$25 price target a share reiterated, Progenity dominant against competition

Updated: 4 days ago

Optifinancial Newsletter - Knowledge is power - Brad Mitchell

This is not financial advice nor recommendations. This is purely our own thoughts and opinions regarding the matter discussed below for entertainment purposes. This is not advice and is never intended to be.

Progenity | $3.00


  • Competition in drug delivery

  • No need for needles, Just drug release is needed

  • Comparisons and thoughts on Pills

  • Progenity’s earnings

Competition:

In the past, I have been burned by holding a biotech without understanding the inherent risks of competition. The company I invested in had great data results, however their price was cut in half after releasing news because their drug was not as good as their competitors. This is why I am evaluating the competition and who Progenity is competing against. Also I will be comparing the market values between PROG and RANI as evidence for why Progenity is undervalued in my opinion.


The competitors working for the best oral delivery method below:


Top 3:

1. Progenity

2. Rani

3. SOMA


Other mentions:

4. LUMI

5. E BIONDD

6. JetCAP (Honorable mention)

7. MucoJet

8. Check Pill (CHEK)


1. Progenity Inc.- The "underdog", lowest valued public company working on precision oral delivery, market cap of $.44 Billion

Below is a depiction of the capsule Progenity has produced and studied. They are progressing and have recently stated in their report they are focusing only on precision delivery of drugs. They have made many more improvements from their past studies and have published quite a bit of research pertaining to their technology. They have the widest moat of testing, and laboratory research amongst the competitors. Take a look at the photos below:




Below is a video I have shared before, but demonstrates the real pill and how it works with the gas pressure mechanism which pushes out the drug at any rate they want depending on the pressure. Keep in mind the reason they can keep the pill so small is because they can compress the H2 gas and package it neatly with the electronics. This small packaging allows the LED lights and sensor to fit into the pill. The Progenity's pill is the smallest tech pill in comparison to the competitors, therefore less risk to causing complications and easiest to accept by the patient. Keep in mind I am an investor in PROG, so I may have personal biases in my analysis.

  • Progenity has various and quite a few studies published with a track record of executing their goals with their DDS2/OBDS pills.

  • Progenity's pill can deliver anywhere in the GI tract, they have shown excellent accuracy in the Small intestines and the Colon. They are progressing their tech and improving it's ability to target different areas of interest. They use machine learning to process where the pill is in the intestines.

  • Progenity is the has shown the ability to send signals wirelessly through to a computer during the capsules journey. This is imperative to have for patients as well as scientists. The feedback mechanism to know if the drug released is very vital to know. Most of the pill combinations below have no current method for feedback to the users. What happens if the pill is not releasing because a person has a completely different intestinal ph for enteric coatings? What happens if the pills malfunction? Progenity has the right tech to make sure that the pills are user friendly and can give this critical feedback to the patient and the doctor.

  • Doctors will love Progenity's technology because they can verify patient compliance. One of the hardest parts about prescribing medicine is that you can't tell if your patient has gone home and correctly followed the orders. This can make it difficult for doctors to correctly assess the patient and their needs. You can see favoritism in this data feedback space for endocrinologists and diabetes right now. Diabetic doctors are all recommending using feedback devices that collect data, because this helps them do better at taking care of the patients. You can look at Dexcom's stock price and see that this great for the device making company. I expect Progenity to do the same.

  • With recent openings in drug combinations that allow large molecule absorption, Progenity will be the leader as they have the most precise tech and have a proprietary drug combination that allows large molecule uptake. (Discussed further below)



2. Rani Therapeutics - The "Perceived Leader" in the oral drug delivery sector, Worth $1.4 Billion as of writing. (Sound on for voice over, explaining)

As a mechanical engineer, I can see quite a few stumbling blocks over their tech alongside the progress they have shown on their website and press releases.

  1. Rani's pill is very large in size and relies heavily on the ph level in the intestinal track for the enteric coating to dissolve. A problem I see in manufacturing is applying a uniform enteric coating over the airbags. Non uniform enteric coatings could potentially cause the bags to explain incorrectly. Also, the rapid expansion of the bag could go horribly wrong if the pill was position perpendicularly in the gut. These are problems that this company will have to answer to with this technology.

