If you enjoy betting on volatile biotech names, then check out Progenity (NASDAQ:PROG). PROG stock is unsafe, unstable, and undeniably exciting.
Progenity fits just about any definition of a penny stock: it has a low share price, a low market cap, and it’s as volatile as it gets. Catch it at the right time, and you could quickly double your capital.
Or PROG stock could go to zero. And as we’ll see, the stock has been in a long, persistent downtrend. At the same time, a Reddit-fueled run-up might be in store for Progenity. So let’s start with a short and an, admittedly, cringe-inducing price history of this fast-moving biotechnology stock.
A Closer Look at PROG Stock
Going back to the beginning, Progenity conducted its initial public offering (IPO) on June 22, 2020. At that time, the company sold approximately 6.6 million shares for $15 apiece.
Pretty much immediately, the early investors were in the red. PROG stock dropped to $9 in July 2020, and closed out the year trading at $5 and change. Anyone who bought that “dip” probably soon regretted the decision. Progenity continued its downward slide in early 2021, falling below $2 during the sweltering summer. PROG stock closed yesterday at $2.04.
While we’re looking at data, it should be noted that Progenity’s earnings per share over the 12 months that ended in June was -$4.28.
That’s a hard pill to swallow. Could Reddit traders come to the rescue? Not long ago, InvestorPlace contributor Chris MacDonald reported that the short interest in PROG stock had ” spiked in recent weeks.” That’s true: the short interest in Progenity shares literally doubled from the end of August to mid-September.
Therefore, Reddit users might expect Progenity to undergo a short squeeze in the near future. There are no guarantees of that happening, of course. But if it happens, PROG stock could rally powerfully.
All of that being said, I don’t want anyone to just buy PROG stock without knowing what the company does to make money. To put it simply, Progenity provides non-invasive prenatal screening tests for women – or at least, that was the company’s primary revenue source (I’ll explain this in a moment).
As MacDonald clarified, “These tests allow users to see whether any deformities or abnormalities exist with their unborn children.” MacDonald also observed that PROG stock had tumbled more than 50% in a single trading session in August. So what happened?
First, Progenity announced a $40 million share offering. That stock offering provided Progenity with a significant amount of capital, but dilution typically isn’t viewed as a good thing for long-term investors.
Changing the Focus
The other main concern is that Progenity announced last week that it was shifting its focus from prenatal testing kits to the company’s biotech pipeline. That move will apparently reduce Progenity’s operating expenditures by around 70%.
That’s promising. But investors might be worried that the change is risky because it’s likely to significantly reduce the company’s revenue. But Progenity may have a new, robust revenue stream soon, as the company was just granted an important patent by the United States Patent and Trademark Office.
This patent covers Progenity’s dissociated placental growth factor (PlGF) test, known as Preecludia. It is used to assess patients for preeclampsia (a potentially fatal pregnancy complication). According to Progenity, the Preecludia test is expected to target an addressable market of up to $3 billion per year in the U.S. Thus, the patent for Preecludia represents a major step forward for Progenity.
Looking ahead, Progenity Chief Scientific Officer Matthew Cooper anticipates that the company will pursue “partnership opportunities for commercialization” of the Preecludia test.
The Bottom Line
As you can see, Progenity is a small biotechnology company that’s in a state of transition. Whether that’s a good thing or not, I’ll let you decide.
Just know that PROG stock is likely to move far and fast, in one direction or the other. In any event, don’t even think about getting on the short side of the trade. After all, the Reddit crowd might punish anyone who dares to do that.
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.