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 | $2.23
PROG's Animal Studies which have shown effectiveness with Adalimumab
Definitions to help you understand the animal studies
The results are a critical piece to fully understanding the Value of DDS
Outcomes that the study is looking for and explanations
Animal Studies and how they give me conviction for solid results:
In the next few days we will discover the efficacy profiles we should expect by using Progenity’s DDS pill.
They have previously shown in animal studies high efficacy in tofacitinib where they only need 1/15th the drug (compared to standard injection) to get the same therapeutic effect but for this round of results, we are looking at Adalimumab which is the world’s top selling drug ($20 billion in revenue).
Progenity used their own proprietary soluble solution with tofacitinib to help enhance the drug bypassing the mucosal layer of the colon.
Currently the DDS product line is trying to tackle Ulcerative Colitis which is around $7 billion a year by a novel delivery method. The tech pill that they will deploy into the market around 2025 (my estimation) will release the drug once it detects that it is in the colon and slowly release it over time to line the intestines with it.
The upcoming topline results (Dec 26- Dec 31st) from the study will demonstrate what the efficacy of this delivery method would look like. They are replicating what the DDS pill would do by probing through the rectum and analyzing how the patients react. Link to their study which has officially ended here. Progenity is currently compiling the data and will be releasing the results on their website through a press release.
My conviction in the results it relies on the previous animal studies they have shown a large decrease in inflammation in the intestinal tissue of mice using Adalimumab (Humira)
Important definitions to help understand the animal study article:
The area circled in red is the beginning of the colon (mice have similar digestive anatomy to humans). This is what they mean by Intracecally (IC) in the animal studies article. They poked a needle through and released the compounds through to the beginning of the colon.
Intracecal (IC) - Released drug at the start of the colon.
Oral (PO) - taken by mouth
Intraperitoneally (IP)- poke needle through membrane that holds all organs in place to get to target location
Above is the picture provided by the Crohn’s Colitis 360 article showing the efficacy of administration of the adalimumab in mice. In the photo on the left, that is the adalimumab directly administered into the proximal colon (most similar to what the DDS will do). The photo on the right is the drug being administered through the system and not into the colon.
The pinkish die is a marker which shows lymphocytes (Killer t-cells) which cause inflammation in ulcerative colitis. As you can visibility see, it makes a major impact on a mouse that has an induced ulcerative colitis.
The largest takeaway from this animal study regarding Adalimumab is that the direct administration of the liquid, non-reformulated drug show higher efficacy and safety in the animal models. When you reformulate a drug, you have to go through an FDA drug approval process. (costly, expensive and risky). If Progenity can reuse an already FDA approved drug by showing that they have efficacy in humans through colonic administration, we will see a sharp increase in the stock price.
Human Study for their topline results
To help understand exactly what they did in the human studies
A misunderstanding I initially had was that the patients in this study were taking the actual DDS pill prototype and having the product administered as it would be done in the commercial market.
After looking through, they did say that they would be doing this study through enema in humans. This emulates what the DDS does but does not use the DDS.
Although I realized this discrepancy a bit late, thankfully it does not change the story towards their product. They have already demonstrated 98.5% accuracy in their DDS saline studies in the colon in their preclinical studies. They have stated that they have made improvements to it since.
Progenity is using the PK/PD study to analyze what dosing regime they will need to use for their patients in future studies. They absolutely cannot skip this step. This will help us understand how many times they will need to take the pill a day and the strength of the delivery method.
For this study in humans, they have to go with a safer and more accessible procedure. They are administering the adalimumab in Ulcerative colitis patients through the rectum and into the sigmoid colon. A key takeaway from this is that the drug was administered in the very last section of the gastrointestinal tract (3 times a day). In the mouse studies, they administered the drug into the cecum. Picture below demonstrating the difference from animal vs human administrations.
In the human study, the drug is being administered in the last section of the system, it may have less efficacy initially or they may have higher doses than expected. They however have completed the study which makes me believe that they did reach levels of efficacy that were acceptable. In the study guidelines, they said they would stop the study if patients did not receive any benefits past 80-160 mg. For reference, the DDS is capable of delivering around 30 mg maximum of liquid solution, but they need to make sure they understand the future design requirements or future dosing regime. I expect for them to only need less than 10 mg to have the same therapeutic response, however this is speculation. If this was the case, you then could expect the cost to be one fourth the amount to patients.
