HCW Biologics faces lawsuit over construction contract breach

HCW Biologics Inc. (NASDAQ:HCWB), a pharmaceutical company, is embroiled in legal challenges related to its new headquarters and manufacturing facilities’ construction and renovation. On Monday, the company disclosed in a regulatory filing that it received a summons and a complaint from BE&K Building Group, LLC, the prime contractor on the project, alleging breach of contract and seeking damages.

The complaint, filed in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, includes claims against HCW Biologics for breaching both the project contract and a subsequent forbearance agreement. BE&K is seeking judgment for damages, interest, and costs. The company is required to respond to the complaint by May 7, 2025.

This legal action follows a series of events starting with HCW Biologics’ entrance into a loan agreement with Cogent Bank on August 15, 2022, for $6.5 million to purchase the property for its new facilities. After failing to close a credit agreement with Prime Capital Ventures, LLC, which led to the company terminating the agreement on January 10, 2024, HCW Biologics found itself facing mechanic’s liens from subcontractors and a draft lawsuit from BE&K in December 2024.

In an attempt to address the situation, HCW Biologics entered into a forbearance agreement with BE&K on January 22, 2025, which allowed the company until March 31, 2025, to secure financing to complete the property’s construction and renovation. As part of this agreement, HCW Biologics made a $1.0 million payment in partial satisfaction of amounts owed.

The ongoing financial difficulties have led to the Cogent Bank loan being reflected as short-term debt since the third quarter of 2024, acknowledging the lender’s right to accelerate the loan due to discretionary default.

HCW Biologics is currently seeking alternative financing to settle the mechanic’s liens and complete the construction and renovation of the property. The outcome of these legal proceedings and the company’s ability to secure additional financing remain uncertain, particularly given that InvestingPro data indicates the company is quickly burning through cash with negative free cash flow. This report is based on a press release statement from HCW Biologics. For deeper insights into HCWB’s financial health and 10 additional key ProTips, visit InvestingPro.

In other recent news, HCW Biologics Inc. has entered into significant agreements with Square Gate Capital Master Fund, LLC - Series 4, moving forward with a registration statement for the resale of its common stock. The SEC has opted not to review this registration statement, and HCW Biologics is requesting an accelerated effectiveness date. Additionally, the company has announced a 1-for-40 reverse stock split to comply with Nasdaq’s minimum bid price requirement, effective April 11, 2025. This decision follows a Special Meeting of Stockholders, where the reverse stock split and other proposals, including the issuance of shares under an Equity Purchase Agreement, were approved.

Furthermore, HCW Biologics has amended an agreement with WY Biotech Co., Ltd. due to delays in finalizing arrangements with a contract development and manufacturing organization. The payment schedule for a $7.0 million upfront license fee has been restructured, with full payment now expected by June 2025. In another development, HCW Biologics has been granted an extension by the Nasdaq Hearings Panel to meet listing requirements, with a new compliance deadline set for June 15, 2025. The company continues to focus on its platform technologies, including its lead product candidate, HCW9302, and maintains licensing programs for its proprietary molecules. These developments are crucial for the company’s strategic positioning and compliance with market regulations.

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