U.S. markets close in 6 hours 16 minutes
  • S&P 500

    +60.11 (+1.50%)
  • Dow 30

    +358.00 (+1.11%)
  • Nasdaq

    +274.44 (+2.35%)
  • Russell 2000

    -9.24 (-0.52%)
  • Crude Oil

    +0.50 (+0.44%)
  • Gold

    +9.30 (+0.51%)
  • Silver

    +0.13 (+0.60%)

    +0.0097 (+0.93%)
  • 10-Yr Bond

    +0.0930 (+3.23%)

    +0.0143 (+1.16%)

    +0.6160 (+0.48%)

    +806.66 (+2.70%)
  • CMC Crypto 200

    +447.20 (+184.27%)
  • FTSE 100

    +59.33 (+0.79%)
  • Nikkei 225

    +112.70 (+0.42%)

Progenity: Not for the Faint-Hearted

  • Oops!
    Something went wrong.
    Please try again later.
·5 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Progenity, Inc. (NASDAQ:PROG) is a biotech stock with an innovative pipeline. The company has been deriving its revenues from molecular laboratory tests, mainly from the sale of its Innatal, Preparent and pathology molecular testing. Its research in the field of precision medicine with respect to inflammatory bowel disease (IBD) has seen significant progress, and the company has registered a number of patents, including that of its Preecludia test for pregnant women.

While its addressable market is large, Progenity has seen its fair share of challenges, and its revenue is in decline. Let's take a closer look at the companys recent developments and evaluate the potential risk-reward prospects of its stock.

Company overview

Progenity, Inc. is a biotechnology firm that develops products for gastrointestinal well-being and oral biotherapeutics. They are developing molecular testing tools as well as investigational ingestible devices meant to provide precise diagnostic samples and drug delivery solutions using a multi-omics approach, combining genomes, epigenomics, proteomics and metabolomics.

Progenity's mission is to make health care more precise and personalized by enhancing disease diagnostics and increasing patient outcomes through tailored medicines delivered locally.

The company was founded by Paul W. Hawran and Harry Stylli in 2010 and is based in San Diego, California.

Strong base of intellectual property

Progenity has a focus on gastrointestinal health and oral biotherapeutics. The company is creating a first-of-its-kind experiment to evaluate pregnant women for preeclampsia, a potentially fatal pregnancy complication. Preeclampsia is usually characterized by high blood pressure, sometimes with fluid retention and proteinuria, and Progenity is in the process of developing a rule-out test for the same, known as Preecludia. This test is what investors are hoping will return the company to growth.

Apart from Preecludia's patent, Progenity has a considerable pipeline. The company recently received four patents for ingestible technologies for its drug delivery system (DDS) for medicines to treat gastrointestinal ailments. These include patents for its ingestible device for therapeutic agent delivery to the GI tract, its treatment of gastrointestinal inflammatory disorders with a Janus kinase (JAK) inhibitor, its treatment of a gastrointestinal condition with a SMAD7 inhibitor and a JAK inhibitor that is used to treat gastrointestinal inflammatory diseases.

Its DDS is an ingestible tablet aimed to help people with inflammatory bowel disease who have failed to respond to other treatments. Its Oral Biotherapeutic Delivery System (OBDS) is one of Progenity's most notable innovations and a liquid-based medication capsule for oral administration.

Whether the company will be able to commercialize this patent portfolio or not remains to be seen.

Novel drug delivery system

A large part of Progenitys research is focused on achieving higher rates of clinical response, reduction and mucosal recovery in IBD. One possibility is to create technology that can deliver pharmaceuticals directly to the disease location, reducing the quantity of drug that enters the bloodstream. This is significant since many medicines used to treat IBD can have toxic side effects at therapeutic levels. Targeted delivery of drugs directly to the colon may boost local tissue concentration, improving efficacy while decreasing system absorption. Moreover, drugs that are liquids, peptides or proteins are difficult to synthesize using existing delayed and extended oral release technology. Hence, it would be ideal to deliver these medications locally to the colon.

Progenity is developing a revolutionary drug delivery system (DDS2) to deliver liquid medication formulations to predetermined areas in the gastrointestinal tract. The mechanical capsule is self-contained and uses an algorithm based on reflected light to determine its location. Moreover, the DDS2 system has significant advantages over other typical delayed-release oral formulations, making it appropriate for treating illnesses including IBD and colon cancer. DDS2 also functions independently of human physiological factors such as pH and transit time, which is why it can ensure an expected high luminal drug exposure and has the ability to inhibit systemic absorption or breakdown in the upper gastrointestinal tract.

The company believes that this technique has the potential to improve efficacy while reducing systemic exposure in the treatment of ulcerative colitis. This research also contrasts existing colonic drug delivery technologies with Progenity's innovative drug delivery system (DDS2) and highlights prospective uses targeted to improve therapeutic efficacy while limiting drug toxicity.

Single-molecule detection technology

Progenity recently announced a new patent linked to its in-development single-molecule detection platform. The company said that the platform would cover crucial methods for calculating target molecules, eliminating the requirement for sequencing.

Additionally, Progenity has built a compelling patent portfolio to support its single-molecule detection platform, including six patent families protecting various features of the company's molecular counting platform, as well as a separate family aimed at detecting nucleosomal positioning patterns, which can be useful for defining cell-free DNA tissue-of-origin. Progenitys single-molecule detection platform is intended to allow tests like liquid biopsy for cancer or non-invasive prenatal testing (NIPT) to be performed without the need for expensive, complex sequencing, lowering costs and simplifying operational implementation. Beyond nucleic acids, the technology has the potential to be used with proteins.

These patents are part of the company's corporate portfolio, which includes 96 patent families with 180 published patents and more than 220 patent applications pending. Moreover, Progenity is aggressively seeking partners to develop these valuable assets further as it transitions away from commercial diagnostics.

Final thoughts

Progenity: Not for the Faint-Hearted
Progenity: Not for the Faint-Hearted

Progenity has seen a sharp reduction in its stock price over the past year. The company had its IPO in June of 2020, when it sold its first shares to the public for $15 each. The journey has been downhill since then for the company, to the extent that the stock price had fallen below $1 last year before showing a major spike.

Currently, the company is trading at an enterprise-value-to-revenue multiple of 3.82 and a price-sales ratio of 0.96, which appear cheap. However, given the declining trend in revenues, there is clearly a lot of pressure on the companys ability to produce a profit. Currently, its main hope to return to revenue growth is to commercialize Preecludia.

The management is optimistic about Preecludia and expects it to cater to an annual market of $3 billion. However, the companys trailing 12-month revenues of around $75 million are nearly half of what it had been achieving in 2019, and the company's main areas of research are still far away from producing any sort of cash flows. Thus, it is a highly risky investment at current levels.

This article first appeared on GuruFocus.