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 | $1.93
What factors are making me question Preecludia
Diving into the science, Does the science make sense?
Final thoughts on Preecludia’s validity
I have been covering this company in depth over the past 6 months however, one item of the company that I have not paid much attention to in my research is their Preecludia product. I have mentioned it in the past and its basic fundamental methods of working. The product that they have to me does not even register on the future revenues in my analysis of this company.
I have covered their oral technology in depth and believe that their technology there is valid and will do well in the market. For Preecludia, its a question mark that I am going to intend to answer with honest thoughts on what this test is and is it legit? Is it credible? I will bring up some negative points.
I want to remind you that I am not an expert in this genetic/blood testing field as it is very complex and I do not have a background in blood pathology. I do have a background in algorithms and will try to pull back the veil on how they are going to tell whether or not a mother has the biomarkers for Preeclampsia.
What has made me question Preecludia’s legitimacy, and what actually is this product?
Preecludia - What is it and what’s its value to the medical community?
Preecludia is a multi-analyte blood test that uses biomarkers and an algorithm to unravel if a woman has a condition called Pre-eclampsia. This condition is a fatal hypertension that can kill the mother and the baby. The best way to prevent it or mitigate this is early delivery of the baby. Preecludia aims to mitigate the amount of unnecessary deliveries that happen. Also, knowing if the mother does not have the condition is equally important as it can reduce the amount of expenditures in complicated cases. Doctors would call this a tool for a methodology in solving medical problems “differential diagnosis”. This test will help doctors narrow the search for the answer for Pregnant women who have complications during pregnancy. There is currently not an accurate way for doctors to test this currently.
Factors which have raised eyebrows for their Preecludia product:
Harry Stylli (The ex-CEO of Progenity) was the CEO of another company called Sequenom. He was fired alongside a few others in a fraudulent case where they skipped some steps on their down syndrome lab test. They found significant flaws in the study in which they were trying to see the test's efficacy. If you recall, Avero labs/genetic testing (sold/closed down now and not a part of Progenity) had been sued because of the billing kick backs which were overcharging the government. They settled and agreed to a 49 Million dollar settlement. Harry also did not know how to run a company. Progenity was very poorly run when it IPO’d and I believe Harry may have just left due to life reasons. Here is the filing to see what the company stated about his leaving. He has some other opportunities however I see him being very stressed and performing sub-par due to his past legal issues and constant failing, cash burning and stress.
Some good things about his leaving is that he still owns a significant portion of Progenity and has not sold his stock as of yet. This tells me that he still believes in Progenity and their future. Some things from Harry’s businesses that were successful. He was very good at connecting people together and businesses together. I think the best thing Progenity did was to buy the assets and IP from Medimetrics GMbh (oral tech pill) and improve on them.
Embargo has been on the Preecludia Validation data since June. However I think that the final draft was submitted in September. I think that Harry overstepped his bounds again and mentioned that they were further ahead than they really were. I have an answer below on why I think this peer review is taking longer than the normal amount of time.
2 People of interest who validate/worked Preecludia
This is a doctor who founded Carmenta biosciences before Progenity acquired them in 2015. This person has a PhD in toxicology and is leading the Preecludia initiative.
Here is the presentation that he submitted in late November
Pankaj Oberoi, PhD - This is/was (not sure of his status) their vice president of development and research who presents over their science. Oddly, from my searching, he was not on Progenity’s website but is on their patents for Preecludia. His linkedin states that he started at a Proteomics lab in September 2021 which is before he presented his slides November 20th. He could have left the company as his job was done/no longer needed or he left maybe to do the test not working. It is odd to me though that he would present and then leave. He also does not show that he worked with Progenity which I also find interesting.
Thoughts on their science:
Definitions to help understand Preecludia:
Analyte - a fundamental component that a test is looking for. Could be a protein, or any base product that can be used to help diagnose a disease or understand more of what is going on.
Assay - This is a procedure used in the medical field to check for concentration and amount of analyte found.
So when Progenity says that they have a Prenatal Multi-analyte Test or Prenatal Assays
This means that they have a way to check a mother before birth by taking a sample of their blood, breaking it down to its fundamental parts that they expect to help diagnose and then using a procedure to fully unravel those parts with an algorithm to see if the mother has Pre-eclampsia or not.
They have claimed that they have an accurate method of doing this and have had over 3000 patients to collect data from.
Biomarker - A biological molecule found in the blood that can be used to help diagnose if the body has any abnormalities. Usually when something is going wrong, especially in cancer, you will see the cancerous cells creating abnormal molecules which can be detected in the blood.
