After running hot for a few weeks, excitement has cooled for Progenity (NASDAQ:PROG). Less than a month ago, it was trading for as much as $6.20 per share. But since then, PROG stock has fallen by around more than 50%, and trades for around $2.50 per share today.
Is this a big surprise? Not really.
Speculative by their nature, clinical-stage biotech plays like this one are known for swinging wildly. This stresses the need to appropriately size positions. Not to mention, do your due diligence before taking the plunge with any specific stock in this sector.
However, if you take a closer look at the details with this situation, it’s clear this is one of the more promising ones out there. Given the strength of what it calls its “innovation pipeline,” there’s a lot more going on with Progenity than its skeptics give it credit. Bears are incorrect in writing it off as just a meme stock.
That phenomenon may or may not have played a role in its rollercoaster moves so far this year. But “meme mania” isn’t the only path PROG stock has back up to its recent highs, and beyond. As more comes out about this company and the varied products/therapies it’s working on, it has a strong chance of making a strong recovery.
With this, you may want to consider it, following its recent weakness. Here’s a deeper look into the company.
The Latest With PROG Stock
Market volatility may be the main reason why Progenity stock has tumbled over the past few weeks. News of the omicron variant of covid-19, plus recent remarks from the U.S. Federal Reserve, have ramped up feelings of uncertainty among investors.
Still, there is something company-related that may have put pressure on PROG stock. I’m talking about news of its most recent capital raise. Obtaining $44 million in cash proceeds from the exercising of warrants, this is just the latest capital raising effort from the company.
On top of this $44 million, it has this year raised another $79.6 million. Via a secondary public offering, a direct offering and from other warrant exercise transactions. This is good news for the company, as it provides it with the capital it needs to finance its strategic transformation from genetics testing company to biotech pure play.
Others, though, may not see this as a positive. Instead, they may see it as a negative, as this warrant exercise is dilutive to existing shareholders. Yet at worst, this is a near-term negative for Progenity. If it can successfully use this cash to further develop its pipeline? The resultant value creation will far exceed the near dilution going on at present.
Big Potential With Its Pipeline
It can be tough to analyze biotech stocks. Unlike with other types of stocks, traditional metrics are not very useful. For example, it’s tough to use valuation metrics like price-to-earnings (P/E) ratios to assess whether a biotech stock is a good opportunity or not. Instead, you have to handicap its potential based on other factors. Namely, the strength of its pipeline.
Fortunately, in the case of PROG stock, there’s definitely big potential with the innovations its currently working on. First is Preecludia, a biomarker test for preeclampsia. There’s big potential for this product, as this method offers many advantages to current methods.
Second, the company’s Oral Biopharmaceutical Delivery System (OBDS). This technology could revolutionize the delivery of liquid-based drugs typically delivered through IVs. As announced back in October, the company has obtained a patent related to this technology. Third, its pipeline of ingestible therapies for gastrointestinal (GI) tract diseases.
With the total addressable markets these products are targeting running in the billions (some cases, hundreds of billions), success with just one of the products in Progenity’s pipeline could send its stock to substantially higher prices.
The Verdict on Progenity
Earning a “B” rating in Portfolio Grader, Progenity is a high-risk, high-potential play. Although skeptics may see it as overhyped, on closer inspection, it’s clear that it has a pipeline of possibly game-changing products in its hands.
It may fail to find success with all three areas it’s currently focused on. But success with just one area, whether with Preecludia, its OBDS technology, or its GI tract therapies could go a long way in vastly increasing the value of this company.
Again, it may take some time for it to make more progress with its pipeline. Yet once these developments arrive, it could renew bullishness for the stock in a big way.
Bottom line: Far from just a meme play, consider PROG stock a buy after its recent drop in price.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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