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.
Progenity | $4.86
Reevaluation is coming
Gamma squeeze on going
Are the competitors actually friends, not foes?
Over the year Progenity has fallen from $15 to .65 cents and now is on its way back in a turnaround.
The market punished the company for the cashburn and poor financial management, however, the company has weathered through and bootstrapped itself. Progenity is reduced their cashburns and even cut their company in half. Tough decisions were made and new management has recently flushed into the scene. They are divesting (selling) a lab which has been rumored to be in progress with Natera (NTRA) for over 290 Million dollars. They also may license their Preecludia asset within that deal and make royalties for years to come. We should expect news over this deal within a week or before the end of year. Waiting for an embargo to be lifted on the Preecludia data from a journal publication. Peer reviewed Journals take around 2 months. We are right around that time for it to be released.
I believe if the speculated Natera deal was to be announced Progenity’s stock would move upwards to 40-80% of where it stands right now. This would give them the needed cash to stop dilution concerns and to also extend their business runway until mid 2024. That is when I am predicting the first sales of their pills to large pharmaceutical companies (If they are not acquired before then).
Link to Q3 results presentation here
What is a PK/PD study and what will it tell us?
The upcoming study is used to analyze the efficacy of the dose of a drug and how much will be required for a response. This study will give us insights into the safety and tolerability of the delivery of adalimumab in treating Ulcerative Colitis in humans.
What I will be looking for is the amount of drug needed. If they need to deliver less drug, to get the same response, this will increase the overall safety profile, and they can deliver more drug to get even better responses. This will help them correctly dose patients in their next study in humans. After this, they will take all of their findings and publish how much prescribers should give for their patients who have Ulcerative Colitis. This will help them swiftly receive FDA approval for their medical device and delivery of the world’s top selling drug to patients to take care of them even further.
I am excited to see what the bioavailability of this drug is as well. If they find that they have acceptable doses in the bloodstream, this could unlock further potential to treat more diseases using Adalimumab all in one swift move.
Other factors this study will help inform the company on is the tuning of how big their pill needs to be and it will give them more data sets to improve their tech/software.
Squeezes: *Disclaimer - not my area of expertise*
On Friday, Progenity closed at its highest close in 5 months. $4.86, It felt like a race watching the stock price edge closer to $5 as investors and traders were fighting a battle to catalyze an ongoing gamma squeeze within the options chain.
Short summary of a gamma squeeze: Buying of short term call options, creates more buying activity as many see the betting of the stock going up as a great time to buy underlying shares. This as well forces the institutional investors holding short positions to buy shares as well to hedge their position. This in turn forces the price to go up. If the options buyers make money or large profits, they tend to, (not always) put their profits back into buying shares. This is just another force which guides the shares upwards in a rapid manner.
A gamma squeeze in my opinion, is most likely the market reevaluating a company’s underlying value. Especially with Progenity, where after deep research it is easy to see the valuation of Progenity is half as much as some of it’s competitors which are laggards behind Progenity. More on competition ahead.
Competition 2.0, any drug delivery that uses permeation enhancers are fair game to add to Progenity’s list of possible markets to tap into:
Last week I went over the technological side of the tech pill. And one may wonder, why is the competition just starting within the recent years. The answer: A lot of research and breakthroughs for oral delivery of large molecule and therapeutic proteins has been unveiled. Companies are racing to come up with the best solution. Progenity in my opinion has the best technology to take the majority stake, but what about others trying to conquer the territory by drug permeations into the gut?
Below are just 2 competitors that are instead of using technology (there are more that need to be researched), are using medical drug combinations to deliver large molecules orally. (I think any good news from these competitors directly corresponds to good news for Progenity)
Oramed Pharmaceuticals | ORMP - Creating oral insulin drug combinations
This company is focused on delivery of Oral insulin to diabetics with their drugs. They have found a way in theory to have insulin release in the gut and uptake. Their market capitalization is currently 826 Million; Which is larger than Progenity’s valuation at the moment. At anytime if this ORMP has success in oral delivery of insulin, you can bet this will be great news for Progenity. As they now have someone who may want to use their technology to give them feedback for release of the drug and also allowing it to be released in a specific area. The drug combination has to permeate through the gut which has been a challenge. If Oramed shows another route to permeate large molecules through the gut, this again advances Progenity’s story of being the leader among its competitors who currently use needles in the gut.
Entera Bio | ENTX - creating oral delivery of large molecule drugs
This company has two products in their pipeline, they are tackling Osteoporosis (to increase bone density) and Hypoparathyroidism (fixing a deficiency which leads to low calcium in blood)
These products are delivered orally and will help to show that large molecules are being used more in oral delivery. Their market cap is 100 million which is less than where Progenity stands, however, Progenity can always have other company’s use their technology in research studies and liquid form to possibly create higher efficacy and better safety. Also the feedback that Progenity’s patented wireless data will be priceless information in diagnostics and studies of these new drugs. This is a bit of speculation from my side, however, I do see this being considered within the next 4-5 years as Progenity continues in their advancement of their Pill.
Current Price: $4.89
3 Month Price Forecast: $10-25
With the current trend of this company and their ability to spread over every single oral delivery system, I can see Progenity appreciating quickly in a short time span.
1 Year Price Forecast: $25
Progenity has potential to receive multibillion dollars in the future due to their reevaluation as the market catches on to the deep value that they have presented.
Final thought on PROG: The competition piece of evidence that Progenity is undervalued. The social trend is there, the technical analysis is also showing a positive appreciation in the stock price. The technology has the opportunity to impact many lives and to improve the efficacy and safety of the drugs in today’s market.
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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