Updated: Nov 28, 2021
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 | $3.54
Clarifying their product pipeline
PIL Dx | DDS | OBDS
Catalyst Timeline analysis
Updated price forecasts
Clarity on the Product Lines:
PIL Dx Platform (Diagnostic platform) - currently in 2nd phase of engineering for large scale manufacturing and lowering production costs. The main focus at the moment for Progenity’s disease diagnostic is listed 1st below:
SIBO (Irritable Bowel Syndrome) - Pil Dx Platform - $138 Million dollar market valuation
They have a diagnostic small intestine pill bacterial capture test that could bring in multi millions in revenue each year as it takes years for doctors to diagnose and treat this disease (SIBO)
CEO talks about SIBO @ 07 mins, 30 seconds in Piper Sandler conference call.
According to the CEO, the data suggests about 10% of the population will have SIBO, the market has not been able to see this because of the disease being so hard to diagnose.
Keep in mind, the current medical market does not have a direct method of diagnosing SIBO, and this will possibly increase the SIBO market valuation as well as tap a new market for diagnostics of the SIBO disease. The risks to this are market uptake and efficacy of the test. Progenity could make $1500 per test off of this pill.
Other PIL Dx Diagnostic platform diseases that could be tested (Per the CEO):
With PIL Dx, they plan to develop measurements of proteins, drugs and other biomarkers. For example Colon cancer screening, Nash and IBD in general from a diagnosis perspective. These tests could also evaluate the performance of drug delivery by identifying markers directly in the GI tract which is currently very difficult to do.
Drug Delivery System (DDS):
The goal of the DDS is to deliver a therapeutic directly to the disease site. It is safer and more effective than existing methods and they will first target Ulcerative Colitis and Crohn's disease with it. Remember the current standard uses IV to administer the drug. Only a fraction of the subcutaneous/IV drug injections makes it to the target site which means a relatively low efficacy. With Progenity, the patient can just take the pill at home in increments and the data will be transmitted to the doctor and uploaded to verify patient compliance as well as making the patient's treatment more effective and safer.
Progenity’s pill auto-locates the entrance of the colon and then lines the colon with the liquid drug. This maximizes the efficacy and increases the safety by reducing the systemic (total body) penetration and dosing it locally even with higher doses. This will completely change the way IBD, Crohn's and Ulcerative Colitis is treated.
For example in Progenity’s recent study with Pfizer’s Tofacitinib: They had 25-40 times more drug in the Colon than any company has ever been able to get. This will limit side effects and maintain a strong safety profile.
Right now they are in the process of establishing the protocols for human studies for Tofacitinib and potentially for Adilimumab using the DDS. They are currently going through a regulatory process review. And they hope in the 1st half of next year to initiate those studies. They also are currently working on functional studies for device performance with Auto-location, with food and without food.
Having food in the system and being able to perform is an absolute domination over any existing pill technology. If Progenity can show that they have auto-location capability in fasting and fed (food inside) states this will be very positive news. No competitor (Competitors here) has the ability to do this as they have to have the patient fast before taking the pills, be ready for this data in the first have of 2022. I expect them to release results before June 2022 on this.
Progenity is also running functional studies in Ulcerative Colitis patients, they want to make sure the functional aspects in non-healthy individuals are optimal as well. These are critical in the future studies for all of their platforms. DDS intellectual property (IP) and software will seep into the OBDS and the PIL Dx Platforms as well.
Two main focuses for Progenity's DDS at the moment:
PGN-01 - Humira - (Correlated with Abbvie)
PGN - 600 Tofacitinib - (Correlated with Pfizer)
The challenge is to prove/verify efficacy of the drugs and to educate the company on which drug to take to market first. And to do more broad clinical studies.
They are planning to partner with large pharma companies, however, Progenity has disclosed that the large pharmas want to see the PK/PD data initially. If the functionality is proven of the pill, you can bet more opportunities and funding will open up.
