Today’s move in biotech Progenity (NASDAQ:PROG) has been significant in many ways. Indeed, any stock that drops more than 50% in a given day is worth taking a look at. The fact that PROG stock is currently down approximately 55% is troublesome.
Now, the biotech sector happens to be filled with generally high-risk, high-reward plays. When such companies announce positive news, these stocks tend to pop to a greater degree than the overall market. However, in times of trouble, the declines can be rapid.
Today’s move in PROG stock appears to be the culmination of a number of factors. Indeed, today’s rapid decline caps off a year-to-date downside move of nearly 90% in this stock. Accordingly, it appears most investors have moved on to greener pastures, in this case.
Let’s dive into what’s moving this stock today.
PROG Stock Down on Variety of Factors
Progenity’s business model is one that is certainly intriguing to growth investors. The company focuses on noninvasive prenatal screening tests for women. These tests allow users to see whether any deformities or abnormalities exist with their unborn children. Thus, this is a company that has seen a lot of hype since its initial public offering (IPO) last year.
Since the company’s IPO in June of last year, things have not necessarily gone as planned. The company’s $15 IPO price has evaporated, with shares trading well below $1 each today. This has reportedly been the result of two key factors.
First, Progenity has been a company that’s been tapping equity markets quite a bit. More dilution generally isn’t a good thing for long-term investors. That said, high-growth biotechs such as Progenity can make the argument that these funds will be utilized well to fund long-term growth projects moving forward. The company’s latest offering, announced yesterday, provides for an additional $40 million in financing. Investors don’t seem pleased with the news.
One of the reasons investors aren’t necessarily pleased is the transformation that’s underway at Progenity. The company announced last week that it was shifting its focus from prenatal testing kits to its biotech pipeline. This move, the company notes, would slash operating expenditures by about 70%. That said, investors are worried that this move will also eliminate the revenue streams investors were banking on to fund growth.
Accordingly, investors seem to be pricing in future offerings and some serious near-term cash flow burn into PROG stock.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.