Top Stock Pick for the Rest of the Year
This small-cap biotech name is my top stock pick for the second half of 2024 as it prepares to introduce a medical breakthrough.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The market saw mild gains on Monday morning, but breadth is nearly two-to-one positive with small caps participating. What is most notable is that there are over 600 new 12-month highs and only 80 new 12-month lows. Chip stocks Nvidia NVDA and Intel INTC are leading, and there are minor signs of rotation into smaller stocks.
My top pick for the second half of 2024 is Hymacyte HUMA. I’ve been discussing this stock extensively for a while, but with an FDA decision due on its biological license for an artificial blood vessel in about a month and good support on the chart, it looks like an opportune time to evaluate the name again.
HUMA has developed something called the Acellular Tissue Engineered Vessel (ATEV). This is essentially artificially-engineered human tissue that can replace blood vessels. The company has been working for over 20 years to develop this product and has received support and funding from the U.S. Secretary of Defense, who sees the product as an important advancement for dealing with battlefield injuries.
HUMA applied in February to the FDA for approval of the ATEV for trauma repair. The FDA accepted the application, and a PDUFA decision is scheduled to be released around August 10, 2024. The ATEV has numerous other applications than trauma repair and recently received a Regenerative medicine advanced therapy (RMAT) designation for the treatment of peripheral artery disease (PAD).
The company is preparing to start sales in the fourth quarter after FDA approval. Cantor Fitzgerald is projecting initial sales of $6.1 million in the fourth quarter and then $30.2 million in the calendar year 2025.
HUMA stock has had a bumpy ride. It came public in the SPAC frenzy in 2020 to 2021 with very high expectations. One of its major investors is an investment banker, Brady Dugan, who is married to the CEO, Laura Niklason. He is a former CEO of Credit Suisse. After he left that position, he started his own investment bank, which had severe financial issues that caused him to liquidate a large number of HUMA shares. This drove the stock even lower after the SPAC frenzy blew up, and it has been an ongoing negative.
However, Gorden Binder, who is on the board of directors and is a former CEO of Amgen AMGN, bought 100,000 shares in mid-May with an average price of around $6.67, which is more than $1 higher than the current price.
In addition to the insider trading, U.S. Senator Tommy Tuberville traded the stock and generated substantial attention and volatility. It is unusual for politicians to trade a stock as small as Humacyte, and the lag in reporting caused some confusion over his actual trades. The stock moved substantially higher on news of his trades even though he had already liquidated his position at a much lower price.
HUMA is now back near support and is awaiting FDA approval and the start of sales. There are a number of other indications for the ATEV that are progressing quickly. There is a substantial total addressable market here, and the product is truly unique. As Cantor Fitzgerald noted, there haven’t been new developments for a conduit in the trauma market for decades. The analyst foresees over $1 billion in annual revenue for various indications by 2032.
There is risk that the FDA will not approve the product on August 10, 2024, but this is a product that the Department of Defense has been behind and one that is also receiving rave reviews from physicians at the Mayo Clinic.
Small-cap biotechnology is a very tough sector to trade, but this stock has outstanding catalysts on the horizon. As always, we look to aggressively trade the name for volatility.
At the time of publication, DePorre was long HUMA and HUMAW.