3rd Product is the OBDS:
OBDS is a refinement of the DDS approach, the goal is in reverse, not to treat GI diseases, but to deliver biologics. Large molecules, Vaccines and monoclonal antibodies. They designed a device that carries a large payload and can carry liquid form of the drugs. Most large molecule drugs on market are injected by needle. The idea of this product is not to change the material of the drug, but change the delivery method which will end up benefiting patients and doctors more. (Means no Drug approval needed from FDA)
The OBDS has a different mechanical engineering mechanism than the DDS. It uses a high pressure liquid jet system that penetrates the mucous layers in the intestines and delivers the drug into the small intestines capillary bed of the GI tract; efficacy of this method has been shown in the lab with muco jet, you can find more on this in my previous article on the technological competition. The high pressure jet method is probably the most safe as needles cannot get caught. 1 risk to Progenity's device is that it may not inject the exact amount of drug needed. I’d be curious to see more research on this aspect. Needle free equals much less risk to the patients and also to the doctors and company’s. Insurance companies will much prefer covering this technology most likely due to the risk averse nature of the needless pill.
In fact, vaccine pills are a perfect use case for this. After hearing that Pfizer has a vaccine pill, my interest in understanding this pill that they use makes me wonder if they are interested in using Progenity’s OBDS platform.
Progenity has shown 15% bioavailability in their early stage OBDS devices which is HIGHER than the same amount that IV’s or injections typically produce. Progenity's higher bioavailability is very important to highlight. They can get away with lower doses and keep the same efficacy. (This means a better safety profile and better efficacy of the drugs)
Progenity just need to get the dosing science perfected, which I believe they will do over their next few clinical rounds (Before end of 2022)
Progenity also has been trying to develop a platform that is versatile for a wide range of large molecules. For instance, If IONS antisense technology, (Their P2 Topline data was just announced by Pfizer and met all primary endpoints (great news)), Progenity will possibly be the leading company to deliver this drug to patients.
They are using two drugs currently for this OBDS program: Adilimumab and Loraglutide (GLP-1)
They illustrate very different molecular weights and profiles which demonstrates Progenity’s versatility in being the leader.
The fact that there are 3 pharma companies partnered, illustrates the need and interest in oral biologics. They are aiming to test in preclinical models (animal models) of these pharma’s drugs. Once the bioavailability is known, we may see cash come in for further development. I imagine that 2 of the 3 pharmas may decide to go with Progenity and pay them hundreds of millions for the development. Lots of the large molecule drugs such as Humira and others are having patent expirations. With the recent watchful eye on the large biopharmas and their patents, they need to find new ways to maintain IP and continue cashing in on their landmark drugs. Progenity is the perfect fit for this as they increase efficacy and safety also while making generics less desirable as patents expire.
Once the dosage regime science of the OBDS is completed within 2022. Progenity will basically be able to do phase 1 studies on drugs and then the will go through the medical device approval process for that device & drug combination and that is all. This is extremely important to note because the timeline to commercialization is shorter than regular biotechs. Once their pill tech is perfected it will be much faster to get to market and increase the standard of healthcare
Partnership to market timelines:
Progenity’s timelines with drugs and partnerships look like 6 months of a phase 1 study, 3 months of data generation and then 3 extra months for finalization. Then doing 6-8 months more work to get approved by the FDA.
This means from start of a partnership to finish of approval,the drug and tech combination will take about 1.75 - 2.25 years.
Assuming they take 26-30% of the drug profits (normal pill manufacturer profits) and own licensed software for doctors and patients to use, you can see that this company can quickly generate positive cash flow in mid-2024.
They have a run rate into late Q3 2022. And have one last divestiture which should bring them in $290 million (Avero Labs & Preecludia assets) which will keep them cash full until mid 2024.
Watch for this news, as it will improve the certainty of Progenity’s future and cause the share price to move up 40%-60% from where it currently stands. Depending on the deal that they negotiate, it may be better or worse. I am hoping that they can end up getting royalties from their Preecludia asset (below).
The reason I am thinking that they will sell Preecludia as well, is that they are transitioning to a Therapeutics business and less of a diagnostics business. I think focusing their energy and resources on the technology drug delivery pill will bring them the most cash and also deliver the most value to the world.
