,539 shares were reserved for future issuance under equity plans[110] 11. Restructuring and Impairment Charges - On July 8, 2024, the company discontinued HIL-214 development in infants and implemented workforce reductions to reduce operating expenses[111] - Employee termination benefits of $5.034 million accrued at December 31, 2024, were fully paid by June 30, 2025[112][113] - Contract termination costs of $1.686 million accrued at December 31, 2024, were fully paid by June 30, 2025[116] - No restructuring or impairment charges were incurred during the three and six months ended June 30, 2025[111][114] 12. Subsequent Events - On August 4, 2025, the company entered into a Merger Agreement with XOMA Royalty Corporation for an acquisition via a cash tender offer and contingent value rights (CVRs)[117][118] - The company delivered notice to Takeda on August 1, 2025, to terminate the Takeda License, effective six months later, with no material early termination penalties[120] - On July 31, 2025, the company entered into a Sublease Agreement for a portion of its Boston Lease, expected to commence in November 2025 for three years and two months[119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting key financial trends, operational activities, and future outlook, including the impact of the pending merger with XOMA and the discontinuation of HIL-214 development Overview - HilleVax is a clinical-stage biopharmaceutical company focused on novel vaccines, with its initial program HIL-214 for norovirus AGE[124] - The Phase 2b NEST-IN1 trial for HIL-214 in infants did not meet its primary efficacy endpoint in July 2024, leading to exploration of other vaccine candidates and strategic alternatives[124][125] - The company has incurred net losses since inception and has not generated revenue, with an accumulated deficit of $547.2 million as of June 30, 2025[127] - A Merger Agreement with XOMA Royalty Corporation was entered into on August 4, 2025, for acquisition[129] Financial Operations Overview - The company's financial statements consolidate wholly-owned subsidiaries HilleVax GmbH and HilleVax Security Corporation, with the U.S. dollar as the functional currency[130] - The Takeda License for HIL-214 (excluding Japan) was terminated via notice on August 1, 2025, effective six months later, with no material early termination penalties[134] - The Kangh License for HIL-216 (outside Greater China) was acquired in January 2024 for an upfront amount of $15.0 million, with potential future milestone payments up to $255.5 million[136][137] Components of Results of Operations - Research and development expenses are recognized as incurred and include salaries, external CRO costs, and manufacturing costs for vaccine candidates[138][139][142] - In-process research and development expenses for H1 2024 related to the $15.0 million upfront payment for the Kangh License[140] - General and administrative expenses cover executive, finance, administrative personnel costs, legal fees, and professional services[141] Results of Operations - Net loss significantly decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to reduced R&D and G&A expenses, and the absence of impairment charges and in-process R&D expenses[146][151] | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (3M) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (6M) | | :-------------------- | :----------------------------- | :----------------------------- | :---------- | :----------------------------- | :----------------------------- | :---------- | | Research and development | $1,328 | $26,601 | $(25,273) | $3,311 | $52,579 | $(49,268) | | In-process research and development | $0 | $0 | $0 | $0 | $15,325 | $(15,325) | | General and administrative | $5,657 | $8,127 | $(2,470) | $11,278 | $16,621 | $(5,343) | | Impairment charges | $0 | $8,235 | $(8,235) | $0 | $8,235 | $(8,235) | | Total operating expenses | $6,985 | $42,963 | $(35,978) | $14,589 | $92,760 | $(78,171) | | Net loss | $(5,266) | $(40,668) | $35,402 | $(11,327) | $(87,497) | $76,170 | Liquidity and Capital Resources - As of June 30, 2025, the company had $159.5 million in cash, cash equivalents, and marketable securities[156] - Existing financial resources are believed to be sufficient for at least the next 12 months, but future funding may be required through equity, debt, or collaborations[128][156][168][170] - The pending merger with XOMA includes potential termination fees ($2.5 million) or expense reimbursement ($1.0 million) under specific circumstances, which could impact available cash[158] - The company fully repaid its $26.2 million term loan facility with Hercules Capital, Inc. on July 19, 2024, including a $2.3 million final payment and prepayment fee[165] Cash Flows - Net cash used in operating activities decreased significantly to $13.5 million for H1 2025 from $62.8 million for H1 2024, primarily due to lower net loss and reduced operating expenses[172][174] - Net