HCW Biologics Inc. (NASDAQ:HCWB) is a clinical-stage biopharmaceutical company focused on discovering and developing novel immunotherapies to lengthen healthspan by disrupting the link between chronic inflammation and age-related diseases. The company has navigated through significant legal challenges in recent years, but has emerged with a strengthened focus on advancing its diverse pipeline of innovative immunotherapeutic candidates.
Business Overview and History
HCW Biologics was founded in April 2018 in Miramar, Florida, with the goal of addressing the critical role that chronic, low-grade inflammation, or "inflammaging," plays in the development of various age-related diseases. The company's approach centers on reducing senescent cells and eliminating the proinflammatory factors they secrete through multiple pathways.
HCW Biologics created two proprietary drug discovery platforms: the TOBI™ (Tissue factOr-Based fusIon) platform and a novel protein scaffold platform. These platforms have enabled the creation of a diverse pipeline of immunotherapeutic fusion molecules, each with unique mechanisms of action and potential therapeutic applications. The company's innovative platforms allow for the construction of molecules with different mechanisms of action, expanding the range of diseases and conditions that may be treated.
In December 2020, HCW Biologics entered into an exclusive worldwide license agreement with Wugen, Inc., a company specializing in cell-based therapies for cancer. As part of the upfront license fee, HCW Biologics received shares of Wugen's common stock, representing a 5.6% ownership interest. Wugen licensed limited rights to develop, manufacture, and commercialize cell-based therapy treatments for cancer based on two of HCW Biologics' internally-developed, multi-cytokine fusion protein molecules.
The company's lead clinical-stage programs include HCW9218, a bifunctional molecule that can impact senescence by reducing senescent cells and eliminating the proinflammatory factors they secrete, and HCW9302, which is designed to activate and expand T regulatory cells to reduce senescence by suppressing the activity of inflammasome-bearing immune cells. HCW Biologics also has several preclinical-stage programs, including HCW9206 and HCW9201, which are being evaluated for their potential in oncology and anti-infectious disease applications.
In 2022, HCW Biologics entered into a Cooperative Research and Development Agreement (CRADA) with the National Institutes of Health and the National Cancer Institute to collaborate on a Phase 1b/2 clinical study in patients with advanced, metastatic and chemo-refractory/chemo-resistant pancreatic cancer. This collaboration represented a significant step forward in the company's clinical development efforts.
Overcoming Legal Challenges
In 2022, HCW Biologics faced significant legal challenges when its founder and CEO, Dr. Hing C. Wong, was involved in a dispute with a former employer, Altor BioScience, LLC and NantCell, Inc. This led to a complex arbitration and legal proceedings that created an overhang on the company's progress for nearly two years.
However, on July 13, 2024, the company announced that it had entered into a confidential Settlement Agreement and Release with Altor, NantCell, and their parent company, ImmunityBio, Inc. This settlement resolved the outstanding arbitration and legal proceedings, providing clarity on the company's intellectual property rights and clinical development strategy going forward. The Settlement Agreement includes mutual general releases and no monetary payments between the parties. HCW Biologics has substantially completed the required remediation procedures under the Settlement Agreement.
Pursuant to the Settlement Agreement, HCW Biologics retained exclusive rights to develop HCW9218 for all age-related diseases other than cancer, as well as the rights to develop HCW9302 and HCW9206 for all indications. ImmunityBio was granted exclusive rights to exploit HCW9218 and certain other TOBI-based molecules for oncology indications, with the exception of the treatment of ovarian cancer with HCW9218, which remains with HCW Biologics. The company transferred and assigned to ImmunityBio ownership of certain intellectual property including TOBI-based molecules for use in the oncology field.
Financial Performance and Liquidity
For the fiscal year ended December 31, 2023, HCW Biologics reported total revenue of $2.84 million, a decrease from $6.72 million in the prior year. The company's net loss for the year was $24.99 million, compared to a net loss of $14.90 million in 2022. The decline in revenue and increased net loss were primarily attributable to the legal challenges the company faced during this period. Annual operating cash flow for 2023 was -$22.51 million, and annual free cash flow was -$28.72 million.
For the third quarter of 2024, HCW Biologics reported revenue of $426,420, a decrease of 49.9% year-over-year. This decline was primarily due to a decrease in sales to the company's licensing partner Wugen. The net loss for the quarter increased by 21.0% year-over-year to $3.90 million, primarily due to higher legal expenses related to the settlement of the arbitration proceedings with ImmunityBio.
