Thursday, October 31, 2019 7:44:23 AM
Agile Therapeutics, Inc. (AGRX) / Oren Livnat, CFA
Price: $0.37; Market Cap (MM): $22; Rating: Buy; Target Price: $5.00
Twirla Rollercoaster Back on the Rise; AdCom Yields Near Unanimous Positive Vote Despite FDA Resistance; Raise PT to $5 Click here for full report
Positive 14-1 vote is historic upset after extremely discouraging briefing docs; likely greatly increases odds of approval. We have long welcomed an FDA AdCom review of Twirla, believing that a panel of majority OB/GYNs would favorably receive a lower-dose weekly combination hormonal contraceptive (CHC) patch to add to their armamentarium and offer patients a better choice than higher-dose, and presumably less safe, Xulane (the branded generic of old Ortho Evra). What we hadn’t anticipated, before Monday, was the FDA delivering one of the most negative AdCom briefing documents we can remember. Fortunately, the panel looked past the FDA’s admittedly arbitrary Pearl Index (PI) efficacy hurdle, and looked past the FDAs alarmist safety concerns—for which we saw no real indicator of above-normal risk—and delivered what has to be one of the biggest AdCom upsets. Despite the FDA explicitly recommending non-approval, the panel overwhelmingly voted 14-1 (with 1 abstention) to approve Twirla. Of course, there remains material risk here, as the AdCom vote is just a non-binding recommendation, and approval clearly requires a total 180-degree turn in agency thinking, and we’d be surprised if final approval is reached on the November 16 PDUFA just two weeks away. However, specific timing aside, we have to think Twirla ultimate approval is quite likely now, so we increase our probability of success to 70% from 60% and raise our target to $5 (from $4). Our target is far above where the stock has been trading, even before the recent negative briefing docs, but recall that AGRX traded around $5 prior to the December 2017 Complete Response Letter. Certainly, there remains a financing overhang, as the company ended 3Q19 with $18M cash and will likely need to raise substantial capital pre-launch. However, post-approval, we believe the market will have an appetite for this asset, and we have no reason to back off from our previous $300M peak U.S. sales estimate which assumes peak 2.6% CHC share (Figure 1) and peak annual Rx volume roughly equal to what unpromoted, black-box labeled Xulane does now. We currently assume a 4Q20 launch, and see profitability in 2023.
· Final approval on November 16 PDUFA date may be a bit optimistic.
· 3Q19 financial update.
· Valuation and risks.
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