Agile (AGRX): Finding Pearl in the Index

Unmet medical needs

As modern women gain control of their own body and career, contraceptive market is growing at a higher rate than GDP. While there are already a variety of options available on the market, plenty market opportunity is still available to new options that provide efficient, safe, and easy to use birth control.

“The Patch” Ortho Evra by Janssen was a great commercial success, until it was shadowed by serious side effects caused by high dose of hormone. AGRX’s Twirla aims to solve this problem by halving the dose while still maintains efficacy.

Finding Pearl in the Index

There is no rocket science behind hormone. As long as Twirla delivers certain amount of hormone consistently into the body, it should work as planned. It is indeed. It is as effective, if not more, as oral contraceptive (“The Pill”). Pearl Index: 5.76 Twirla vs 6.72 Pill in Phase III.

Unfortunately, those numbers are too high. And it is not because of science or technology, but due to poor compliance among trial subjects. To save money, Twirla trial included high percentage of low quality enrollments. These enrollments were there simply for the money. Since contraceptive trials are not supervised, compliance was horrible.

Hopefully, AGRX learned the hard lesson and will tinker it down to FDA acceptable range in current ongoing trial. That means below 3 or even 2.

First Round Syndrome of Small Companies

AGRX is a typical example of companies that succumbed to first round CRL. It could due to practical reasons: lack of experience, lack of resource, to save some money. Or it could due to scientific reasons that can not be foreseeable and only be revealed by carrying out the trial. Such as unexpected safety or efficacy issues, specific issues to certain group of patients, or disease specific issues.

Whatever reason it is, as long as the value of the drug holds, this kind of first round twist represents tremendous investment potential. First round “failure” usually brings disappointment, sell-off, and substantially undervalued stock price. It is a good chance to accumulate when it occurs.

Over promising optimism

It may be a human nature or business norm. I found AGRX is one of those companies that over-promise the future:

Changing expectation so much in such a short period of time is amazing to me. It reminds me how Microsoft Windows calculates “how many minutes” left in completing certain copying or installation tasks.

On another quick note, similar things happened to ACRX after the CRL. First the management hinted it would be a quick resubmission and 2-month review. Then it turns out a slow resubmission and standard 6-9 month review. The management believed no clinical trials was needed; now FDA is demanding a new trial.

How could you believe anything the management says? Or we should not rely on them anyway. Just expect the worst as an investor.