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January 15, 2020
Harry Stylli, Ph.D.
Chief Executive Officer
Progenity, Inc
4330 LaJolla Village Drive, Suite 200
San Diego, CA 92122
Re: Progenity, Inc.
Draft Registration Statement on Form S-1
Filed December 19, 2019
CIK No. 0001580063
Dear Dr. Stylli:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1, filed on December 19, 2019
Summary, page 2
1. Please provide the source underlying the estimate in the final sentence
of paragraph four
regarding the size of the total addressable market for your preeclampsia
test in the United
States.
Precision Medicine for GI-Related Disorders, page 7
2. Please revise your pipeline chart to include all completed, current and
future stages of
development and regulatory approval through which each product must
pass. Discuss the
anticipated FDA regulatory pathway for your precision medicines in
development and, as
applicable, similar foreign regulatory agencies.
Harry Stylli, Ph.D.
FirstName Inc
Progenity, LastNameHarry Stylli, Ph.D.
Comapany NameProgenity, Inc
January 15, 2020
Page 2
January 15, 2020 Page 2
FirstName LastName
3. We note your statement at Drug Delivery System (DDS) describing DDS
as "investigational drug/device combinations designed to deliver drug
directly to the site
of the disease in the GI tract in an effort to improve efficacy while
limiting toxicities
caused by systemic exposure." Please revise your disclosure here and
throughout the
prospectus to eliminate any suggestion that your product candidates
have been or
ultimately will be determined safe and effective as such statements
are determinations that
only the FDA has the authority to make.
4. Please revise to identify your precision medicine product candidates
by the designations
you disclose at page 30, PGN-600, PGN-001, and PGN-300.
Risk Factors
Our Seventh amended and restated certificate of incorporation and amended and
restated bylaws
will provide that the Court of Chancery, page 69
5. We note inconsistencies between your disclosures here concerning your
exclusive forum
provision, and those found at page 175 under "Exclusive Forum
Selection Clause." For
example, disclosure here describes the selection of the Court of
Chancery of the State of
Delaware for certain claims, and the federal court located within the
State of Delaware if
the Court of Chancery does not have jurisdiction, however this federal
court alternative is
not reflected in the provision as described under "Exclusive Forum
Selection Clause."
Please note that this is an example only.
Use of Proceeds, page 73
6. Please revise to disclose in greater detail the principal purposes for
which the net proceeds
are intended to be used with respect to your research and development
pipeline. To the
extent the net proceeds will be used to fund the clinical development
of your product
candidates for GI-related disorders, please revise to specify how far
in the clinical
development you expect to reach with the net proceeds. If a material
amount of funds are
necessary to complete their clinical development, please state the
amounts and sources of
other funds.
Key Components of Our Results of Operations, page 83
7. Please revise to disclose the material terms of the third party payor
contracts entered into
in January, 2020, representing an estimated approximately 100 million
covered lives.
Please file these contracts as exhibits to your registration
statement. Please refer to Item
601(b)(10) of Regulation S-K.
New Product Development, page 83
8. Given the early stages of your products identified for development,
please revise to clarify
in what sense your pipeline of new products and technologies is
"substantial."
9. We note the reference in the final sentence to the achievement of "key
milestones" as a
Harry Stylli, Ph.D.
FirstName Inc
Progenity, LastNameHarry Stylli, Ph.D.
Comapany NameProgenity, Inc
January 15, 2020
January 15, 2020 Page 3
Page 3
FirstName LastName
key factor in evaluating your performance, but see no additional
identification or
discussion of the key milestones in your prospectus. Please advise or
revise.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Critical Accounting Policies and Significant Judgments and Estimates
Stock-Based Compensation, page 98
10. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation and
beneficial conversion features.
Business, page 103
11. Please disclose the current and necessary future stages of development
and regulatory
approvals, if any, for your epigenetics platform.
Our Research and Development Activities
Molecular Tests, page 111
12. We note your graphic includes Preparent 3rd Generation and Riscover
2nd Generation as
"In Development," but do not find any narrative disclosure regarding
the steps completed
with respect to such development. Please revise your graphic to detail
the steps completed
and remaining and add the appropriate narrative disclosure.
Intellectual Property, page 124
13. Please revise to disclose when the latest to expire patent is
currently schedule to expire
with respect to your Molecular Testing Technology Patent Portfolio,
and your Precision
Medicine Technology Patent Portfolio.
Financial Statements
Notes to Financial Statements
2. Basis of Presentation, page F-7
14. We note that you have determined that Avero is a variable interest
entity ("VIE") and you
are the primary beneficiary. Please disclose the applicable
qualitative and quantitative
information for the VIE as required by ASC 810-10-50-2AA(d), 50-3 and
50-5A.
9. Stock Incentive Plan and Stock-based Compensation, page F-23
15. Please direct us to the disclosure required by ASC 718-10-50-2d.1 -
The weighted-average
grant-date fair value of equity options granted during the year or
revise the disclosure as
necessary.
Harry Stylli, Ph.D.
Progenity, Inc
January 15, 2020
Page 4
3. Revenue, page F-39
16. Please disclose the opening and closing balances of your contract
liabilities from your
contracts with customers or tell us why you believe that disclosure is
not necessary. Also
explain the significant changes in your contracts asset and liability
balances. Refer to
ASC 606-10-50-8 and 50-10.
General
17. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Eric Atallah at 202-551-3663 or Lisa Vanjoske at
202-551-3614 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Paul Fischer at 202-551-3415 or Celeste M. Murphy at 202-551-3257 with
any other
questions.
Sincerely,
FirstName LastNameHarry Stylli, Ph.D.
Division of
Corporation Finance
Comapany NameProgenity, Inc
Office of Life
Sciences
January 15, 2020 Page 4
cc: Branden C. Berns, Esq.
FirstName LastName