UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 9, 2020

 

Progenity, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Registrant’s Telephone Number, Including Area Code: (855) 293-2639

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On November 9, 2020, Progenity, Inc. issued a press release and earnings presentation announcing its financial results for the third quarter ended September 30, 2020. The press release and earnings presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.

As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibits 99.1 and 99.2 incorporated herein shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall such information or Exhibits 99.1 and 99.2 be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

 

 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

Progenity Provides Corporate Updates and Reports Third Quarter 2020 Financial Results

 

Reported 84 thousand tests in the third quarter, up 12% compared to the second quarter

 

Achieved a preeclampsia test analytical verification milestone

 

Management will host conference call and webcast today at 4:30 p.m. ET/1:30 p.m. PT

 

 

SAN DIEGO, November 9, 2020 – Progenity, Inc. (Nasdaq: PROG), a biotechnology company with an established track record of success in developing and commercializing molecular testing products, today provided corporate updates and reported financial results for the third quarter ended September 30, 2020.

 

Progenity made significant progress during the third quarter, both with its revenue generating business and especially with its innovation pipeline programs. The company continued to grow its overall volume demand and increased its in-network position by adding national and regional contracts, and saw additional commercial and government payors covering average risk NIPT. The company also announced it had secured additional COVID-19 testing capacity in order to meet anticipated higher demand for the test ahead of the winter season.

 

On the innovation front, the company announced it successfully achieved a preeclampsia test analytical verification milestone, with the program now transferred to the operations group which will be responsible for both validation and full commercialization of the test in 2021.

 

“We continue to make progress in establishing a strong foundation with our core molecular testing business and anticipate these efforts to translate into stronger and consistent operating performance near term. We are particularly excited with the progress and transformational potential of our R&D pipeline and look forward to our upcoming preeclampsia R&D day for investors on November 20, 2020,” said Harry Stylli, Ph.D., CEO, chairman of the board, and co-founder of Progenity.

 

Third Quarter 2020 Results and Other Corporate Highlights

 

 

 

 

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Third Quarter 2020 Financial Results

 

Comparison of Three Months Ended September 30, 2020 and June 30, 2020

 

Revenue was $25.9 million in the three months ended September 30, 2020, up from $17.3 million in the three months ended June 30, 2020. The second quarter revenues reflected a $10.3 million accrual for refunds to government payors.

 

Total accessioned tests volume, which includes the company’s Innatal, Preparent, Riscover and COVID-19 testing, was 84,067 in the third quarter of 2020, up by 12% compared to the accessioned tests volume in the second quarter of 2020, which was 75,017 tests.

 

Gross margin was 9.2% for the three months ended September 30, 2020, compared to negative 26.5% for the three months ended June 30, 2020, which primarily reflected the effect of revenue reduction related to refund accrual in the second quarter.

 

Operating expenses were $46.9 million for the three months ended September 30, 2020, compared to $42.2 million in the three months ended June 30, 2020.

 

Net loss attributable to common stockholders was $47.1 million for the three months ended September 30, 2020 and basic and diluted net loss per share was $1.01, compared to a net loss attributable to common stockholders of $53.1 million and a net loss per share of $6.11 for the three months ended June 30, 2020.

 

 

Comparison of Three Months Ended September 30, 2020 and 2019

 

Revenue was $25.9 million in the three months ended September 30, 2020, compared to $18.8 million in the three months ended September 30, 2019.

 

Gross margin was 9.2% for the three months ended September 30, 2020, compared to negative 33.2% for the three months ended September 30, 2019.

 

Operating expenses were $46.9 million for the three months ended September 30, 2020, compared to $48.6 million in the three months ended September 30, 2019.

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Net loss attributable to common stockholders was $47.1 million for the three months ended September 30, 2020 and basic and diluted net loss per share was $1.01, compared to a net loss of $97.9 million and a net loss per share of $19.85 for the three months ended September 30, 2019.

