Piper cuts Humacyte to underweight; PT to $4 from $10


Piper Sandler downgraded Humacyte (NASDAQ:HUMA) to “underweight” from “overweight” and reduced its price target to $4 from $10, citing the sizable stock pullback in the sector. The stock closed at $5.37 on May 13.

The Humacyte Human Acellular Vessel (HAV) is a regenerative vascular conduit currently in various stages of clinical trials, targeting multiple vascular applications, including vascular trauma repair, arteriovenous access for hemodialysis and peripheral arterial disease.

“The primary reason for the downgrade is the sizable pullback in several commercial-stage companies that, in our view, are better alternatives, compared with a pre-revenue company in this volatile tape,” analyst Matt O’Brien writes. 

The simple fact of the matter, Mr. O’Brien said, is that several commercial-stage companies with differentiated technologies have seen a considerable pullback in recent months, given all the volatility, making them more attractive than a pre-revenue name like Humacyte, which has not seen the same level of stock price contraction (down 30%), compared with those names (down 27% to 66%). 

“We certainly recognize the strong technology Humacyte has developed and see a future for the company given multiple ongoing clinical programs in large markets. However, we believe the stock will struggle in the near term, so we are moving to the sidelines for now,” he added.

In addition, he said the “timing of commercial sales for HAV may slip past our third quarter of 2023 estimate and the pace of the ramp on the top-line is steep, potentially a bit too aggressive.” 

Mr. O’Brien also said that given the heightened risk of a pre-revenue company in this environment, a lower multiple is appropriate and he reduced his multiple from about 20 times to about six times enterprise value/estimated 2025 sales, resulting in the lower price target.