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AGRX: Countdown to Dec. 26, 2017 PDUFA for Twirla®

11/08/2017
By David Bautz, PhD

NASDAQ:AGRX

Agile Therapeutics, Inc. (NASDAQ:AGRX) is a women’s healthcare company focused on developing healthcare products to fulfill the unmet contraceptive needs of women. The company’s lead candidate product, Twirla® (AG200-15), is a once-weekly low-dose hormonal contraceptive patch that contains the active ingredients ethinyl estradiol (EE, a synthetic estrogen) and levonorgestrel (LNG, a type of progestin). The patch utilizes the company’s Skinfusion technology, which allows Twirla® to be the first contraceptive patch capable of delivering LNG across the skin in a reliable manner. The company has conducted a comprehensive development program for Twirla® that includes three Phase 3 clinical trials. The company has refilled the new drug application (NDA) for Twirla® and the PDUFA date is Dec. 26, 2017.

Business Update

Additional Phase 3 Data Presented on Twirla®

Over the past few weeks, Agile has presented additional results from the Phase 3 SECURE trial at the 2017 North American Forum on Family Planning and the American Society for Reproductive Medicine Scientific Congress & Expo 2017. Each of the presentations concerned data showing a decrease in the length of bleeding and spotting episodes during the SECURE trial. 

Over the course of the trial, women on Twirla® reported a decline in both the total number of bleeding/spotting episodes and the length of scheduled bleeding. The following chart shows that the mean total number of bleeding/spotting episodes decreased from 6.0 to 4.9 days from cycles two to 13. In addition, the length of scheduled bleeding decreased from 4.7 days during cycle two to 4.1 days during cycle 13. A decrease in bleeding/spotting is an important attribute for a contraceptive and is something women generally prefer for long-term contraceptive choices.


Financial Update

On November 6, 2017, Agile reported financial results for the third quarter of 2017. As expected, the company did not report any revenues. Net loss for the quarter was $7.1 million, or $0.22 per share. R&D expenses for the third quarter of 2017 totaled $3.2 million, compared to $4.9 million for the third quarter of 2017. The decrease was primarily due to a decrease in clinical trial activity partially offset by an increase in manufacturing commercialization expense. We anticipate these expenses to continue to increase as the company prepares for the launch of Twirla®. G&A expenses for the third quarter of 2017 were $3.5 million, compared to $2.2 million for the third quarter of 2016. The increase was primarily due to an increase in pre-commercialization activities. We anticipate these expenses to continue to increase as the company prepares for the commercial launch of Twirla®.

Cash burn for the third quarter of 2017 totaled approximately $7.1 million, and the company exited the third quarter of 2017 with approximately $43.8 million in cash and cash equivalents. In August 2017, the company sold approximately 5.3 million shares of common stock in an underwritten public offering that netted the company approximately $18.5 million. We believe the company has sufficient cash to fund current planned operations into the second quarter of 2018. 

As of Nov. 3, 2017, Agile had approximately 34.2 million shares of common stock outstanding. In addition, the company has approximately 3.8 million stock options, 0.2 million warrants, and 0.3 million unvested restricted stock units for a fully diluted share count of approximately 38.5 million.

Valuation

We value Agile using a probability adjusted discounted cash flow model that takes into account potential future revenues for Twirla® based on a launch in the second quarter of 2018.

Even with a Pearl Index that is slightly higher than has previously been seen in other approved hormonal contraceptive products, we do not believe this is a reason for the FDA not to approve Twirla®. The company has done a good job of showing why the Pearl Index is higher than previously seen in other hormonal contraceptive trials based on a correlation with BMI. Trials for previous hormonal contraceptive products typically had an upper limit for BMI to be included in the trial, thus it is not surprising those trials would show a lower Pearl Index than the SECURE trial. Once approved, we don’t believe the slightly higher Pearl Index will have an adverse impact on peak revenues. We base this on the information presented by the company showing that clinicians do not discuss Pearl Index values with their patients and instead focus on the characteristics of each product that may fit best with a particular patients lifestyle while assuming that if approved by the FDA the product is effective at preventing pregnancy. Lastly, we believe the SECURE trial adequately addressed all the concerns the FDA had when the CRL for Twirla® was issued, thus we anticipate the product being approved on or before the PDUFA date of December 26, 2017. 

We forecast for Agile to attain 9% market share 7 years after launch in 2018. This leads to peak revenues of approximately $400 million. After accounting for operating expenses, an estimated 35% tax rate, a 12% discount rate, and an 85% probability of approval we value Twirla® at $301 million. When taking into account estimated capital requirements for the launch of Twirla® of $20 million, and dividing by the fully diluted share count of 38.4 million shares, this leads to a valuation of approximately $7.50 per share.

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