On February 11th, Agile Therapeutics (AGRX) reported topline results from their comparative wear study challenging the adhesion of Twirla matched against Xulane (Figure 1). Once the news hit the wire, AGRX quickly traded up above $1.00 in the premarket but was quickly hit with selling pressure at the bell. At the moment, it appears the stock is in the hands of the short-term traders but the data from the study is what the long-term investors are really interested in. The results of this comparative study are significant because of the adhesion data being one of the issues for Twirla’s 2017 CRL. Now with positive adhesion data, Agile has a major piece of Twirla’s NDA resubmission that is expected in the first of this year and a potential PDUFA date by year-end.
Figure 1: Twirla noninferiority vs Xulane (Source AGRX)
Even though the share price has almost doubled since the beginning of 2019, investors should be optimistic about more gains ahead. This news should hopefully now trigger a series of positive catalysts between now and the end of 2019 as the company progresses Twirla towards a potential FDA approval. In my view, the bulls now have more to look forward to than the bears do. I intend to outline these bull and bear cases using Agile’s fundamentals and AGRX’s technicals to help potential investors make their own decision to buy or abstain.
Agile Therapeutics is a women's healthcare company committed to fulfilling the unaddressed needs of the modern woman. The company's lead product candidate, Twirla, is designed to provide women with an alternative contraceptive that potentially offers greater convenience and compliance.
Back on December 21, 2017, the FDA issued a CRL, indicating that Agile's resubmitted NDA for Twirla could not be approved in its present form. The CRL noted deficiencies relating to quality control adhesion test methods and descriptions that are part of the manufacturing process for Twirla. The CRL also cited "objectionable" conditions uncovered during an inspection for Twirla's third-party manufacturer, (Corium International Inc.) facility.
In April 2018, Agile met with the FDA for a Type A meeting met in order to discuss the deficiencies noted in the CLR and Twirla's NDA. In May, the company announced the meeting notes, which triggered a substantial sell-off from ~$2.65 to $0.65 per share.
In June 2018, the company announced they had submitted a formal dispute resolution request "FDRR", with the FDA for Twirla. The dispute related to the determination from the DBRUP, that concerns surrounding the adhesion properties of Twirla prevent the approval of the NDA. The FDA stood its ground and the FDRR was denied in July, causing another share price decimation down to $0.23 per share.
Since then, the company has complied with the FDA and performed the requested adhesion study to demonstrate Twirla's ability to stay on through the whole week of application. Thankfully, the results of the adhesion study show Twirla is capable of doing that, which should put those concern to rest. Going forward the company is preparing to submit Twirla's NDA and await the FDA's decision to host an Advisory Committee "AdCom" to review the safety and efficacy of Twirla and decide to recommend Twirla for approval.
Fundamentals - Bull Case
The bull case using fundamentals is based on a potential rapid reversal. Currently, the company's fundamentals are abysmal. At the end of 2018, Agile only had about $7.8M in cash on hand (Figure 2). Management believes they only have enough cash to support the company and its operations into the second quarter of 2019. The company will need more money with the purpose of keeping the company running and to prepare for a potential commercial launch of Twirla. With no other means of income, the company will most likely employ their $100M shelf offering.
Figure 2: AGRX Financial Overview (Source AGRX)
So how is this possibly bullish? I believe this can be seen as a bullish state of affairs because these are known conditions. The shelf offering, the weak balance sheet, and potential increase in expenses are all known and accepted. Therefore, I don’t expect a mass shareholder exodus as the company reports an increased number of outstanding shares over the course of the year. The funding should be allocated primarily towards commercial launch. So, I accept that the cliché of “you need money to make money” applies here.
Fundamentals – Bear Case
My bear case for the fundamentals is based on the potential unknown increase in expenses and a chance Twirla fails to grab a significant portion of the market. Even if the company gets Twirla approved, we don’t know how much capital will be needed to build out or hire a 70-100 rep salesforce for Twirla (Figure 3). What happens if Twirl has a lackluster launch? How long will the proceeds from the ATM keep the doors open and supporting Twirla launch? These unknowns might off in the distance, but I foresee them restricting investors from fully committing to AGRX until the company can prove they can be a successful commercial stage company.
Figure 3: Twirla Commercialization (Source AGRX)
Technicals – Bull Case
The stock has had plenty of downside for the past couple of years, with multiple falling knife events due to sequential regulatory setbacks. These falling knife actions ultimately led to a 52-week low of ~$0.23 back in July/August of 2018. Since then, the stock has recovered substantially and is starting to develop a good set-up pattern on the charts.