  2. The medicine has to be in a solid form and it pierces through the intestine to go behind the gut walls. I think this is a very risky mechanism because of the nature of how it will poke through the wall. This can open the intestines up to bacteria going through the puncture wound. Also if food such as lettuce is being digested, it could in fact get lodged in between the needle and possibly cause food to be implanted deep past the intestinal walls. Everyone's intestines may have slightly different elasticity's and having a consistent solution for everyone will be difficult. Penetration may fail if the needle is angled incorrectly due to the air bags deploying and wrapping along the geometry of the curved intestines.

  3. The Air bag has a few downsides that could cause issues:

  • During deployment, the bag shown in the video seems like it could cut/harm the process of how the intestines squeezes and pushes food down the tract. I think this will cause issues in some patients as the application could cause blockages since the geometry is not dissolvable and will stay the same through the whole GI tract.

  • The non-uniform profile of the system may cause quite a bit of concern to the FDA as they could see it being very risky, possible causing much harm if it was to cause a blockage. Doctors would need to verify the health of the GI tract because in some cases, tumors or abnormalities which would normally be passed by the pill profile may capture and hold on to the product.

  • Manufacturing the airbags and also packing them into a pill will cost more than Progenity's pill. If you want massive market uptake, you will need to find a way to make millions of pills and this product will be difficult to create and mass produce. A small company that is composed of doctors and scientists will need manufacturing engineering to look at their product. From what I am seeing, they will have to wrap each pill by hand and then drop them into a gel which if it has defects, it could prematurely release the product and cause a lot of harm as it could not pass through the stomach. Also another problem is how does the gas escape and will that cause indigestion with the large volume of extra gas created?

4. Repeated needling of the digestive tract - is a great way to cause problems in uptake of nutrients, cause inflammation due to fighting of bacteria and possibly reopening a wound in the GI. These will be extremely difficult to treat.


Highest valued (RANI) precision delivery company only has 1 research study.

The Rani pill's advantage is that they use a bullet needle which can deliver any solid or hard medicine. Previously, other digestive tech that used needles has failed.

Rani has only 1 press release that I could find saying that they had success in greater than 70% of their patients. (If anyone can find more studies or research from them please reach out to me so I can include it). My "gut" feeling is that Rani has quite a bit ahead of them in regards to improving their technology. They have a lot of work to do in regarding the effects of how a large amount of dissolved enteric capsule material & gas will impact the intestines, They also have to make sure that their pellet can actually be absorbed properly and does not leave behind scarring and remnants behind the digestive wall. Any holes or pressure in the gut can be a dangerous way to get the patients sick.


Another observation is:

The Rani pill only has the ability to work in the small digestive tract. The list of diseases they can effectively treat if there pill works safely and effectively is smaller than Progenity's. They do not have the ability to treat ulcerative colitis $6.9 Billion annual. Progenity has the ability to reach the colon, where no tech has been able reliably to reach before.


3. Soma - The pill that can deliver insulin, long lasting

This pill uses a needle and a turtle shape inspired design that self rights itself using gravity to position itself. The base is heavy to keep itself upright. It then fires a needle and injects insulin into patient.



Video of how SOMA works here


I think this design has a lot more to work on. My question about the SOMA is how can they consistently get the needle to stick? With the stomach moving and the human moving as well, it may be pretty hard for the device to find a good place to stick. Especially when eating this with food as diabetics usually do when taking insulin. Possible food could be in the way, the stomach, also they have a sugar disk which once it dissolves, releases the insulin. This means sugar would be introduced into the stomach as well. For active diabetics, this may not be a plausible solution. There also is the question of how do you make sure the needle does not allow bacteria to leak through the walls or the intestines or get stuck during a contraction.

This will not be able to treat many other diseases without quite a few modifications. This was developed by MIT and Novonordisk.

Novonordisk (NOVO) attended the Precision Oral Drug Delivery conference. I think it is likely that NOVO is looking to license or use Progenity's tech to help increase the SOMA's abilities or also look to use Progenity's pill for long lasting insulin use as well. Currently, researchers have found that there are large molecule uptake enhancers which allow large molecules to be uptaken through the intestines without injection (described in detail further down below). Needles will not be needed in the future for insulin consumption with drug combinations that allow the digestion system to open up to hormones such as insulin.


4. LUMI - This pill unfolds into three legs and has micro needles filled with the drug

This is a very conceptual research project that has some promise but nowhere near devoloped. Here is a link to the description and a few photos below showing the product:

Above shows the size of the pill.

