Progenity (NASDAQ:PROG) is developing two products that look poised to become quite lucrative. What’s more, given the company’s tremendous opportunities, the valuation of PROG stock is quite reasonable.
On the other hand, at this point the deck seems to be stacked against unprofitable companies such as Progenity that are likely a few years away from entering the black.
Still, in light of this company’s strong potential, I think that some investors should buy its shares.
The Oral Biotherapeutic Delivery System
Progenity is working on an oral biotherapeutic delivery system that could easily become a blockbuster.
The system, which the company calls OBDS, is supposed to enable biopharmaceuticals to be delivered orally i.e., in pill form. According to Progenity, “Biologic drugs have become standard of care for a variety of diseases, including rheumatoid arthritis, psoriasis, diabetes, Crohn’s disease, ulcerative colitis, and many cancers.”
Yet at this point, biologics, including monoclonal antibodies, can only be administered intravenously. Delivering these treatments in pill form would have numerous benefits for patients, healthcare providers and drug makers.
CFO Eric d’Esparbes correctly, in my view, stated that delivering biologics in pill form instead of IVs would increase patients’ compliance with medications and lower healthcare providers’ costs. It is definitely much cheaper and easier to take pills than receive IVs, which are often disseminated in hospitals.
d’Esparbes added that Progenity’s system can also enable biologics to treat more diseases and “become more competitive with small molecule substitutes.”
A Test for Preeclampsia
Progenity is also developing a test for preeclampsia, called Preecludia. The Mayo Clinic reports that, “Preeclampsia is a pregnancy complication characterized by high blood pressure and signs of damage to another organ system,” which can lead to fatal complications for women and their babies.
According to d’Esparbes, Preecludia is a “rule-out test for preeclampsia.” In other words, Preecludia can only determine if a woman does not have the condition.
Still, the Mayo Clinic reports that many tests, such as blood tests, fetal ultrasound and a nonstress test or biophysical profile currently may be needed to determine if a woman has Preeclampsia.
By quickly determining that many women do not have Preeclampsia, Preecludia can save healthcare providers a great deal of money and time, making it potentially quite valuable.
On the OBDS front, Progenity is already partnering with three drug makers, including at least one major pharmaceutical company, with which it established an alliance in the third quarter. I don’t believe that these drug makers would spend valuable time and money to partner with Progenity on OBDS unless it had a very good chance of working well.
Also encouragingly, d’Esparbes sounded very optimistic about data that will be reported in the coming months on OBDS. “We believe we should be able to generate compelling data in animal models and provide clinical proof of concept with first-in-man studies,” he reported.
Regarding a study of Preecludia that has been completed but whose results have not yet been published, the CFO said, “Our Preecludia test achieved the primary hazard ratio endpoint of the study protocol and demonstrated strong performance.” That statement makes me very confident that the test works well.
The Bottom Line on PROG Stock
Progenity’s OBDS looks poised to become very valuable for healthcare providers, drug makers and patients. Its Preecludia test appears to be well-positioned to save healthcare providers a great deal of money and patients a large amount of time.
Meanwhile, there are strong signs that both OBDS and Preecludia work well. Given these points, Progenity appears set to report very strong financial results in several years.
What’s more, the market capitalization of PROG stock, which is around $385 million, is quite reasonable in light of the company’s tremendous potential.
Still Progenity is unprofitable, and it’s likely to stay that away for at least two or three years. With many investors becoming nervous about rising interest rates, the market has turned against unprofitable companies, and that situation is unlikely to change for the next few months.
Therefore, I urge long-term, risk-tolerant investors to buy a small amount of PROG stock now. That way, they can benefit from strong data and deals reported by the company, but will not be badly hurt if its stock continues to fall.
If Progenity’s shares fall below $1.80, if the company’s outlook improves, or if the market becomes more tolerant of unprofitable companies, I recommend that investors buy more of the shares.
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On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Plug Power, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.