As of September 30, 2024, HCW Biologics had $998,220 in cash and cash equivalents, compared to $3.60 million as of December 31, 2023. The company's total assets were $26.56 million, and its total liabilities were $36.53 million, resulting in a stockholders' equity deficit of $9.97 million. The company's debt-to-equity ratio stood at -1.28, while its current ratio and quick ratio were both 0.07.
To address its liquidity concerns, HCW Biologics launched a multi-faceted financing plan in the third quarter of 2024. This included a $2.50 million private placement of common stock, the issuance of $6.90 million in secured notes, and the exploration of business development transactions, such as out-licensing agreements. The company also entered into an engagement letter with Maxim Group to act as the exclusive placement agent for a multi-step equity financing.
HCW Biologics has a $6.50 million loan from Cogent Bank, secured by a first priority lien on the company's new headquarters building. As of September 30, 2024, the company has reflected this loan as Short-term debt, net, to reflect that the lender has the right to accelerate the loan under a discretionary default provision related to unpaid construction invoices.
In a significant setback, the company was the victim of a criminal scheme in 2024 involving the impersonation of a purchaser upon the default on a legally binding commitment to purchase $8.0 million of secured notes from the company. This scheme resulted in the misdirection of approximately $1.30 million held in company accounts to a fraudulent account controlled by a third party, which the company recognized as a non-operating loss.
Pipeline Advancement and Regulatory Milestones
Despite the legal and financial challenges, HCW Biologics has continued to advance its pipeline of immunotherapeutic candidates. The company's TOBI™ Platform is built around a Tissue Factor scaffold and can pack multiple protein targets, including cytokines, single-chain antibodies, and ligands, into a single fusion molecule. This allows the creation of molecules capable of engaging multiple immunostimulatory functions and addressing various signaling pathways simultaneously.
HCW9218, a lead product candidate developed using the TOBI™ Platform, is currently being evaluated in an ongoing Phase 2 clinical trial in ovarian cancer in combination with neoadjuvant chemotherapy. HCW Biologics has exclusive rights to develop HCW9218 for all non-oncological age-related diseases.
HCW9302, the basis for the company's autoimmune program, is designed to activate and expand T regulatory cells to reduce senescence by suppressing the activity of inflammasome-bearing immune cells. HCW Biologics has filed an IND application with the FDA to evaluate HCW9302 in an autoimmune indication.
HCW9206, a preclinical-stage molecule, has a unique design consisting of three powerful cytokines - IL-7, IL-15, and IL-21 - intended to stimulate T cell proliferation and activation, enhance NK cell cytotoxicity, and improve immune surveillance. HCW Biologics maintains the rights to the injectable form of HCW9206, while the ex vivo rights have been licensed to Wugen.
In the first quarter of 2024, the company reported the completion of enrollment in two ongoing clinical trials evaluating HCW9218 in solid tumors and pancreatic cancer.
More recently, in February 2025, HCW Biologics announced that it had received clearance from the U.S. Food and Drug Administration (FDA) to initiate a first-in-human Phase 1 dose escalation clinical trial to evaluate its lead drug candidate, HCW9302, in patients with moderate-to-severe alopecia areata. This represents a significant milestone for the company as it expands its clinical development efforts into the autoimmune disease space.
Risks and Challenges
While HCW Biologics has made progress in overcoming its legal challenges and advancing its pipeline, the company continues to face several risks and challenges. These include the inherent risks associated with the development of novel immunotherapies, the need to secure additional financing to fund its operations and clinical trials, and the potential impact of macroeconomic factors, such as inflation and supply chain disruptions, on its business.
Furthermore, the company's recent delisting notice from Nasdaq and the need to regain compliance with continued listing requirements add an additional layer of uncertainty and complexity to its operations. HCW Biologics has indicated that it intends to request a hearing to appeal the delisting notice and is working to implement a plan to regain compliance.
Conclusion
HCW Biologics has navigated through a tumultuous period, weathering significant legal challenges and financial constraints. However, the company has emerged with a strengthened focus on advancing its diverse pipeline of innovative immunotherapeutic candidates, including its lead programs HCW9218 and HCW9302.
With the resolution of the legal disputes and the implementation of a multi-faceted financing plan, HCW Biologics is positioning itself to continue the development of its promising drug candidates and explore new avenues for growth. The company is exploring numerous additional molecules with substantial potential applications and is considering business development transactions, such as out-licensing agreements, as a fundamental element of its financing strategy to provide future non-dilutive capital required to fund clinical development.
Investors will be closely watching the company's progress in securing additional financing, regaining Nasdaq compliance, and achieving key clinical and regulatory milestones in the coming years. While HCW Biologics faces significant challenges, its innovative platforms and diverse pipeline offer potential for growth in the rapidly evolving field of immunotherapies for age-related diseases and autoimmune conditions.