 

Cash and cash equivalents were $60.0 million as of September 30, 2020. As of September 30, 2020, Progenity had 47.0 million shares outstanding.

 

COVID-19 Update

Public health measures related to the novel coronavirus are greatly impacting healthcare practices. We have responded to the COVID-19 pandemic by implementing and maintaining robust response plans, seamlessly continuing laboratory operations and maintaining pre-pandemic turnaround times. We enhanced our digital sales and support capabilities, increased proactive test reporting and remote genetic counseling capabilities, and expanded our mobile phlebotomy services, assisting our customers to continue serving their patients with the same quality care.

 

Webcast and Conference Call Information

 

Progenity will host a webcast and conference call to discuss the second quarter financial results and answer investment community questions today, Monday, November 9, 2020 at 4:30 p.m. ET / 1:30 p.m. PT. The live call may be accessed by dialing 833-519-1237 for domestic callers and 914-800-3810 for international callers and entering the conference code: 5878610. A live webcast and archive of the call will be available online from the investor relations section of the company website at www.progenity.com.

 

About Progenity

 

Progenity, Inc. is a biotechnology company with an established track record of success in developing and commercializing molecular testing products, as well as innovating in the field of precision medicine. Progenity provides in vitro molecular tests designed to improve lives by providing actionable information that helps guide patients and physicians in making medical decisions during key life stages. The company applies a multi-omics approach, combining genomics, epigenomics, proteomics, and metabolomics to its molecular testing products and to the development of a suite of investigational ingestible devices designed to provide precise diagnostic sampling and drug delivery solutions. Progenity’s vision is to transform healthcare to become more precise and personal by improving diagnoses of disease and improving patient outcomes through localized treatment with targeted therapies. For additional information about Progenity, please visit the company’s website at www.progenity.com.

 

Safe Harbor Statement or Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, which statements are subject

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to substantial risks and uncertainties and are based on estimates and assumptions. All statements, other than statements of historical facts included in this press release, including statements concerning the impact of the COVID-19 pandemic on our business, operations, financial results, and future performance, and the progress of our research and development efforts are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our plans, estimates, and expectations, as of the date of this press release. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the forward-looking statements expressed or implied in this press release. Such risks, uncertainties, and other factors include, among others, the ongoing COVID-19 pandemic, our ability to develop and commercialize our testing products as well as innovate in the field of precision medicine, our ability to obtain and maintain regulatory approval or clearance of our products on expected timelines or at all, our plans to research, develop, and commercialize new products, the unpredictable relationship between preclinical study results and clinical study results, our expectations regarding future test volumes, our expectations regarding our in network position, anticipated capacity for our tests, and those risks described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Progenity’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 to be filed with the SEC and other subsequent documents we file with the SEC.

 

Progenity expressly disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

 

Investor Contact:

Robert Uhl

Managing Director, Westwicke ICR

ir@progenity.com

(619) 228-5886

 

Media Contact:

Kate Blom-Lowery

CG Life

kblomlowery@cglife.com

(858) 457-2436

 

 

 

 

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Progenity, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

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Progenity, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share amounts)

 

 

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Progenity, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

 

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Business Update and Third Quarter 2020 Financial Results November 9, 2020 Exhibit 99.2

