NOTE TO EDITORS: The Following is an Investment Opinion Issued by Spruce Point Capital Management
Expresses Concerns About Management’s Prior Work History Associated with WebMD, and Particularly at its Subsidiary Medical Manager, Where an Accounting Fraud Occurred
Examines Progyny’s Financial Reporting and Accounting and Raises Concerns About its Revenue and Expense Recognition, Client and Member Disclosures
Believes Numerous Headwinds Exist for 2023 Financial Targets, Including Reliance on Large Technology Clients Such as Amazon and Alphabet in the Face of Industry Layoffs
Questions Progyny’s Marketing Claims and its Fertility Treatment Plan, Which Maximizes Revenues for Itself and its Partners, but May Not Be Supported by Existing Scientific Research
Sees 60% to 80% Downside Risk to PGNY’s Share Price and Urges Investors to Visit www.SprucePointCap.com and Follow @SprucePointCap on Twitter for the Latest on $PGNY
Spruce Point Capital Management, LLC (“Spruce Point” or “we” or “us”), a New York-based investment management firm that focuses on forensic research and short-selling, today issued a detailed report entitled, “Diagnosing Progyny As A Strong Sell,” that outlines why we believe shares of Progyny, Inc. (NASDAQ:PGNY) (“PGNY” or “Progyny” or the “Company”) face up to 60% to 80% downside risk, or approximately $7.00 – $14.00 per share. Download or view the report by visiting www.SprucePointCap.com and follow us on Twitter @SprucePointCap for additional information and important updates.
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Spruce Point Report Overview
Based in New York City, Progyny is a fertility benefits management company that offers patients a benefits solution and access to a network of fertility specialists. In March 2015, Progyny was created through the merger of Auxogyn, a biotech start-up that attempted to develop a predictive, non-invasive embryo selection technology (called Eeva), and Fertility Authority, an online IVF referral network founded by former CEO Gina Bartasi (now CEO of competitor Kindbody). A year later, Progyny pivoted to fertility benefit management, billing itself as “the Uber of fertility.” Today, the Company’s benefit plan has failed to gain mass adoption. It has primarily been implemented by large technology companies, which fueled its early growth, but now presents a major headwind as layoffs reverberate through the technology industry.
Key findings from our report include:
We believe that the fertility benefits marketplace is becoming increasingly commoditized and crowded. Despite being the largest pure play company in its industry, we believe Progyny has few sustainable competitive advantages or points of differentiation from its peers. Though Progyny’s approach to fertility (for better or worse) has essentially become the standard of care among the focused fertility benefit managers, it can be replicated. Since Progyny’s relationships with its clinics are non-exclusive, the Company lacks both operational control over costs and quality and any meaningful differentiation in its clinic network. While Progyny was an early mover in its space, other high-profile private companies have exhibited rapid growth and achieved both scale and impressive wins with their models. Based on our research and analysis, we have identified that these other players have competitive differentiation in terms of business model (e.g., Kindbody, with owned clinics), payer relationships (e.g., WIN Fertility, with strong payer links), international scope (e.g., Carrot, as arguably the leading solution for employees outside the U.S.), and breadth of solutions (e.g., Maven, taking a more holistic view of women’s health). Several of these players have gone even further to innovate in related areas, such as payments and personal technology that leverage apps and wearables.
We foresee numerous headwinds to Progyny’s revenue growth in 2023 and 2024, most notably being the massive layoffs underway at their marquee technology clients, including Amazon and Alphabet. Thus, we believe consensus estimates are too high.
