When financial asset traders talk about Progenity (NASDAQ:PROG) stock, oftentimes they’re not discussing the company’s merits and challenges. Rather, they’re debating the short-squeeze potential.

Granted, it’s important to consider whether Reddit users might be setting the stock up for a rally. On the other hand, it’s difficult to predict if and when this type of event might occur.

As an informed investor, you don’t have to try to second-guess what social media traders might or might not do. Instead, you can choose to buy PROG stock based on the company’s potential as an innovator in addressing gastrointestinal (GI) disorders.

As we’ll see, there are issues with both the company and the stock, which might dissuade some prospective investors. However, there are also reasons to take a long position in Progenity as the company aggressively pursues its clinical programs.

A Closer Look at PROG Stock

Just to recap, Progenity conducted its initial public offering (IPO) on June 22, 2020. At that offering, the company sold approximately 6.6 million shares for $15 apiece.

Unfortunately, PROG stock has been on a general downward trend since the IPO. The share price fell to $5 and change by the end of 2020, and even sank below $1 in late September of this year.

There are signs of a possible comeback in the works, however. October might turn out to be a good month as the Progenity share price appears to be heading towards $4. It trades at about $3.40 today.

At this point, I should reveal a figure which some investors might find to be problematic.

Specifically, Progenity’s earnings per share, on a trailing 12-month basis, is -$4.28. That’s definitely a red flag when the stock price is less than $4.

Still, if you’re willing to accept the company’s currently negative earnings profile, then we should be able to find positive developments to keep you in the trade.

Vast Market Opportunity

Progenity’s primary specialty is orally administered biotherapeutics that diagnose and/or treat GI issues.

As the company points out in its investor presentation, direct and noninvasive access to the GI tract could potentially improve the efficacy and safety outcomes.

The currently available diagnostic modalities for GI problems, such as endoscopy, surgery and biopsy, are typically invasive.

Progenity’s clinical pipeline could offer superior alternatives. For example, PGN-001 (colon-targeted adalimumab) and PGN-600 (colon-targeted tofacitinib) target ulcerative colitis.

As the company points out, the addressable market for GI-targeted topical inflammatory bowel disease (IBD) therapeutic delivery exceeds $15 billion.

Alarmingly, there are 1.8 million IBD patients in the U.S. alone, and Progenity seeks to provide localized, topical delivery to the colon to address IBD. Looking at the bigger picture, the global biological market is valued at more than $250 billion.

When we combine an unmet need with a huge market, this adds up to a considerable revenue-generation opportunity for Progenity.

Patent Power

Part of Progenity’s pathway to profitability, no doubt, is developing the company’s portfolio of patents.

Just recently, the company made significant headway in this area as the United States Patent and Trademark Office (USPTO) issued several patents related to Progenity’s ingestible technologies for the GI-delivered therapeutics.

These include:

• An ingestible device for delivery of a therapeutic agent to the gastrointestinal tract
• Treatment of inflammatory conditions of the gastrointestinal tract with a Janus kinase (JAK) inhibitor
• Treatments of GI tract diseases with a SMAD7 inhibitor and, separately, with a chemokine/chemokine receptor inhibitor

With those newly approved patents, Progenity now has a sizable GI-targeted therapeutics portfolio. This includes more than 170 issued patents and pending applications, directed toward 17 inflammatory bowel disease targets.

The Bottom Line

It’s not psychologically easy to invest in a stock that’s been trending downward. Holding PROG stock will require patience and faith in the company. However, Progenity is operating in a high-need clinical area with a large addressable market.

Therefore, if you keep your position size small and can handle the volatility, a stake in Progenity could be your next big winner.

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On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.