Forward Looking Statements This presentation contains “forward-looking statements” within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties and are based on estimates and assumptions. All statements, other than statements of historical facts included in this presentation, including statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to product candidates, estimates of market size, estimates of market growth, business trends, expected testing supply and demand, the anticipated timing, design and conduct of our planned clinical trials, the development of our product candidates, including the timing and likelihood of regulatory filings and approvals for our product candidates, our ability to commercialize our product candidates, if approved, the pricing and reimbursement of our product candidates, if approved, the potential to develop future product candidates, the potential benefits of strategic collaborations and our intent to enter into any strategic arrangements, the timing and likelihood of success, plans and objectives of management for future operations and future results of anticipated product development efforts, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the forward-looking statements expressed or implied in this presentation, including those described in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and elsewhere in such filings and in other subsequent disclosure documents filed with the U.S. Securities and Exchange Commission (SEC). We cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. Forward-looking statements are not historical facts, and reflect our current views with respect to future events. Given the significant uncertainties, you should evaluate all forward-looking statements made in this presentation in the context of these risks and uncertainties and not place undue reliance on these forward-looking statements as predictions of future events. All forward-looking statements in this presentation apply only as of the date made and are expressly qualified in their entirety by the cautionary statements included in this presentation. We disclaim any intent to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances, except as required by law. Industry and Market Data: We obtained the industry, market, and competitive position data used throughout this Presentation from our own internal estimates and research, as well as from industry and general publications, and research, surveys, and studies conducted by third parties. Internal estimates are derived from publicly available information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on such data and our knowledge of the industry and market, which we believe to be reasonable. In addition, while we believe the industry, market, and competitive position data included in this prospectus is reliable and based on reasonable assumptions, we have not independently verified any third-party information, and all such data involve risks and uncertainties and are subject to change based on various factors. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

Q3 2020 Progenity Corporate Highlights Grew total tests 12%; reported ~84,000 tests in Q3 2020, mostly from COVID-19 testing. Continued expansion of COVID-19/SARS CoV-2 diagnostic testing to broader geographies within our channel to support unmet need. Continuing improvements in revenue cycle management to maximize revenues. Achieved an important analytical verification milestone for our Preeclampsia rule-out LDT, tradename PreecludiaTM. Work progressing well under precision medicine pharma collaboration; continued engagement with pharma for further potential partnerships. Achieved Innatal 4 development milestone: demonstrated ability to quantify fetal fraction. Added access for 60M health plan members with Multiplan contract. Two abstracts, including category award winner, related to our PIL Dx capsule presented at American College of Gastroenterology (ACG) meeting in October 2020. 

Test Volumes: 2018 – 2020 (YTD) Strong History of Volume Growth Cumulative Quarterly Test Volume (Thousands) Q2 2020 Q1 2020 22% Q3 2020 79 75 84 +12%

Volume Growth Surpassed Q1  Monthly average volumes grew 12% in Q3 primarily from Covid testing Continued progress in Q3 toward recovery and growth Resilience in NIPT demand, supporting carrier screening demand Launch of new carrier test panels growing rapidly Demand for SARS CoV-2 tests increasing; expanding capacity Monthly Average Volumes (thousands)

Expanding the In-Network Footprint New Multiplan contract; 60M health plan members have access to Multiplan services Added 1.5 million regional plan covered lives in Q3 Aetna covering average risk NIPT through end of 2020 Centene, Humana and some state Medicaid plans also began covering NIPT for average risk In-Network Lives – Progenity (millions) 2019 2020 Additions + + + Total In-Network Lives 2020 Additions: Aetna/Cigna/Other (1) Does not include Multiplan; some overlap with current in-network lives 2019 1

R&D Pipeline Update

Achieved an important analytical verification milestone Constructive FDA pre-sub meeting for IVD test version Brand name determined Preeclampsia R&D day on November 20, 2020 An Important Analytical Verification Milestone Achieved  Source: Progenity internal study Preeclampsia Rule-out LDT Test: One Step Closer to 2021 Launch KEY TAKEAWAYS: High confidence in analytical results & accuracy of assay Performance verified in operational CLIA lab Achieved acceptance criteria for CAP Validation Test Performance Specifications Provides confidence clinical studies will reflect true biological responses De-risks clinical verification and overall preeclampsia program

Innatal 4: Innovating Next-Generation NIPT COST EFFECTIVENESS QUALITY RESULTS Maintain premium clinical value and reliability FASTER TURNAROUND TIME Set a new competitive benchmark in the market Cost effective workflow improves COGS Q2: Achieved a key development milestone enabling measurement of fetal fraction Q3: Achieved second de-risking development milestone demonstrating ability to quantify fetal fraction NOVEL, SINGLE-MOLECULE COUNTING ASSAY FOR NIPT innatal® prenatal screen 9 4