Above are the drugs in work with their 2 therapeutic platforms: OBDS and DDS, notice that their are two large pharmas that are undisclosed, the leading theories are that they are Pfizer and Abbvie because of the similarities between the drug combinations. However, Novonordisk may be interested as well due to their previous work with the SOMA device for insulin delivery and attendance in the PODD (precision oral drug delivery) conference. Also Novonordisk uses GLP-1 agonist as well.
I am also looking forward to see if Progenity can tell us if they have any further partnerships. Their technology will be useful in many cases (large molecules, monoclonal antibodies and much more), The Ionis partnership is a showcase that niche high potential profit companies can use Progenity's tech to deliver the drug with higher bioavailability. By having a shortstrand dna delivered, It also showcases how Crispr Cas12a tech may be able to be delivered this way as well.
From the charts above from their Q3 financial slides, The next piece of information we may receive will most likely be the DDS, PK/PD clinical data by the end of December.
This data will show that the drug/pill combination can work for the large pharmas. This will be very important information moving forward. For development of Humira in their pill (Adilimumab).
The next catalyst is Preecludia and ongoing efforts to license it. They may end up selling it and receiving royalties from it. However, if the bread crumbs that we have picked up on with Natera are correct, it will be sold to Natera after Progenity has developed an execution plan. This is why I think Progenity has hired a consultant firm to help them make their labs ready for Natera. And this is why cash burn will be high but will come down dramatically in Q1-Q2 of 2022.
3rd Catalyst will be the OBDS clinical PK/PD data generation, there will be multiple data points for two drugs. We will have the Adalimumab variant and the GLP-1 drug as well to watch for in this.
4th Catalyst: DDS functionality study: This is a study to help them get an understanding of the device function with fasted and non fasted patients, In other words, patients who have eaten and who have not eaten, They are aiming to make sure the pill can be taken with food. This would be excellent for patients and market uptake. They are always improving their pill so you can say that each study will impact the functionality of their pill in the future.
Current Price: $3.63
3 Month Price Forecast: $10-25
With the current trend of this company and their ability to spread over every single oral delivery system, I can see this company going much higher in a short time span.
In 2025 Price Forecast: $60-70
This will be when they are delivering their first commercial product into the industry. They will need funds for marketing, but I think the
In 2030-2032: $370-420
I make this comparison because of the early stage Dexcom, diabetic medical device company that took about 10-12 years to lift of from half a billion to 60 billion. If you look at the similarities and see that Progenity is in fact the dominant player in this oral delivery market, then they will most likely trade in this range. One thing I look for is: Will doctors prescribe this? And Dexcom's technology allows doctors to get feedback. Progenity's technology will do the same. Also, Progenity may be able to deliver long lasting insulin for Diabetes as well. They have an extremely large territory to cover which gives me confidence that they can be bigger than anyone initially expects.
One large reason insulin is now in play for oral delivery is because the cost of it has come down substantially, which means it can now be delivered in larger volumes.
Final thought on PROG: Staying Long on this as I believe their technology will disrupt the healthcare industry
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.
Thanks for subscribing to our newsletter. If you find this information helps you, please share it with someone else! It will help us out greatly.
Until next week,
and the Optifinancial Team
Optifinancial is not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA ;nor an accountant nor a lawyer. Optifinancial is not a finance professional through formal education. Optifinancial believes in and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment of money. The contents on this site/letter/email are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. Optifinancial can’t promise that the information shared on our posts is appropriate for you or anyone else. By using our content, you agree to hold Optfinancial or any constituents related to Optifinancial harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided through our site, website, social media and newsletter.
Optifinancial does not collect information about you other than (1) what you personally provide if you submit a comment (your email will not be published) or sign up for our newsletter updates and (2) what’s available through normal server logs and Google Analytics. Optifinancial won’t sell or disclose your information to others unless we have received prior written agreement from you (e.g., you agreed to let me share your comment on a post with other readers).
17350 State Highway 249
Ste 220 #3942
Houston, Texas 77064