The weekly chart (Figure 4) shows the stock has broken out its descending triangle and is still moving up towards the long-term moving averages. I believe this was mainly due to seller exhaustion, followed by accumulation n Q3 and Q4 of 2018. Even after several months of gains, the RSI on the weekly has yet to reach the overbought area on the weekly chart, so I still see some room for AGRX to run.
Figure 4: AGRX Weekly (Source Trendspider)
As for the daily chart (Figure 5), we can see multiple bullish signals occurring in the past weeks, including the share price rising above the 50, 100, and 200-Day moving averages. Now we must wait and see if the share price can break and hold above $1.00. If so, the stock would officially breakout of the symmetrical triangle pattern that has been forming since the end of September. Typically, when a stock breaks up through the top trend line of a triangle pattern, we see the share price level up to a new holding area or continuation.
Figure 5: AGRX Dailly (Source Trendspider)
Where could the price run up to? If the stock can break out above that top trend line on the hourly chart (Figure 6), we could see a triggered gap fill up to $2.00 on the weekly charts in the coming months. If it is denied, we might see a range-bound stock till the next catalyst event. Considering these charts, I would say the stock has a lot of bullish potential left in the tank.
Figure 6: AGRX Hourly (Source Trendspider)
Perhaps the strongest bullish signal is the lack of a strong sell-off on positive news. It is a common occurrence to see a strong sell-off (“sell the news”) following a major catalyst event in a small cap biotech. Perhaps we will see this in larger regulatory events such as an AdCom decision or approval, but most positive press releases have equaled a positive change in share price in the past months. This tells me the many of the investors are holding their positions for a longer period than just a catalyst run-up.
Technicals – Bear Case
The technical bear case has two strong arguments…First, the stock has a history of losses and big sell-offs following bad news (Figure 7). Sadly, the stock has had more years of losses than years of gains. Perhaps that is all in the past and the recent all-time low has provided a fresh start, but the stock has an overall negative reputation for being a money pit. This provides plenty of selling points or resistance levels on the way back up.
Figure 7: AGRX Monthly (Source Trendspider)
The second argument comes from the stock trading under $1.00 since May 2018. This becomes an issue because one of the NASDAQ minimum listing requirements is for a stock to maintain a share price at or above $1.00 and have a market cap at or above $1M. Once a stock falls below one of these levels for 30 consecutive days, the company is notified of a potential delisting in 180 days. The company has a chance to remain compliant if it can trade above $1.00 for 10 consecutive trading days or the company can appeal for an extension. If the stock cannot find a way to remain above $1.00 before delisting, I expect the company to perform a reverse split to regain compliance. Failure would result in delisting and the company would most likely end up trading on the OTC market, which can be devastating for a small cap stock. I suspect short-sellers will defend the $1.00 area hard over the coming weeks and months to force the reverse split narrative and develop a negative sentiment.
The positive results of the adhesions study have checked off a box on the company’s Twirla to-do list (Figure 8).
Figure 8: Twirla Path to Approval (Source AGRX)
That leaves the NDA resubmission, FDA inspection at Corium, and a potential AdCom before the company receives a PDUFA date. The company has provided a timeline for these potential upcoming milestones (Figure 9)
Figure 9: 2019 Milestone (Source AGRX)
Those milestone events will be large catalysts and should be big movers for AGRX. In my previous AGRX article, I had stressed the importance for potential investors to get in before these upcoming events and I still believe that applies. Although the stock is up about 10-15% higher, it just starting to breakout out of that chart pattern, so I believe there is still time to jump in.
For me, I have entered my pilot position and I am looking to add to my position as the company continues to check-off boxes on their to-do list. Despite the strong probability for dilution, I intend to hold AGRX through 2019. I believe my bull cases are stronger than my bear cases, so I will hold on to my shares. I anticipate the stock to make consistent gains due to the synergy between the potential changes in the fundamentals and the developing chart patterns. My ultimate goal is to trade a portion of my position if Twirla is able to receive FDA approval and hold the rest going into commercial launch.
I must restate from my last AGRX article: Precisely forecasting the stock price in the near term is enigmatic. Considering this, I would like to stress caution that AGRX is an extremely speculative stock. There is a risk that investors lose all or a considerable amount of their investment. Although the upside of AGRX is great, it is a long way from being free of risk.
Disclosure: I am/we are long AGRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.