Precipio Inc (NASDAQ: PRPO) has been a big topic of conversation as of late, and for good reason. After announcing positive news from on client uptake and manufacturing, the stock has been rocketing. Today alone it’s up 31.16% so far.
Nonetheless, a short run of big gains is never a strong basis to make an investment. After all, investing is a long-term game. With all of the attention on the stock, I decided to dive in and see what the big picture looked like, and I have to say, I’m impressed.
The science that drives the company’s products is second to none. Moreover, PRPO just landed an key client. If all goes will, this single account could be the one that sends the company into the big leagues.
Of course, those that are in when the price is peanuts will reap the rewards when the stock price climbs to peanut butter!!! Here’s why I believe we’re going to see big gains out of the stock ahead:
What Is Precipio?
Before I get into the opportunity here, it’s important that you know what Precipio is. The company operates in the biotech space. Dialing in a little deeper, it is a diagnostics company.
PRPO has an ultimate goal of eradicating the problem of misdiagnosis in the medical community. The company has tackled this goal by building a platform that delivers quality diagnostic information to patients and providers around the world.
The company developed the platform by taking advantage of the intellect, expertise and technology developed within various academic institution. The company then combined technologies and expertise to come up with what it believes to be the best diagnostic platform on the market today.
The truth is that it’s hard to argue that statement. Through partnerships with world-class academic institutions that specialize in cancer research, diagnostics and treatment, the company has greatly reduced the time to receive the result of diagnostic testing across an array of ailments, while increasing the accuracy of these diagnostic tests.
As mentioned above, Precipio is a diagnostics company, therefore, their product is their platform that greatly reduces the time-to-results and increases accuracy. At the moment, the company markets two product kits. These are known as:
The first product on the list, known as ICE COLD-PCR, is a technology that preferentially enriches mutant DNA sequences in an excess of wild-type DNA. This is done through a process that allows PRPO to selectively amplify the mutant DNA.
As a result of this process, the company achieves an up to 500-fold increase in sensitivity when identifying mutations. Moreover, this leads to the most precise sequence alteration detection rates available.
Ultimately, this opens the door to testing of liquid biopsies. This is key as it removes the restriction for obtaining a tissue biopsy for genetic testing. Ultimately, ICE COLD-PCR allows for more accurate diagnosis and monitoring of patients currently on therapies.
HomScreen HRM Kit
The second product that Precipio has under its belt is known as the HomeScreen HRM Kit. The kit is comprised of the company’s proprietary hematologic malignancy mutation profile screening panel.
At the moment, the HomeScreen HRM Kit includes screens for JAK2 (V617F), JAK2 Exon 12, MPL & CALR. These are mutations that are commonly found in a wide array of cancers.
Moreover, the panel takes advantage of a cost effective detection technology that yields for rapid results. This greatly reduces cost, and the time it takes to get a result. In fact, the screen can be completed within 4-6 hours. With a reduction in time-to-result, care givers are better prepared to provide life-saving treatments in a time frame that will lead to more successful outcomes.
PRPO May Have Just Announced Its Big Break
In the past few trading sessions, Precipio released two big pieces of news. In my opinion, the first of these may just prove to be the company’s big break. Here’s what we’ve seen:
Methodist Hospital of Memphis Gives PRPO Its Big Break!
The first bit of news was released on April 3, 2019. In this press release, PRPO announced the adoption of its HomeScreen HRM kit by Methodist Hospital in Memphis, TN. The reasons that Methodist chose the company’s product are simple:
- Low Price – The technology developed by Precipio comes at a reduced price when compared to other market alternatives. This ultimately leads to better reimbursement rates and a larger audience having the financial ability to undergo diagnostics.
- Time To Results – With their previous providers, Methodist Hospital saw a turn-around-time (TAT) of between 2 and 4 weeks. However, PRPO guaranteed the hospital that it will receive results in an average of 2-4 days. This is incredibly important, saving valuable time that can be used to treat patients with aggressive conditions that will rapidly grow worse over the course of 2-4 weeks.
- Quality – Through Precipeo’s proprietary technology, the company is able to provide top-quality results, reducing occurences of misdiagnosis.
For PRPO, this is incredible news for two reasons:
- Revenue – It is expected that the uptake of the HomeScreen kit by Methodist Hospital will generate revenue in the range between $50,000 and $100,000 per year for the company.
- An Open Door In A Competitive Space – Believe it or not, the hospital business is pretty competitive. As a result, when larger hospitals find success with a new technology, other hospitals will want to get on board. Methodist hospital in Memphis is a large one that sees quite a bit of traffic. As a result, success with this client could lead to droves of other potential clients wanting to get involved.
The Second Release Has To Do With A Commercialization Effort
In another release, issued on April 9, 2019, Precipio said that it has negotiated a definitive agreement with a manufacturer to produce its IV-Cell media. The company has been working to commercialize its IV-Cell media by offering Research-Use Only (RUO) based media to large laboratory customers.
In the process, the company said that it became apparent that inorder to expand and improve business economics, the best move for the company was to identify a manufacturing partner.
In the release, the company said that the manufacturing partner has the necessary experience, expertise, ability to scale, and large volume manufacturing capabilities needed to produce the media for global distribution.
PRPO Makes A Great Buyout Target!
With Methodist Hospital in Memphis taking the company’s products in house, a growing offering, and more, the company has plenty to offer a potential suitor. Moreover, Precipio currently trades with a market cap that’s under $20 million. So, it wouldn’t take much for a large company to pick this asset up from a financial standpoint. All in all, the company makes a compelling buyout target!
Consider The Risk
While things are starting to look great for Precipio, an investment in the company will come with risks. Some of the most pressing risks in my opinion include:
- Need For Funding – The truth of the matter is that it wouldn’t be surprising to see the company announce an offering or other dillutive move in the near term. In the fourth quarter, the company lost $2.1 million. While revenue is growing substantially, and losses are declining, the under $2 million the company has in current assets on the books won’t last forever. So, there will be a need to raise funding in one way or another.
- Short Target – In the past, Precipio has been a victim of heavy short volume. A short attack on the stock could become a painful reality for investors after recent gains.
The Bottom Line
The truth of the matter is that penny stocks can be risky business. However, every once in a while, you find a diamond in the rough. With the company’s product being chosen by Methodist Hospital in Memphis, we may be watching as the company gets its big break. After all, other hospitals will want to be able to provide competitive diagnostic services, and few options can provide results as quickly as HomeScreen.
Moreover, with the IV-Cell media, and a large manufacturer partnered in the product, we may see yet another opportunity to build revenue and provide value to investors relatively soon.
All in all, it looks like the work that PRPO has been doing to turn the corner and provide a compelling opportunity to investors is paying off. In my view, the company has plenty of room to grow, even after recent, dramatic gains.