cash used in investing activities increased to $82.3 million for H1 2025 from $61.1 million for H1 2024, driven by higher purchases of marketable securities[175][176] - No cash was provided by financing activities in H1 2025, compared to $15.7 million in H1 2024 from equity offerings[177] | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(13,507) | $(62,781) | | Net cash used in investing activities | $(82,283) | $(61,130) | | Net cash provided by financing activities | $0 | $15,677 | | Net decrease in cash, cash equivalents and restricted cash | $(95,790) | $(108,234) | Contractual Obligations and Commitments - No material changes to contractual obligations were reported as of June 30, 2025, compared to the 2024 Form 10-K[178] Critical Accounting Policies and Significant Judgments and Estimates - No material changes to critical accounting policies and estimates were reported as of June 30, 2025, compared to the 2024 Form 10-K[179][180] JOBS Act and Smaller Reporting Company - The company is an emerging growth company (EGC) and has elected to use the extended transition period for new accounting standards[181] - The company is also a smaller reporting company, allowing for scaled disclosures[184] Recent Accounting Pronouncements - Refer to Note 2 for details on recently adopted and issued accounting standards[185] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that quantitative and qualitative disclosures about market risk are not applicable to the company as it qualifies as a smaller reporting company - The company is a smaller reporting company, and therefore, this disclosure is not applicable[186] Item 4. Controls and Procedures Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[187] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[188] PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity transactions, other disclosures, exhibits, and official signatures Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings, though it may be involved in claims incident to the ordinary course of business - No material legal proceedings are currently active against the company[190] Item 1A. Risk Factors This section details significant risks primarily related to the pending merger with XOMA, including uncertainties regarding its completion, potential adverse effects on business and operations, the possibility of dissolution and liquidation if the merger fails, and risks associated with employee retention, business restrictions, termination fees, and the contingent value rights (CVRs) - The pending transaction with XOMA may not be completed as anticipated, potentially leading to a decline in stock price and requiring the company to pay termination fees (up to $2.5 million) or expense reimbursement (up to $1.0 million)[192][193][194] - Failure to consummate the merger or another strategic transaction could lead to dissolution and liquidation, with uncertain cash distribution to stockholders[195][196][197] - The announcement and pendency of the merger could adversely affect business, financial results, and operations, including challenges in employee retention and diversion of management's attention[198] - The company is substantially dependent on its remaining 12 full-time employees to facilitate the merger, and their loss could harm the ability to complete the transaction[199] - Stockholders may not receive any payment on the CVRs, and they may expire valueless, as payments are contingent on specific events[205] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or issuer repurchases of equity securities during the period - No unregistered sales of equity securities[208] - No issuer repurchases of equity securities[209] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities[210] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[211] Item 5. Other Information No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the six months ended June 30, 2025 - No Rule 10b5-1 trading arrangements were adopted or terminated by officers or directors during the period[212] Item 6. Exhibits This section provides a list of exhibits filed with the Form 10-Q, including the Merger Agreement, Sublease Agreement, and various certifications - Includes the Agreement and Plan of Merger, dated August 4, 2025, by and among XOMA Royalty Corporation, XRA 4 Corp., and HilleVax, Inc. (Exhibit 2.1)[215] - Includes the Sublease Agreement, dated July 31, 2025, by and between HilleVax, Inc. and Stellaromics, Inc. (Exhibit 10.2)[215] - Includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[215] Signatures The report is duly signed on behalf of HilleVax, Inc. by Robert Hershberg, M.D., Ph.D., Chairman, President and Chief Executive Officer, and Shane Maltbie, Chief Financial Officer, on August 6, 2025 - Signed by Robert Hershberg, M.D., Ph.D., Chairman, President and Chief Executive Officer[219] - Signed by Shane Maltbie, Chief Financial Officer[219] - Date of signing: August 6, 2025[219]