This shows the expanded version that expands the micro needles and jabs the drug into the intestinal walls, it then breaks apart after deployment. This uses the same type of tech that pills use where the outer capsule dissolves (enteric coating) and then allows the device to expand outwards


5. BIONDD - a device that rotates 2 halves until it snags the intestinal walls

This is from a very small company Biograil from Denmark that just received a $8 million or 5 million Euros to start up. Interestingly, they signed a partnership with Janssen Pharmaceuticals to facilitate growth in December of 2020.


This could have some promise, however, Progenity's autonomous tracking technology will be needed in order for this to work in the body. This pill also pierces the intestinal walls. I could see this grabbing a piece of food or missing and slicing/damaging the walls of the stomach & intestines. Swallowing the pill with spikes also is interesting. Not sure that there has been enough studies to understand if this pill will be successful.


6. JetCAP - Mechanical Pill, relies on a compression spring and enteric coating to release




The JetCAP is about the same size as Progenity's. It's the low tech version and has less capabilities. I found some great comparison charts that show whom the researchers believe is JetCAP's competition below:


JetCAP is most-like Progenity's pill in functionality except it uses low tech, less capable technology. Above shows that JetCAP views it's technology as better than it's competitors.

Notice how they do not include Progenity here. Which I find interesting because they compare Progenity below:


This shows how Progenity's tech is much further ahead than the competitors confirmed by a 3rd party source. It by far meets the above comparisons, and also is in Human studies. (Expecting for Progenity's topline results this Q4 in late December)

Progenity's pill is also able to release the same amount of drug volume as JetCAP. JetCAP does not allow precision delivery but just another method to deliver drugs using an enteric coating that dissolves at specific PH levels.

Also keep in mind, needles are not necessary for delivery of large molecule drugs, there are new drug combinations that open the intestines to allow absorption into the bloodstream.


Here is a video to their analysis to the competition here. MUST WATCH.


7. MucoJet - A pill that releases a jet of liquid in order to try to penetrate the wall of the mouth


This device sends a pressurized for of drug into the mouth to hopefully self administer vaccines. It could possibly be digested and used elsewhere. The novel idea is that the high pressure will allow some of the drug to bypass the mucous walls, therefore higher bioavailability. I see this being effective for a vaccine. They will need to rely on Progenity's patented autonomous technology for accurate use in the intestines if they ever decide to make it work in the GI tract.


8. Check Pill - A diagnostic pill for the colon, similar goals to Progenity's PIL Dx (competes but also proves pre-check colonoscopies market)


Check Pill is a small company with $70 million dollar valuation

What is a colonoscopy and why is it so important?

Adults 45 and over (mostly males) are recommended to get a colonoscopy to watch for polyps and tumors that can turn into cancer. Colorectal cancer is a severe disease and can be prevented with early detection and intervention.

In my personal life, my beloved father fell victim to this disease. He fought an 8 year battle with this disease before passing recently. I hope all of these companies can find success and really do want Check pill to push into this market as it could save the US alone around 14 billion dollars.

Colon cancer is normally found too late because patients avoid the colonoscopy and the tumors turn into cancer. This form of cancer metastises (moves from colon to another part of body) due to the large amount of blood flow through this part of the GI tract. Great news is you can treat it effectively if you find it early. This pill could involve a yearly check up for millions of people.


Check Pill's tech works by rotating continuously and scanning the GI tract using x-rays. Then reflected x-rays are then captured in their sensors which then will produce a 3d map for doctors to see. This will help in this space in showcasing oral technology. If Check Pill becomes successful, it will also correlate to Progenity's stock price as well.

One cautionary part about this technology is the use of x-rays which are ionizing radiation. This means it can knock electrons of DNA and damage biologics. The size of an x-ray is about the size of an atom or electron. This is why doctors use this technology sparingly.


Progenity's PIL Dx uses a safer form of light in the visible spectrum using 3 LEDs and a photo sensor. I believe that Check Pill will push into this market first but then Progenity will most likely come after and start taking more market share due to the sheer amount of data they have from all three product lines they have. They can use AI and machine learning to discover tumors and polyps and locate exactly where they are in the GI.

Final thoughts on Progenity's pill towards it's competitors:

After reviewing Prog's pill with it's competitors, it is obvious that the key outlier between Progenity and the others is that Prog's pill has more data and ability to broadly treat disease. They have the most control of their technology and do not rely on outdated enteric coatings. Instead they rely on the data collected and precisely releasing the drug.

