By Shares of Humacyte Inc (NASDAQ: HUMA) nearly doubled on Friday after receiving full approval for its flagship SYMVESS product from the US Food and Drug Administration (FDA).
Regulatory approval for the company’s bioengineered human tissue marks a major step forward in regenerative medicine and trauma care.
Humacyte stock sure has made its investors a happy lot today – but a more important question is: would it be able to sustain its recent gains heading into the next year?
Unfortunately, there’s reason to believe it may not.
Insiders have been unloading Humacyte stock
Recent insider moves have not been particularly encouraging in Humacyte.
Brady W. Dougan – its board member who’s married to chief executive Laura Niklason sold a total of 1.5 million shares of Humacyte via his LLC called Ayabudge for $6.6 million in November.
Insider selling is often considered negative because it signals a lack of confidence in the company’s future prospect.
That’s because executives and board members usually have more information than an average investor.
So, when they trim or sell their stake entirely, it typically suggests they see the stock as overvalued or expect the company to face challenges ahead.
If any of those assumptions prove true, Humacyte stock may end up losing today’s gain over the next few weeks.
HUMA is yet to turn a quarterly revenue
FDA’s approval for Humacyte’s SYMVESS sure is a big news for regenerative medicine.
But one must not forget that it continues to be a pre-revenue company for now. Humacyte lost $39.2 million in its third financial quarter – a significant increase from $26 million a year ago.
The Nasdaq listed firm ended its Q3 with $71 million in cash, cash equivalents, and restricted cash, which suggests it may have to dilute its shareholders to fund operations moving forward.
What’s also worth mentioning is that Humacyte stock was worth about $3.0 before today’s gain.
So, there’s possibility that investors are manipulating its modest price tag to pump it up before unloading all of it to lock in sizeable profits.
Humacyte faces litigation for misleading investors
Finally, Humacyte is currently grappling with a class-action lawsuit over allegedly misleading investors about the regulatory compliance of its production facilities.
The biotech firm has failed to share critical information with its investors about its business and operations.
If such allegations prove to be true, “the company’s conduct constitutes a serious violation of securities laws,” as per Reed Kathrein of Hagens Berman – a law firm investigating the matter.
And it’s not like Humacyte stock pays a dividend to reward its shareholders for their patience through the turbulence.
Nonetheless, Wall Street has a consensus “buy” rating on Humacyte shares with price targets going as high as $25 at writing.
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