This Biotech Got Hit on a Competitor’s Good News. Here’s Why I’m Adding
Let’s see how one of my biotech holdings just handed me an entry I’ve been waiting for.
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We have some bounce action on Monday, and it is gaining momentum, because the early strength wasn’t sold. Breadth is running about 69% positive, so the buying is broad, and there are about 125 new highs against 150 new lows, the best ratio in a while. The Roundhill Magnificent Seven ETF (MAGS) is leading with a gain of 1.7%. Oil is down sharply, with the United States Oil Fund (USO) off about 5.7%, and that is giving sentiment a nice boost.
One tech name that is struggling is Apple (AAPL), which reports tonight. Apple has been a laggard in AI, and that has made it something of a safe haven compared with the companies spending heavily on data centers. But it is an expensive stock, and it carries the same risk of a sell-the-news reaction we have seen from the other megacaps.
I suspect another thing helping the bulls today is that investors are looking past the election and the emotions it stirs up. The most likely outcome is gridlock, with neither side able to advance its agenda, and that is good for the market.
Biotech’s Hard Road
Biotechnology is one group I’ve been watching closely as a beneficiary of the rotation, but it is giving back some of last week’s strong move today. Biotech is always a difficult place to own anything. Since the summer, funds have been cutting the size of their books, which means selling what they own rather than what they dislike. That has been frustrating for buyers who focus on fundamentals.
One name I own and am watching closely is Precigen (PGEN). Before Friday, the stock was already down roughly a third from its high, with nothing wrong at the company. Then, after the close on Friday, the Food and Drug Administration gave Inovio Pharmaceuticals (INO) accelerated approval for its treatment, Voceryq. Precigen sold off about 25%.
Both companies treat the same rare disease, recurrent respiratory papillomatosis. A virus causes growths in the airway that have to be cut out again and again because the virus stays in the tissue. Precigen’s treatment, Papzimeos, has been on the market since August 2025.
I view the selling as an overreaction to a headline. But Inovio’s approval also creates a problem that will weigh on the stock for a while.
A Big Overreaction
Inovio can ship its product right away, but it is unlikely to see meaningful sales for a long time, because there is no permanent billing code for it yet. Until Medicare issues one, every claim goes in under a miscellaneous code. Someone at the insurer reads each one, with the paperwork attached, and decides case by case whether to pay. The hospital buys the product first and finds out afterward whether it will be reimbursed. These codes are issued quarterly. Precigen waited about eight months for its own, and its revenue took off after the code went live in April. It now has insurance coverage reaching roughly 315 million people and hospitals that already know how to order and bill for its treatment. Inovio starts that process this week.
Inovio’s approval also comes with strings. Accelerated approval is granted for serious diseases when early results look promising, but it requires a follow-up trial to confirm the treatment works. Inovio has to run a study of about 100 patients against a placebo, which it hasn’t designed, filed or started. And it will have to recruit for it in a disease where patients can simply get the approved treatment instead.
There are also questions about how well Inovio’s product works compared with Precigen’s. The Food and Drug Administration approved Voceryq based on an open-label study of 32 patients with no comparison group. Seven of 26 patients, or 27%, needed no surgery in the year after treatment. Comparing separate trials is never exact, but Precigen’s treatment was approved with roughly 50% of patients reaching that same result, and the FDA granted it full approval, accepting the results as proof the treatment works rather than as an early sign that it might.
None of this will hurt Precigen’s revenue this year or next.
Why It Still Weighs on the Stock
Until Friday, Precigen was the only company that could treat this disease, and anyone building a model could draw a straight line. Now there is a second product, and nobody can say yet how it will sell, who will prescribe it, what it will cost or which patients it will take. Analysts have to put a competitor into their 2028 numbers without a single quarter of evidence to size it with.
That separates the earnings from what investors are willing to pay for them. The earnings are unaffected. The willingness to pay up for them is not, because an investor who was comfortable owning a monopoly now has to form a view on market share. Most will wait for evidence rather than guess.
What Resolves It
Precigen reports on Wednesday. The consensus is around $71.6 million in revenue and 6 cents a share in earnings, which works out to roughly 30% sequential growth. I think the analysts are behind again, the way they were last quarter. The second quarter got help from a backlog that cleared when the billing code went live, and this quarter won’t have that. I’m watching the cash coming in against what customers owe as closely as the revenue line, because a good number with slow collections is not a good quarter. At the end of June, Precigen was owed about $72 million by customers, more than its entire second-quarter revenue of $55 million.
I bought Precigen into the selling on Friday night and am adding more today. I expect management to address many of these concerns on its conference call, and that should help the stock.
At the time of publication, DePorre was long PGEN.