Proteome - A set of proteins that can explain what a cell is or a dna strand does. Essentially it is a way to help categorize different biological structures which for our purposes can call Analytes/Biomarkers
Pathophysiology - The way the functions change when a person has a disease. Pathophysiology is the study of abnormal states. Progenity mentions this in the slides when referring to Pre-eclampsia.
Reagent - A reagent is a substance that can change color or react to let the us know if there is a presence of it in the blood. They use reagents in combinations with these analytes/biomarkers to indicate presence of them in the blood
They used their Proteomics platform to perform research
Below is their process. They use their Preecludia kit which contains a bunch of reagents and the blood sample is input into a machine which drops blood samples in.
The machine then records data and then Progenity takes the data and runs it through an algorithm to determine whether or not the mother has Pre-eclampsia or not.
My First thought is, ok, so this machine is a very vital component to their research and clinical utility. What type of data do they collect?
The collect concentration and %CV
The CV is a process in which to accurately define how much error you have in your measurement. Under 10 is good. In Progenity’s data sets, they show that their machine was able to measure to 3.4. That’s very good and acceptable data.
Once they have/know the error in their data, they can look at the concentrations of the analytes created by the reagent and blood combining.
They then take the concentrations, upload the data into the machine learning algorithm on a computer that they have trained and then it spits out whether the mother has Pre-eclampsia.
Final thoughts and conclusion:
Short answer: I think Preecludia is a legitimate test
Let’s look at the number of patients which was greater than 400 in their verification study.
They show that they had solid results for detection of Pre-eclampsia. For verification.
They finished in Mid 2021 with a validation study of over 1,700 patients!
They said that they’d be getting results mid 2021 (which they did). And submitted a massive amount of data to a journal for peer review. After looking at how Preecludia works, what kind of machine learning, and testing 100’s of biomarkers. There is a definite reason why this peer review is taking so long.
There is a lot of data to parse through and alot of insights medical reviewing this.
Let’s do a little math here:
Say you have 100 biomarkers that you are testing for each patient, you then have to have someone review each data point. They have to look for good data and metrics which make sense for each biomarker.
Because there were over 1,700+ patients and 3000+ samples taken, we have to expect that there will be some outliers in the data that the peer reviewers are asking questions about to determine validity of their data.
The peer reviewers also need to see the inner workings of the algorithm and understand how it takes each data point and crosses it into a yes or no. They may have questions on varying biomarkers that could be different but still get a yes or no. I am expecting alot of slowdown to the 100’s of questions for the many biomarkers.
This algorithm I assume takes multiple hours to process which means it is a lot to walk through.
This is also why the embargo is taking place and for so long. It is just because this data set and method is much higher in data and needs to be checked in every corner to make sure patients are served well and so that the medical community can trust the test.
Especially with the scrutiny from the folks at Nytimes article here.
It was good to see though a response back from the analysts and community in whole saying this article was erroneous. Here’s Natera’s response in a PRESS release about the Nytimes article. Talk about drama in the prenatal space. The Nytimes article directly talks about sequenom as well which Harry Stylli ran. The article directly attacked the Prenatal testing space. It feels like there was an agenda behind the Ny article (speculation).
How does Natera relate to Progenity? They worked together on Preecludia in the early stages of the developments of its assay’s. They have some crossover in the market as Progenity and Natera as well settled a lawsuit together. The lawsuit was over that Progenity over took more IP than they should have. Progenity refuted. They then came to a settlement.
Recently in a Q2 2021 press release from Natera: they stated that they have paid $10 million to an undisclosed company to execute a commercialization plan of a product.
They then stated that if they execute on that plan, Natera would pay a whopping $290 million dollars for those assets. Hmm. Starts to make you think who that could be? Natera also raised 500 million the same week that they found the results of Progenity's verification study of Preecludia. They also settled that lawsuit 10 days later.
Lastly, the Avero labs were sold for 10-11 million, I think this was in efforts to possibly cover up the $10 million that Natera paid to Progenity. Speculation, but that's why I think the labs sold for the price it did. I think Northwest Pathology is just a 3rd party which is helping the transaction.
(Credit to Yony Sabo on bringing this up to me, also great research on twitter over Preecludia, it's worth a look, he covers other components I did not do today. Regarding the trademark of Preecludia not being activated yet and much more about the journal publication)
Preecludia is legitimate in my opinion. I would however like to get a deeper understanding into how exactly the algorithm works.
Current Price: $1.71
2 Month Price Forecast: $8-12
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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