Another point I'd like to make is the Progenity is much further ahead than their competitors. They are leading the space and seem to be overshadowed. I'd call Progenity's pill the "Tesla" of the precision pills. They have integrated, LEDs, Sensors, Large Volume of liquid drug, Autonomous technology and amassed data and studies. It is obvious that the competition is lagging in these areas. The ability to detect/release drugs precisely and safely is very important.


How is Rani Therapeutics 1.4 Billion dollars? Rani has the most risk ahead for their technology, they have 1 study, have not demonstrated much data collection and seem to just rely on old technology. Progenity is much further ahead and have demonstrated results. Progenity is only worth .4 Billion dollars. From this, it is easy to see how Progenity could possibly 3x in share price just on this idea alone. In my opinion, this is strong evidence that the market has not caught on and the price is distorted from reality. When the market reevaluates, it will be a rapid appreciation in share price.


Lastly, even if another company comes up with a better way of delivering the drug, they still will be needing Progenity's data and IP to broaden the use of their pill.

Large Molecule uptake, No need for needles in digestion, just need precision (Progenity)


For years it was hard to have large molecules permeate through the intestines until recently, they have made permeation enhancer combinations which allow large molecule uptake.


Some, essentially in layman terms, when the permeation drug is released, it loosens up the tight junctions very briefly which will allow large molecules to be absorbed through the intestinal walls. The problem thus far is being able to release at the same time the actual drug is being released. The enteric process has made it impossible for both the drug and the permeation enhancer to effectively open the intestines to large molecules. With Progenity's pill, they have the ability to deliver it wherever they need to together. That's why when you look at Progenity's study's and research, they say they have a proprietary drug formulation. It's because they have figured it out and are using a drug permeation enhancers.


Snippet from this recently published research article on the drug permeation device below, its a great read. :

"For decades, scientists have explored various excipients and delivery technologies to diminish the degradation in the gastrointestinal tract and to increase permeability across the enterocytes, with the purpose of enabling the oral administration route for macromolecules. In the 80s, oral cyclosporin A and desmopressin entered the market. However, these are exceptions that are largely based on unique physicochemical characteristics of the two peptides. Last year, two more oral biologics were approved: Rybelsus® from Novo Nordisk, an oral semaglutide tablet, and Mycappsa® from Chiasma, an oral octreotide capsule. Although the oral bioavailabilities of semaglutide and octreotide are low—in the range of 0.5–2%, their success holds great promise for the oral delivery of biologics in the future [122,123,124]. Rybelsus® and Mycappsa® utilize permeation enhancers (sodium salcaprozate (SNAC) and sodium caprylate) that have been thoroughly explored over many years to facilitate oral absorption of macromolecules such as peptides and oligonucleotides. Permeation enhancers enable para- and/or transcellular transport of the macromolecules by loosening the tight junctions between the enterocytes or fluidizing the cell membrane, respectively (reviewed in [125]). In Rybelsus®, the permeation enhancer SNAC increases the permeation of semaglutide over the gastric barrier by a transcellular mechanism of action [124,126]. Furthermore, SNAC has been shown to neutralize the low pH of the gastric fluids, which can attenuate the enzymatic activity in the stomach. SNAC also enables the release of monomers of semaglutide from the more stable multimeric form in the tablet. To succeed at raising permeation, permeation enhancers need to be administered simultaneously with the drug or shortly before [124,127]."


SNAC is able to be used with Progenity's tech effectively.

Blurb on Earnings:

  • Cashburn: Their pathway to cashburn or net loss is a quarter is $5-6 million a month or ($15-18 million) $15 million is still true.

  • Runway: They have a projected runway before they run out of money in Q3 2022.

  • Cash on hand: at this moment in time estimated to be around $80 Million

Progenity had a wild after hours session briefly after they reported their quarterly report. The price moved down from 3.55 to 2.73 and then back up to above 3.68. Almost a full dollar swing. This shows that the shareholders had conviction. There may have been some selling and also some shorting at the same time.


Price targets | Current Price: $3.46

3 Month Price Forecast: $17-56

Final thought on PROG: Progenity should be worth more than their competition, Rani at 1.4 billion shows me that the market has not caught on and we are going to see the price increase rapidly. From my technological and engineering perspective, the leader will emerge to be Progenity.

Disclosure: We do own PROG securities/shares at the time of publication.

All stocks talked about we have invested in, and do not intend to give advice nor recommend acting upon the information.

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Until next week,

Brad Mitchell

Colby McCoy

and the Optifinancial Team

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