A class action lawsuit was filed against Humacyte, Inc. (HUMA) by Levi & Korsinsky on November 18, 2024. The plaintiffs (shareholders) alleged that they bought HUMA stock at artificially inflated prices between May 10, 2024 and October 17, 2024 (Class Period) and are now seeking compensation for their financial losses. Investors who bought Humacyte stock during that period can click here to learn about joining the lawsuit.
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Humacyte is a pre-revenue biotechnology company that is focused on developing a platform to deliver universally implantable bioengineered human tissues, advanced tissue constructs, and organ systems.
The company’s claims about the expected timeline for receiving FDA clearance for the BLA (biologics license application) of its facility and treatments are at the heart of the current lawsuit.
Humacyte’s Misleading Claims
According to the lawsuit, Humacyte and three of its senior officers (Individual Defendants) repeatedly made false and misleading public statements throughout the Class Period. Particularly, they are accused of omitting truthful information about compliance issues at the company’s Durham, N.C. facility and ancillary issues from SEC filings and related material.
For instance, during the Class Period, the CEO noted that the company had reached a major milestone in relation to the acceptance by the FDA for its BLA seeking approval for the Human Acellular Vessel (HAV) in the vascular trauma indication. Furthermore, the CEO stated that the FDA had already undertaken the Pre-Licensing Inspection of its Durham facility. Also, he added that Humacyte remains on track for its BLA review and commercial launch preparations of the HAV in vascular trauma.
Finally, on the earnings call the same day, the COO mentioned that the company completed the pre-license inspection of the Durham manufacturing facility and received a very favorable outcome.
However, subsequent events (discussed below) reveal that Humacyte had failed to comply with good manufacturing practices, including quality assurance and microbial testing at the Durham facility.
Plaintiffs’ Arguments
The plaintiffs maintain that the Defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period. Importantly, the Defendants are accused of misleading investors about the timeline of the BLA approval for its HAV in vascular trauma.
The information became clear in a series of events that occurred between August 9, 2024 and October 17, 2024. In August, Humacyte announced that the FDA would need additional time to finish its review of the BLA for the acellular tissue-engineered vessel (ATEV) in the vascular trauma indication.
Moreover, the company announced that in the course of the review, the FDA visited and inspected its manufacturing facilities and was in active discussions with Humacyte.
On October 17 when the market opened, the FDA released a Form 483 related to Humacyte’s Durham, North Carolina facility, where it observed several violations. Some of these violations included “no microbial quality assurance,” “no microbial testing,” and inadequate “quality oversight.” As a result, the company believed there was a risk to the FDA’s approval of ATEV for vascular trauma. Following the news, HUMA shares fell by 16.4% on the same day.
To conclude, Humacyte misled investors about the poor working conditions in its factories, which led to a delay and possibly cancellation of the BLA for HAV in vascular trauma indication. HUMA shares have plunged 47.9% in the past six months, causing massive damage to shareholder returns.
