HilleVax(HLVX) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited financial statements, management's discussion, and disclosures on market risk and controls Item 1. Financial Statements (Unaudited) Unaudited Q1 2022 financial statements reveal a significant net loss increase due to higher operating expenses and fair value adjustments of liabilities Condensed Consolidated Balance Sheets Total assets decreased to $114.7 million, liabilities surged to $283.1 million, leading to a $168.4 million stockholders' deficit Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $111,252 | $124,566 | | Total current assets | $111,732 | $124,707 | | Total assets | $114,696 | $127,159 | | Liabilities and Stockholders' Deficit | | | | Convertible promissory notes payable at fair value | $175,349 | $158,276 | | Warrant liabilities - related party | $93,869 | $56,445 | | Total current liabilities | $282,926 | $227,762 | | Total liabilities | $283,068 | $227,916 | | Total stockholders' deficit | ($168,372) | ($100,757) | Condensed Consolidated Statements of Operations Net loss significantly increased to $67.9 million in Q1 2022, driven by higher operating expenses and substantial non-cash fair value adjustments Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Research and development | $6,211 | $267 | | In-process research and development | $2,500 | $— | | General and administrative | $2,603 | $1,198 | | Total operating expenses | $11,314 | $1,465 | | Loss from operations | ($11,314) | ($1,465) | | Change in fair value of convertible promissory notes | ($17,073) | ($73) | | Change in fair value of warrant liabilities - related party | ($37,424) | $— | | Total other income (expense) | ($56,573) | ($81) | | Net loss | ($67,887) | ($1,546) | | Net loss per share, basic and diluted | ($10.06) | ($0.32) | Condensed Consolidated Statements of Stockholders' Deficit The stockholders' deficit grew to $168.4 million as of March 31, 2022, mainly driven by the net loss incurred during the first quarter - The stockholders' deficit grew to $168.4 million as of March 31, 2022, mainly driven by the net loss of $67.9 million incurred during the first quarter[14] Condensed Consolidated Statements of Cash Flows Net cash decreased by $13.3 million in Q1 2022 due to cash used in operating and investing activities, ending with $111.3 million Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($10,715) | ($417) | | Net cash used in investing activities | ($2,500) | $— | | Net cash used in financing activities | ($99) | $— | | Net decrease in cash and cash equivalents | ($13,314) | ($417) | | Cash and cash equivalents—end of period | $111,252 | $40 | Notes to Condensed Consolidated Financial Statements Key notes detail organization, liquidity, accounting policies, and significant events including a $2.5 million R&D payment and post-quarter IPO proceeds - The company is a biopharmaceutical firm focused on developing and commercializing novel vaccines, with its initial candidate being HIL-214. It has funded operations through convertible promissory notes and has never generated revenue[20][23] - In March 2022, the company paid Takeda a $2.5 million contingent payment related to the Takeda License, which was recorded as in-process research and development[58] - On May 3, 2022, the company completed its IPO, selling 13,529,750 shares at $17.00 per share for net proceeds of approximately $210.3 million. In connection with the IPO, all outstanding convertible notes converted into common stock[81] - On April 18, 2022, the company entered into a loan agreement for up to $75.0 million in term loans, borrowing an initial $5.0 million[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses HIL-214 development, Q1 2022 financial results, and enhanced liquidity post-IPO, sufficient for the next 12 months Overview HilleVax focuses on HIL-214, a norovirus vaccine candidate, initiating a Phase 2b trial and completing a $210.3 million IPO - The company's sole focus is on HIL-214, a vaccine candidate for norovirus, which has been studied in nine previous clinical trials by Takeda and LigoCyte[85] - A Phase 2b clinical trial, NOR-212, was initiated in May 2022 to evaluate HIL-214 in infants, with interim immunogenicity results expected in H1 2023 and top-line safety and efficacy results in H2 2023[85] - The company completed its IPO on May 3, 2022, raising net proceeds of approximately $210.3 million[87] Results of Operations Total operating expenses increased to $11.3 million, and net loss surged to $67.9 million, primarily due to R&D and fair value adjustments Comparison of Results of Operations (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $6,211 | $267 | $5,944 | | In-process research and development | $2,500 | $— | $2,500 | | General and administrative | $2,603 | $1,198 | $1,405 | | Total operating expenses | $11,314 | $1,465 | $9,849 | | Net loss | ($67,887) | ($1,546) | ($66,341) | - R&D expenses increased by $5.9 million, primarily due to $3.0 million in clinical development for HIL-214, $1.6 million in personnel costs, and $0.8 million in consulting fees[105] - Other expense of $56.6 million in Q1 2022 was primarily driven by a $37.4 million increase in the fair value of the Takeda Warrant and a $17.1 million increase in the fair value of convertible promissory notes[108][109] Liquidity and Capital Resources Cash of $111.3 million as of March 31, 2022, bolstered by $210.3 million IPO proceeds and a $75 million term loan facility - As of March 31, 2022, the company had cash and cash equivalents of $111.3 million. This was bolstered by IPO net proceeds of approximately $210.3 million in May 2022[110] - In April 2022, the company secured a term loan facility for up to $75.0 million and drew an initial $5.0 million[111] - Management believes existing cash, combined with IPO proceeds, will fund operations for at least the next 12 months, including the Phase 2b NOR-212 study[116] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company qualifies as a smaller reporting company - Not applicable to a smaller reporting company[131] Item 4. Controls and Procedures Disclosure controls were effective as of March 31, 2022, with internal control evaluation not yet required for the newly public company - Management concluded that as of the end of the quarter, disclosure controls and procedures were effective[132] - Due to its status as a newly public company, management is not yet required to evaluate the effectiveness of internal control over financial reporting[134] PART II. OTHER INFORMATION This section details legal proceedings, comprehensive risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings[135] Item 1A. Risk Factors Extensive risks include dependence on HIL-214, significant losses, need for financing, clinical uncertainties, and reliance on third parties - The company is entirely dependent on the success of its only vaccine candidate, HIL-214, and its failure would materially harm the business[138][153] - The company has a history of significant operating losses and will require substantial additional financing to achieve its goals, which may not be available on acceptable terms[138][144][146] - The business relies heavily on the license from Takeda for HIL-214; termination of this license would result in the loss of rights to develop and commercialize the product[143][193] - The company relies on third parties for manufacturing HIL-214 and conducting clinical trials, which poses risks related to performance, compliance, and supply chain disruptions[143][195][198] - The business is subject to risks from the COVID-19 pandemic, which could disrupt clinical trials, supply chains, and regulatory processes[143][279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Granted 479,085 stock options and completed IPO raising $210.3 million net proceeds, with no material change in planned use - Granted options to purchase 479,085 shares of common stock at an exercise price of $8.05 per share during Q1 2022[379] - Completed its IPO on May 3, 2022, raising net proceeds of approximately $210.3 million after deducting underwriting discounts and offering costs[380] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[383] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[384] Item 5. Other Information The company reports no other information for this item - None[385] Item 6. Exhibits This section lists key corporate documents and agreements filed as exhibits, including loan agreements and incentive plans - Lists key corporate documents and agreements filed as exhibits, such as the Loan and Security Agreement with Hercules Capital and the 2022 Incentive Award Plan[386]