IN THIS ISSUE
This small biotechnology company has fallen from $15 a share to $1 a share in one year. We think this can go to $8-17 in the next year as they prove out their technology pill.
The CEO exited, plenty of drama in this story!
Ethereum is becoming the trendsetter when it comes to cryptocurrency. Could this be the beginning of the flippening?
This company is aiming to help pregnant women rule out a hypertension condition in pregnancy which can cause fatality. They have recently announced effective topline results with an embargo. (We can’t share the details until a topline journal publishes the data… Oh the suspense!) They also have an impactful, disruptive technology which aims to double both the efficacy and safety profile of different types of drugs. The technology pill also has other variants. However, we think the highest impact and monetary value will come from the drug release pill variant.
Here’s the action-play by play for the last year in bullets (feel free to add any by messaging me):
Company IPO’d at $15 a share.
Shares started falling as soon as they started trading and hung around $9. Once the earnings report came out of them burning cash like it didn’t matter, the shares sank and kept sinking.
The cash runway shrank and they started going into debt.
Another earnings report came out and they were still hemorrhaging, even with their genetics testing business.
Progenity hired a VP of strategic development, Sean Lavin. Five days later they cut half of their employees. They also closed down a low margin and lawsuit ridden genetics lab business.
Athyrium Capital (institutional investors) has purchased over 60% of Progenity's stock over the past year. Athyrium Capital is rumored to be controlling the share price by shorting it with the private loan placement and simultaneously buying shares. This way they can control price and gain control of the company. Athyrium’s track record shows companies they invest in end up being bought out by larger companies.
The CEO left the company with a full year of benefits and has 90 days before he can sell shares. It will be interesting to see whether he holds his assets with Progenity. He owns approximately 11% of the company shares. There is speculation that the CEO (11%) is leaving because Athyrium Capital (leading owner of 60%) is tidying up the business to be bought out by another larger biopharma. This year has been very slow for mergers and acquisitions of biotechs. There are plenty of suitors that would fit Progenity as they have somewhat proven technology of drug release.
There are a few theories circulating about why this stock as hit such a low. The main ones attribute it to the debt they have accumulated and their uncertain future. We think if they can execute on their two product pipelines, they will be able to generate a billion a year in revenue, eventually garnering a stock price around $30-50 a share.
The problem is they have failed to show fiscal soundness throughout the year. They have, however, shown execution in their technical side as they engineer the optomechanical device (DDS2). Along with the DDS2, Preecludia has shown to be very effective in ruling out preeclampsia by using biomarkers which are patented by Progenity. According to their Q2 earnings call, their Preecludia product will most likely be partnered with a large manufacturing distributor. We think this is a great plan as they do not have the infrastructure to support a full on productionization of their diagnostic test that over 70 million patients a year may use.
Another thing to consider is their ex-CEO mentioned on the Q2 earnings call that potential partners had approached them. Now that they have proven Preecludia, that gives them the leverage they need to make better deals. The DDS2 is an additional component to potential partnerships.
I have to caution some investors that partnerships and deals can take months to years to complete, depending on obstacles. We think Progenity may be in an agreement for their very attractive DDS2 technology pill. Their pill can help increase drug efficacy and does not need to go through the FDA approval process.
For first time lookers at this company, the DDS2 pill works by releasing at a specific point in the digestive track. It does this by sensing where it is using an optical sensor and software. It can be tapped into wirelessly as it flows through the digestive system, giving the user feedback. It could also be used in the digestive tract for collecting samples such as stomach fluid, bacteria collection, etc. that doctors use to test sick patients. It could also potentially be used to perform a less intrusive pre-colonoscopy. It could be an early detection method for younger adults with a family history of colon cancer.
The applications go on and on. However, we think the most impact at the moment will be the drug release variant. They have shown exceptional efficacy and safety of harsh drugs in twelve adult male beagle dogs. We are expecting data in December from the human trials. This will be a pivotal point for this company as they will be reevaluated by the market for all applications if they show success in human trials.
Current Price: $1.11
End of December: $3.10
Six Months: $5-7
Final thought on Progenity: Great time to look at buying in. They do have substantial debt, so that is something to consider. This is not financial advice, these are our thoughts and interests put in writing.
Disclosure: We do own PROG securities/shares at the time of publication.
Ethereum is pushing back to the $4,000 mark. Until recently, the trend of major coins followed Bitcoin. If Bitcoin went up, the other major coins followed, then the alt coins, and then finally the bottom of the barrel coins came up last. Now we are starting to see a new trend in which Ethereum actually leads the pack. The other coins are following Ethereum now which could signal the beginning of the flippening.
One thing driving the price of ETH is the NFT market. “Since it was launched in 2015, Ethereum has given the world use cases in gaming, identity management, decentralized finance (DeFi), and much more. But the use case co-founder Vitalik Buterin is most surprised by is non-fungible tokens (NFTs), which have enjoyed spectacular success this year.” NFT’s are just another use for ETH to grow and increase overall use. A quick explanation of NFT’s is they are one of a kind digital art. “NFTs are cryptographically unique tokens that can be linked to digital content such as images and music. Opensea, the leading NFT marketplace, has logged more than $3 billion in trading volume so far in August.” More than 3 billion on digital art is crazy, but with the increase of big name athletes and stars wanting their own NFT’s, we doubt this will slow down.
Increased from the previous article on ETH
Current Price: $3,969
Six Months: $4,500
One Year: $8,200
Three Years: $15,000
Jack Dorsey, the founder of Twitter, has shown his interest in Bitcoin and now is showing some interest in ETH. “Twitter seems to be testing the addition of crypto features to its Tip Jar service, according to a mobile developer who claims to have reverse-engineered the feature.” The more usability the better as the crypto market emerges.
One of ETH’s competitors, Solano, has also been getting a lot of attention lately, so it might be beneficial to take a brief look at it. “Solana was founded in 2017 as a direct competition to Ethereum. Soon, Cardano (ADA) joined the race. Like Ethereum and ADA, SOL supports smart contracts and is gaining popularity with developers building DeFi apps and creating NFTs (non-fungible tokens). Among the three, Solana is the fastest by supporting nearly 70,000 transactions per second and that too at a meagre price.” Sol offers speed and a lot of it. It still has a long way to go to kill ETH but it is definitely worth mentioning.
Disclosure: Currently, we are purchasing both ETH and SOL.
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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