Via U.S. Navy photo by Petty Officer 2nd Class John F. Looney & U.S. Navy photo by Mass Communication Specialist 3rd Class Jake Berenguer
Agile Therapeutics Inc (NASDAQ:AGRX) has had to traverse a long and winding path in its attempt to get its lead contraceptive asset, a patch called Twirla, past the FDA. The company first submitted for approval back in 2013, and promptly received a complete response letter (CRL) from the agency attributing a lack of efficacy data to its response.
Agile followed up with an extensive phase III study, on the back of FDA recommendations, and put out data from this study at the turn of the New Year (we’ll look at this in a little more detail shortly). Markets widely interpreted the data as negative, and the company sold off to the tune of a little over 80%.
Fast forward a few months, and Agile just gave word that it’s met with the FDA, and it intends to resubmit its application, armed with the just mentioned data, before the end of the second quarter of this year.
Some are looking at this as a Hail Mary. If it pays off, however, there’s a large potential upside. Analysts put peak sales for the asset at anything from $340 million at a low single digit market penetration to upwards of $600 million, and expectations are that the time to peak sales from the initial commercialization run could be as little as two years.
For a risk tolerant biotech trader then, this situation represents an interesting binary play. The company will collapse if Twirla picks up another FDA knock back, and we’re probably looking at complete discontinuation in its current iteration. Next up is an FDA approval, and from there an immediate and dramatic upside revaluation on the cards.
With this in mind, here’s a look at both sides of the story:
The patch itself is based on a technology that Agile developed pre-IPO. It’s called Skinfusion, and at core, it’s an attempt to improve on the current available patch type delivery systems. It’s not all that revolutionary (it’s primary claim is that it has a central core and an outside layer, which stops leakage of the active ingredient and the adhesive), but it doesn’t need to be for Twirla to work. What it does need to do, however, is allow for the combined and effective delivery of two active ingredients – both of which are well established in the female contraceptive (primarily oral administration) space – ethinyl estradiol, or EE, which is a synthetic estrogen, and levonorgestrel, or LNG, which is a type of progestin.
Early stage studies suggested this was the case, but later stages became less clear, and adherence issues (which are key for a product like this) surfaced. This was the root of the initial FDA decline.
Right now, however, and looking forward, it’s not really about this legacy data. Instead, it’s about the phase III trial that the company conducted in response to its early knockbacks, and whether this data is enough to garner a regulatory green light in the US.
As mentioned, wider markets (and as indicated by their response to the numbers) believe its not.
This opinion is somewhat valid. The gold standard outcome determinant in these contraceptive trials is what’s called the Pearl index. It’s a pretty complex mathematical set of inputs, but the output is simple – a high number translates to a higher chance of accidental pregnancy, whereas a low number translates to a lower chance. The FDA has never approved a contraceptive asset that served up a Pearl index score (at a confidence interval of 95%) of more than 4.0.
When the Agile data came out with values of between 5.36 – 6.42, and in the intent to treat population these values only dipped to 4.80 – 6.06, things didn’t look great. That’s why the company sold off – because markets knew the FDA would have to make an unprecedented move if it was to green light Twirla based on these metrics.
So What’s the Other Side of the Story?
Well, it’s a commonly known fact that contraceptive drugs don’t work as well in overweight or obese women. Before the data hit press, markets had no idea that less than 40% of the patient population in the study were normal weight. Of the remainder, 25% were overweight, and 35% were obese.
There’s no question, then, that these overweight participants skewed the data towards a higher Pearl. If they hadn’t been included, the results would have almost certainly been better. In fact, even if markets had have known they were to be included prior to the numbers hitting press, chances are the reaction wouldn’t have been so strongly bearish.
So that brings us to the question: Will the FDA be willing to approve the patch, even though it’s above the standard threshold for efficacy (based on historic approvals), because a large portion (majority) of the sampled population in the latest trial was overweight?
This author thinks yes.
There’s every chance we’ll see a label addition, one that details the reduced efficacy impact of overweight user administration. This, however, in the grand scheme of things, isn’t too much of a problem. It’s a large enough market not to limit considerably the revenues available on the back of a labelled approval, and at its current capitalization, there’s plenty of upside potential even with a trimmed down target population.
As mentioned, it’s still a very risky play. A buy ahead of the FDA’s decision would be one very much against the grain (and the beliefs) of wider markets, and the more risk averse would be well advised to sit on the sidelines. As part of a balanced portfolio, however, and as a speculative binary and contrarian punt, this one might be worth a look.
We expect NDA submission in the coming eight weeks, which would set up a PDUFA somewhere around year end, early 2018.
