Shares of medical aesthetics company Elevai Labs (NASDAQ:ELAB) popped higher this morning following a key disclosure. Specifically, Elevai signed an exclusive, worldwide manufacturing and processing technology licensing agreement with INmune Bio (NASDAQ:INMB) to manufacture stem cells. Although ELAB stock has responded vigorously to the news, a digestion of challenges and controversies are leading to choppy trading in shares.
According to a press release, the licensing agreement grants Elevai the ability to leverage INmune’s proprietary “EMx” technology. This enables Elevai to “manufacture current Good Manufacturing Practice (“cGMP”) grade, human umbilical cord-derived mesenchymal stromal cells (hucMSCs) at a lower cost to Elevai than purchasing hucMSCs outright.”
These manufactured cells can be incorporated into certain licensed topical cosmetic products sold in the medical aesthetics skincare market, per the official statement.
Elevai anticipates that adopting the EMx technology represents a step toward its goal of achieving “vertical manufacturing integration.” At the same time, the move should expand long-term production capabilities and lower overall costs.
In the end, the firm believes that controlling its product pipeline through efficient solutions like EMx will facilitate “greater stem cell consistency” and purity. Moreover, it may propel the company forward in the medical aesthetics skincare market.
Huge Risks and Rewards Await ELAB Stock
Fundamentally, the excitement for ELAB stock today centers on the total addressable market here. According to Roots Analysis, the global medical aesthetic market is expanding at a rapid clip. Last year, estimates called for the sector reaching a valuation of $34.6 billion. Experts project that this metric could eventually hit $102.2 billion by 2035. If so, that would represent a compound annual growth rate (CAGR) of 9.4%.
As for ELAB stock specifically, the underlying enterprise carries a diminutive market capitalization of around $30 million. That makes it a nano-cap play, where the cutoff for this designation lands at a measly $50 million. Essentially, if Elevai manages to take an appropriately sized nibble of the core market, ELAB could fly higher. Of course, though, things are rarely that simple in the nano-cap space.
Beyond just the “administrative” challenges awaiting ELAB stock due to its tiny stature, other industry-specific headwinds are also lurking. First, the issue of umbilical cord-derived cells understandably carries controversies. These include issues around “patient safety, autonomy, and potential for conflict of interest.”
For clarity, the press release emphasized the stem cells’ “ethical sourcing and screening of umbilical cords of healthy full-term newborns.” Nevertheless, this is a hot-button issue.
Another issue here relates to supply. Because of their specialized nature, the human body does not carry an abundance of stem cells. Therefore, Westlake Dermatology — a leader in dermatology and plastic surgery — argues that human stem cells do not represent a viable option for general skincare.
Why It Matters
It’s possible that for specialized, physician-prescribed skincare solutions, stem cells could be viable. However, the market has not responded well to ELAB stock overall. Since its public market debut, shares have stumbled more than 50%. Currently, no analysts cover ELAB on TipRanks.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
