PROG | Preecludia Competition $3-6 a share possible this week

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.

Disclosure: We own PROG securities/shares at the time of publication. This could affect my biases in my analysis.

 

Progenity | $1.72

  • Background

  • Competition in the Preeclampsia space

  • Thoughts over this earnings on Monday after hours 03-28-22

 

Background on Preeclampsia:


This is a condition that affects women during pregnancy which can cause mortalities in the mother and baby.

There are currently zero ways to effectively treat this condition other than an early delivery. The problem which affects many women is that during pregnancy sometimes they develop the symptoms but there are limited and accurate ways to find tests for it. Tests are needed to help rule out this condition so that their is certainty in the approach doctors take in deciding if they need to perform a c-section or induce early delivery of the baby.


Another reason for creating a reliable test is that sometimes patients can present the signs but not have preeclampsia, which is useful for doctors and patients alike to know. As they would stop from unnecessary intervention. This would stop many from undergoing extreme measures and would allow for a different route of treatment. These tests, if reliable and robust, will aid in saving insurance and patients from having to foot the bill of the additional medical expenses that occur in preterm deliveries.


Here is an excerpt from a doctor from Roche speaking about difficulty to detect the condition:

A serious pregnancy complication, preeclampsia is characterized by the onset of hypertension and proteinuria (protein in the urine). But detecting it is not easy. Nicknamed “the great imitator”, preeclampsia often mimics symptoms of many typical pregnancies, such as nausea, lower back pain, weight gain and swelling of the limbs. - Dr Yi-Ning Su


These companies below believe that they have the answer. I will discuss the advantages of each product below.

 

Competition:

Progenity Recently developed a commercial rule out test for the 28-37 week time frame, Current market capitalization: $276 Million


Roche (Large Pharma) First Trimester Screening (First 12 weeks) Have commercialized in Europe


Sera Prognostics In development of a Preeclampsia test that covers all trimesters which they presented on March 18th. Current market cap of $109 Million

Noticeably on the date that they presented, the stock did not move too much. I think they are a few years out before finishing their product. They also are trying to cover the whole gestational period which is seriously complicated. The market is seeming to not believe them yet.


Connecting the dots:

Progenity currently has the dominant test which will be approved for use in the United States. It tests in a more practical band of time than Roche. I also think Roche may be a potential partner to license out the rights to use Preecludia abroad.


I think Roche could possibly want the monopoly on the Preeclampsia testing market, or could possibly want to bolster their revenue with Progenity’s Preecludia. The great reason that Preecludia works well is that it covers one of the most important bands of time in Pregnancy. 27-38 weeks is the 3rd trimester. The 38-40 weeks are when babies are typically born.

Roche’s product may not get much attention because Preeclampsia does not show it signs normally until after 20 weeks. I could see the commercialization actually helping the Roche product line as it would bring more awareness of these tests to doctors.


For Sera Prognostics, they seem to have an ambitious product as the mountain they must climb is steep. They claim to be able to test at any time during pregnancy. I think at the early stages of their study, they will most likely be ambitious with the band of time that they can effectively test for Preeclampsia. However, as they start to see that they aren’t able to accurately predict for all of the weeks, They may scale back their projections. They must have accuracy to do well commercially.


Final thoughts:

For earnings this Monday, I think Progenity may announce a partner that is going to be able to distribute their product. If they do, I hope they share the details surrounding the deal as this would mean they are very close to making revenue off of the product.


If Progenity does not share a licensing partner for Preecludia, I will be buying more stock during after hours as I do believe the stock may dip.

There are a few other aspects that could pull the tether on the stock price such as updates with the OBDS partnership progressions. Looking for the Ionis relationship here. If they continue forward out of feasibility studies in animals, we may see large sums of payments coming. Genome therapies are starting to show a lean toward injections in very high diffusion zones which Progenity’s OBDS offers.

DDS pipeline progression or new partnerships/sponsorships.

A reduction in cashburn, learning about the Avero lab sale, closing the $90 million offering

 

Current Price: $1.72

5 day Forecast: $3-6

I am basing this off of a positive partnership update for their Preecludia product line.


10-12 Year Price Forecast (2030-2032):

Bear case: $400 a share or $66 billion in valuation

If Progenity takes a bit longer on their goals and commercializes in 2028, I believe they will still be driving 3-4 billion a year and could be trading at a PE of 20.

Bull case: $1,200 a share or $198 billion in valuation.

If Progenity can start commercialization in 2025 and progress their technology through multiple revenue streams, we could see solid dominance and incredible growth. I think they could capitalize on Humira and then further large molecules (tofacitinib & GLP-1). If their Ionis partnership pushes through as well (60 billion market by 2030), we could see 9-12 billion a year. And with a PE of 20.

Disclosure: We 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

and the Optifinancial Team

 

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