PROG | Preecludia Validated

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 | $1.50

  • Preecludia peer review released in Pre-proof for the JPBA medical journal -

  • Why is this peer review important?

  • How Progenity can leverage Preecludia to pull themselves out of debt

 

This is an exciting time to be a stockholder in Progenity. They recently rose 15% on their peer reviewed publication on Preecludia being published by JCBA which is located on Science direct.

I was able to get access and read the publication. They followed all of the guidelines and protocols. They had ethics committees and the whole cavalry to make sure this study was done correctly. The peer reviewed journal at the conclusion said these words: “the test was reliable, preproducible & will give robust results”.


Just in case you need a refresher on what the Preecludia product is:

Preecludia is a blood test that uses machine learning and 8 biomarkers which are very distinct to rule out if during pregnancy symptoms of Preeclampsia arise.


This graphic below shows what it does in practice.

 

Why this is an important step piece of news for Progenity:

For those who have been investing or looking to invest, I will go into detail on the reasons why this piece of news is excellent for the company.


  1. Credibility - going against Progenity with lawsuits (I believe 1 more left that is most likely being dismissed) / CEO - Harry Stylli leaving and blood testing companies in general were getting bombarded. Also the other risk was that their debt load can not be sustained. Preecludia had become a very large uncertainty as so much had been thrown out against the company and the general blood testing businesses in general. Preecludia was almost being priced in not to work. This is where the peer reviewed journal completely stops the confusion. This publication allowed the medical and investing community alike to see that Progenity’s data is valid and was not incorrect. If you look at the Ex-CEOs past, it showed that he had trouble before with a company called sequenom. They essentially oversighted data which showed that their down syndrome blood test was unreliable. That company that he ran was caught and the stock dropped to near zero. I think that is why Progenity stock price fell so hard in its first year after it went onto the public market. It dropped from $15 - .66 cents in little over a year. I think the market knew that Harry had a fraudulent past for blood tests. They also had quite a bit of lawsuits from the avero labs business which is now sold off as well. Regardless, they now have a legitimized product and will be giving us an update on their licensing and partnerships with it this March.

  2. Revenue and pull out of debt - the next big question is, how much money can Preecludia make? Can it offset Progenity’s debt? Will they be covered by insurance? To answer these questions, we need a few more pieces of information as right now we have to still guess a bit. What we know now is that they already have the kits manufactured and ready to be deployed. We also know that the market for Preeclampsia in the US is 3 billion dollars annually. They also are doing some preclinical testing to verify how it would work in the medical environment. We also know that blood tests can cost up to $1,500 without insurance. I think at this point, Progenity would do best with outsourcing their product and receiving royalties from it. It is also typical to get an upfront licensing fee from the licensee to sell the product. I could see Natera (NTRA) Buying the rights to sell Preecludia and then giving Progenity a 290 Million dollar up front payment. Then Progenity may receive royalties from the test 10-20% per test. In the event that Progenity were to announce something like this, the stock would most likely start trading towards a billion dollar market cap. (Progenity’s current market cap is $244.97 million at the time of writing) The reason this would be is that the payment would free Progenity from debt, and the royalty money could eventually cover some or most of their current cash burn. They then would be able to focus on expanding their oral therapeutic pipelines which I think are a multibillion dollar a year business (Explained in depth in previous articles).

 

Final thoughts:

Progenity has an earnings call on March 28th after market close. I think this is when we hear about the partnership updates with Preecludia. I also hope to hear more about where their OBDS product line stands with Large pharma. If the Ionis partnership continues, I foresee that becoming a large revenue stream for Progenity. I do believe more genome therapeutics will want to use Progenity’s product as injections sites are where the adverse events happen for these types of drugs.

 

Current Price: $1.50

2 week Price 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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