For regular dosing of humira, crohn’s and colitis patients take an initial dose of 160 mg. And then taper it down to 80mg and then every other week take 40 mg to maintain the disease.
Humira costs around 7.5k for 80 mgs of drug (7.5k a month). Ouch. Insurance most definitely would cover a way to make this cost less.
Progenity can help reduce this cost and fit their product in place to split the difference, possibly charging 3k a month per patient. Also with the possible reduced toxicity build up or immune response, patients can stay on the drug for longer.
What are we looking for in this Topline result study here:
Primary outcomes to look for 3 patients that enrolled:
To assess safety and tolerability of 3 daily doses of adalimumab.administration via enema to patients with active ulcerative colitis (UC).
This means they are checking how patients respond to delivery into the colon. Basically answering, is it safe and how do patients respond to this drug delivery method.
To assess local tissue PK of adalimumab after administration via enema to patients with active UC.
They want to see how much of the drug has bypassed the mucosal layer and is active inside the tissues. This will help them determine dosing and help us see what amount of drug they will need to get a therapeutic effect.
To assess local tissue PD changes after adalimumab administration via enema to patients with active UC
They are taking a biopsy of the site (taking tissue) and checking to see if the immune response is. Essentially, helping answer the question: how long can we have patients on this drug? Does the tissue show lower immune response than the standard of care.
To assess systemic PK after adalimumab administration via enema to patients with active UC.
They are checking blood to see how much enters into the bloodstream. Essentially checking if the levels of drug are lower in the whole human body/system than current standard of care (humira injections)
To assess more systemic PD changes after adalimumab administration via enema to patients with active UC.
They are going to compile charts and analyze how patients did vs most likely the standard of care. They did not mention this directly but they state the methods
which typically use the standard of care as the baseline.
Below are some Acronyms used:
What is PK?
Pharmacokinetics - the study of how the human body affects a drug
What is PD?
Pharmacodynamics - is the study of how the drug affects the human body
What is UC?
Ulcerative Colitis - A chronic disease that inflames the intestines
That’s a lot to unpack. But it's something as an investor you should look to understand!
Feel free to message me on twitter @Opti_news / stocktwits or at my email: firstname.lastname@example.org to ask questions, debate or critique my thoughts and analysis.
I also hold a weekly Wednesday night call that can be found on twitter. You can join in there to listen and then ask questions as I open up the floor for discussion!
I will have some extra information in the future on other aspects of this business that I have not covered:
Including another pill variant of Progenity (the RSS
Another competitor and my thoughts on their “SmartTab”
Reasons why Rani’s (another competitor) could help extend large pharma patents however, it is very risky. My thoughts will be on that as well.
Discussing my misunderstanding of the Humira patent. They lose exclusivity to some manufacturers in 2023, but maintain rights until 2034.
Price forecasts below! Short term is obviously lower conviction, but long term I have higher conviction in those.
I hope you enjoyed the read!
Current Price: $2.33
3 Month Price Forecast: $10-17
If the PK/PD topline data comes out for the DDS this December and shows much more efficacy than current efficacy of Humira by injection or IV, then the company will be reevaluated as it is now seriously an impact and catalyst for change in the healthcare industry. If the data is good, they will show the power of oral drug delivery. Remember RANI is shown to be the leader at the moment with their pill that injects into the intestines. I do not believe their technology has the right ingredients for serious market uptake. Too many stumbling blocks and patients have to take the pill in a fasted state. For Progenity, they will be exploring non-fasted states in the 1st Quarter of 2022 using the DDS. If they show functionality through both states, the share price could surpass my current forecasts as now the pill will be seen as the best for patient and physician experience.
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.
Final thought on PROG: After diving into their board members and management. Progenity is strategic. Their technology has been in development before 2010 and now has reached the time where it will start picking up pace and fast. These four horses will guide Progenity and disrupt healthcare. Before you know it, the company may be a large biopharma if they can stave off the buyout offers along the way.
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,
and the Optifinancial Team
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