Expecting preclinical study with first fully autonomous device in Q4 2020 Progress continues under current pharma partnership OBDS oral biopharmaceuticals ORAL DELIVERY FOR SYSTEMIC BIOPHARMACEUTICAL DISTRIBUTION Adalimumab (PGN-OB1) GMP batch produced Emerging drug pipeline Announced successful completion of a preclinical device function study Expecting device clinical function study initiation in Q1 2021 DDS targeted therapeutics LOCALIZED DRUG DELIVERY FOR GI DISORDERS GI-targeted adalimumab (PGN-001) GMP batch produced GI-targeted tofacitinib (PGN-600) GI Precision Medicine Programs advancing toward the clinic and progressing partnership Oral Biotherapeutics

PIL Dx ingestible fluorescent laboratory On track to initiate clinical proof of concept study in Q1 2021 LOCALIZATION à SAMPLING à PRESERVATION à RECOVERY à ANALYSIS Microbiome, cells Multi-omics Multiple GI diseases ACG Abstract Award/Oral Presentation: Clinical study demonstrating successful localization & assay accuracy compared to invasive standard of care protocol ACG Poster: Need & preference for PIL Dx device verified Full function preclinical study planned for 1H 2021 On track to initiate clinical proof of concept study in 2H 2021 LOCALIZATION à SAMPLING à IN SITU ASSAY à TRANSMIT RESULTS (no recovery) GI Precision Medicine Programs advancing toward the clinic Diagnostics RSS sampling + preservation technology Multiple assays and diseases Lead indication in SIBO

Third Quarter Financial Results

Resilient Demand Reflected in Q3 Revenue Q3 revenue reflects continued In-Network and revenue cycle management transition INN transition expected to generate gradual improvement in reported revenue Operational improvements further enhance revenue potential 1. Includes $10.3M accrual for refund reserve Revenue (millions)

Financial Overview $ in millions ©2020 Progenity, Inc. All rights reserved. Q2 2020 Q3 2020 YTD 2020 Revenues $17.3 $25.9 $60.0 ASP ($/test) 230.2 308.6 252.4 COGS 21.8 23.6 72.0 SG&A 29.9 33.9 95.3 R&D 12.2 13.0 36.5 Net Loss (53.1) (47.1) (117.3) Operating Cash Flows (13.5) (51.3) (95.7) Cash & Cash Equivalents 113.6 60.0 60.0 Indebtedness 78.9 78.6 78.6 Includes $10.3M accrual for refund reserve 1 1

INNOVATION PIPELINE MILESTONES & VALUE DRIVERS Q4 2020 – Q1 2021 Expand testing menu within Women’s Health channel STRATEGIC SIGNIFICANCE Increasing differentiation of OBGYN/MFM Business Accelerating revenue cycle enhancements Dx business generates recurring long-term cash flows In-network coverage supports volume growth and market share capture Potentially transformative GI Precision Medicine platform Potential additional pharma partnerships, revenues and growth catalysts Initiate clinical proof of concept study RSS sampling + preservation technology SARS CoV-2 RNA diagnostic testing Expanding SARS-CoV-2 testing broadly within our channel Finalize clinical verification, explore rule out window; initiate validation phase innatal® prenatal screen Innatal 4 : optimization phase assay performance; progressing through development milestones PIL Dx ingestible fluorescence laboratory ACG presentation and poster on PILDx in SIBO OBDS oral biopharmaceuticals Initiate prototype preclinical studies and full function preclinical studies Initiate prototype preclinical studies and full-function clinical study DDS targeted therapeutics Launch proprietary platforms Expand into new GI sales channel leverage GYN channel

Q&A Session