These Are Some of the Best Ideas From the 7th Annual Small Cap Growth Conference
The 7th Annual Small Cap Growth Conference hosted by Dawson James Securities is in the books, with presentations from some companies that could offer opportunities for investors. Small-cap growth stocks are those in the bottom 10% of the U.S. equity market's capitalization that have rapid growth rates in earnings, sales and other financial metrics.
Details on the Small Cap Growth Conference
The Small Cap Growth Conference was held on Oct. 12 in Florida and offered a full day of two-track presentations from companies in the healthcare, technology and consumer sectors. Conference attendees heard from executives from more than 30 different small-cap companies, giving them the chance to develop investment theses for several of publicly traded names.
Investing in small-cap companies presents more risk but also the opportunity for greater reward. However, investors have to know where to look for the best ideas, and Dawson James drew together some of the best and brightest names traded on the Nasdaq.
“As specialists in companies that have disruptive technology and are biotechnology innovators, we are excited by equities that have the potential for exponential returns yet are trading at compressed valuations,” said David Weinstein of Dawson James.
CollPlant Biotechnologies: CLGN
One of the companies that presented at Dawson James' Small Cap Growth Conference this year was CollPlant Biotechnologies, which has the unique capability of growing human collagen. In many ways, CollPlant could be the future of regenerative medicine.
Currently, the company sells the ink used to print organs and tissues of all kinds on 3D printers, which could one day prevent the need for organ transplants. About one-third of the body’s proteins are made of collagen, making it the basic building block of organs and tissues.
Currently, the collagen that's widely used is from pigs or cows, which is not only unsustainable but also cruel. Some labs also use collagen from cadavers, which also isn't sustainable. These sources of collagen can introduce viruses into the patient and degrade quickly.
However, many pharmaceutical companies are working on new organs and tissues, so they need collagen. As a result, CollPlant engineered a way to grow human collagen by taking five human genes from DNA and integrating them into a tobacco plant, enabling the growth of human collagen whenever it's needed. This collagen grown by CollPlant is hypoallergenic, making it much safer than those other collagen sources, and it's sustainable because the company is using plants and can continue to grow more.
For now, CollPlant is selling bio-ink, a collagen product used in 3D printers to print human organs and tissues. However, as more and more companies work on ways to grow human organs, they will have to purchase their collagen from thus under-the-radar Israeli company.
CollPlant's stock price had a banner year in 2021, surpassing $20 a share after the company announced a deal with AbbVie (ABBV) subsidiary Allergan, the world's largest producer of dermal fillers. Unfortunately, CollPlant's stock price plummeted alongside the rest of the market in 2022 — even though the company's opportunities remain.
Allergan signed an agreement with CollPlant that included an upfront payment of $14 million for dermal fillers with the potential of additional milestones payments of $89 million, plus royalties on future sales of the product by Allergan. Understandably, many pharmaceutical companies want the broad rights to use CollPlant's product, but the company is set on a licensing model, which means long-term recurring revenues. The company may end up with multiple large deals for different applications of its product.
Importantly, CollPlant has already received approval in Europe for wound care products following successful trials, and there has never been an adverse event when using the product for wound care. Additionally, the company has $36 million in cash on its balance sheet and only burns about $12 million a year, giving it a long runway for growth without the need to raise capital anytime soon.
Another company featured at the 7th Annual Small Cap Growth Conference was HeartBeam , which is making breakthroughs in heart attack detection. Of course, the 12-lead electrocardiogram (ECG) is the gold standard in detecting heart attacks, but patients must go to the hospital to have it done. HeartBeam is solving this problem with a device that's the size of a credit card.
While the Apple Watch and other wearable devices have received significant attention among tech-focused media outlets, such devices use only two leads, making them inadequate when it comes to truly knowing whether someone is having a heart attack. It even states on the websites about those wearables that they can't detect a heart attack because they aren't accurate.
HeartBeam co-founder Branislav Vajdic says they believe they're the first to solve the problem of not knowing whether to go to the hospital for chest pain.
"This company was founded to solve the unsolved problem of heart attack patients not knowing how to proceed when they experience chest pain," he said. "To the best of our knowledge, there's no other patient-facing technology that helps a patient in that position decide if they are having a heart attack or experiencing something benign like a pulled muscle or indigestion."
Another problem with heart attack detection is that the 3D monitoring commonly used only covers one side of the heart. However, the attack could occur on the other side of the heart, making it undetectable for devices currently on the market.
HeartBeam is moving through the approval process with the Food and Drug Administration and expects approval within the next 90 days. To use the credit-card-sized device, patients simply place it on their chest and hold it there. The device takes a reading wirelessly and transmits the results to the monitoring center.
It's designed for people who have had a heart attack already and are now monitoring their condition. The device also connects to their cell phone and tells them immediately whether they should go to the hospital.
The conference also highlighted NextPlat (NXPL), an e-commerce platform that uses non-fungible tokens (NFTs) to track everything bought or sold on the internet. Unlike many cryptocurrency and NFT uses, NextPlat's platform doesn't have anything to do with the purchasing process.
It's entirely used for tracking sales and purchases and is aimed at eliminating fraud in e-commerce, especially involving prescription orders at online pharmacies. Charles M. Fernandez, chairman and CEO of NextPlat, says they're just getting started.
"NextPlat has now made its first move by its investment in RXMD to begin the process of the sale of health and pharmaceutical products online," he said. "I plan to launch a line of pharmaceutical and over-the-counter products on our platform by the end of the first quarter."
When it comes to small-cap companies, there are many to choose from. It's critical that investors choose wisely because while they all are high-risk names, the possibility of great reward could make investing in some of them worth the risk.
However, it's always a good idea to do your due diligence, and a conference like this one is just the tip of the iceberg. After spending some time digging into the ideas you like the best, you'll be able to see which small-cap names offer the greatest promise.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.