What happened

Shares of Progenity (PROG -10.12%) were up more than 34% on Tuesday. At the time of its initial public offering in 2020, the biotech company went for $13 a share, and the stock has been highly volatile because it is a retail investor favorite. The stock closed at $3.47 a share on Monday, opened at $3.96 on Tuesday, and rose to as high as $5.05 during morning trading. The company has a 52-week high of $7.86 and a low of $0.6570. The last time the stock was at $5 was in early April.

A pregnant patient is being examined by a doctor.

Image source: Getty Images. 

So what

It is the second time in less than a month that Progenity has taken off on a short-squeeze-fueled frenzy. The company, which had consistent prenatal testing revenue prior to the pandemic, has largely shelved that side of its business to focus on developing its innovation pipeline, including its Preecludia test that rules out preeclampsia, a pregnancy-related blood pressure disorder. The company is also looking at unique drug delivery systems for gastrointestinal drugs and oral biotherapies.

Now what

Since that last run, Progenity reported third-quarter earnings on Nov. 10, and it had only $182,000 in revenue and a net loss of $43.7 million. Those numbers were an improvement from the $52,000 in revenue and net loss of $47 million it reported in the same period a year ago, but the company seems to be long way from making a profit.

The stock will likely continue to be volatile, though there may be some support for long-term optimism as it recently received four patents connected with its GI tract delivery system for therapeutics. It has also said it has begun several cost-cutting measures to improve its profitability.

There is plenty of potential in the biotech company's pipeline as it has a portfolio of 180 patents and more than 220 pending patent applications. It is betting that its unique drug delivery system and its multiple applications will grow profits. The big concern, however, is how the company will be able to afford to develop its patents in the interim without much cash coming in. It has gone from having $91.5 million in cash last Dec. 31 to $65.9 million at the end of June, to $54.1 million at the end of September.