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Agile (AGRX): Should You Catch this Falling Knife?

Shares of Agile Therapeutics (AGRX), a biotech which specializes in women’s healthcare, are in a nose dive, down about 66% in the past two days. The downturn was a result of the FDA issuing briefing documents expressing concerns regarding the company's Twirla, a contraceptive patch pending approval on November 16. This comes ahead of Wednesday’s meeting of the Bone, Reproductive and Urologic Drugs Advisory Committee which is set to review and discuss the marketing application for Twirla.

Containing a blend of hormonal contraceptives such as ethinyl estradiol and levonorgestrel, Twirla works through a patch which delivers similar amounts to those provided by its oral counterparts. It is applied once a week, consecutively for 3 weeks, with a week’s break in between doses.

The documents highlighted a number of concerns, among them Twirla’s effectiveness in proportion to its safety, as the estimated Pearl Index (PI) in the Phase 3 ATI-CL23 study exceeds the required level. Approved combined hormonal contraceptives (CHCs) must come in under a threshold of 5.0, whereas the trial’s PI came in at 5.83.

Further adding to the gloom were trial results which showed 2x pregnancy rate in obese women. As almost 30% of females ages 18-44 were classified as obese by the CDC in 2017, this is a concern. Agile’s proposal to include a limitation of use label based on the patient’s weight and BMI were not deemed enough by the FDA.

Clearly, there is a significant amount of frustration from the bulls. Yet, AGRX is still trading well below price target expectations.

In a report issued following the release of the briefing documents, RBC Capital’s Randall Stanicky says Twirla still has about 30% chance of approval. Considering this best-case scenario, the analyst reiterates a Buy rating on AGRX stock, while cutting his price target to $2.00 (from $3.00). That said, the analyst believes the stock could drop as low as $0.25 on the back of a rejection from the FDA.

"Though not binding, outcome of this AdCom is going to be increasingly important for Twirla's approval opportunity on its 11/16 PDUFA,” Stanicky noted. If approved, the analyst believes it can “capture 2.2% TRx share in the sizable ~$3.9 billion CHC market that is growing annually in the mid-single digits given the unique benefits that a CHC patch product without a unique black box safety warning could bring."

In addition, Oppenheimer analyst Leland Gershell has lowered his price target to $4.00 (from $5.00), saying, “We were particularly surprised by the apparent rejection of AGRX's proposal to include label language stating reduced effectiveness in overweight/obese women, which we had seen as a reasonable regulatory strategy.” The analyst believes the violent sell-off could provide an opportunity for risk tolerant investors should the panel reach a more supportive conclusion. This would give the stock an increase of over 900% from its current levels.

All in all, Agile has a lot of disappointed bulls out this week as the stock plummets. According to TipRanks, out of 5 analysts polled in the last 3 months, all 5 rate the stock a "buy." The 12-month average price target stands at $3.40, marking over 800% upside from where the stock is currently trading, which is most likely a result of analysts’ inability to turnaround new price targets so quickly. (See Agile stock analysis on TipRanks)