You've heard the old saying, "If at first you don't succeed, try, try again." Agile Therapeutics (NASDAQ:AGRX) just proved the wisdom of the adage.

In December 2017, Agile received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) for its contraceptive patch Twirla. The FDA rejected the biotech's regulatory submission because of concerns about quality adhesion test methods used in manufacturing the patches. 

But Agile worked with the agency to address the issues. Those efforts paid off last week, with the FDA giving the biotech a nice Valentine's Day present by approving Twirla. Is Agile Therapeutics stock now a buy after its big FDA win?

Man holding a card with FDA approved printed on it

Image source: Getty Images.

Market potential

Make no mistake about it: Twirla could be a big success story for Agile. Around $5.6 billion is spent every year in the U.S. on hormonal contraceptives. Combined hormonal contraception (CHC) birth control pills claim nearly half of the market. Vaginal rings make up another 15% of the market. Existing contraceptive patches account for around 5% of the market. 

Twirla could pull market share from all three of these product categories. That's a combined $3.8 billion potential addressable market for Agile in the U.S. alone.

Of course, Twirla won't capture all of the market. However, based on market research, Agile thinks that its patch could snag a market share of between 5% and 8% at its peak, reflecting annual sales in the range of $190 million to $304 million. 

This sales estimate seems attainable. Twirla is less invasive than rings. It delivers a lower dose than current birth control patches on the market and could potentially have fewer negative side effects. And unlike birth control pills that must be taken daily, Twirla only has to be applied to the skin once per week. 

Preparing to launch

Twirla won't hit the market just yet, though. Agile plans to first reach out to payers to try to secure reimbursement for its contraceptive patch. The attractive profile of the product should help the company succeed in those efforts.

Agile intends to begin hiring and training its sales team starting in the second quarter of 2020. The company will likely build a sales force of between 50 and 90 reps. The hiring of this team will be phased based on formulary acceptance for Twirla. 

While these efforts are under way, Agile will also complete the validation of its commercial manufacturing process with contract manufacturer Corium. If all goes according to plan, the company will begin shipping Twirla in Q4 of this year.

Thanks to a loan facility set up with Perceptive Advisors earlier this month, Agile should be in pretty good shape to fund its commercialization activities. The company already received the first tranche from the loan facility of $5 million. FDA approval of Twirla allows Agile to get the next tranche of $15 million. Another $15 million will be available contingent upon the company achieving specified revenue milestones. 

To buy or not to buy?

Agile's market cap currently stands close to $280 million. If Twirla can hit the company's peak annual sales targets, the biotech stock should have plenty of room to run.

Wall Street analysts are quite bullish about Agile's prospects. Of the five analysts covering the stock, three rate Agile as a buy with the other two analysts calling the stock a strong buy. The average one-year price target for Agile reflects a 20% upside to the current share price.

There's a risk, though, that even if Agile's share price climbs significantly the company could take advantage of the higher share price to conduct a stock offering to raise more cash. This would dilute the value of existing shares and likely cause the stock to give up some of its gains.

On the other hand, there's also a chance that a larger drugmaker could view Agile as an attractive bolt-on acquisition candidate. A company with an established sales force targeting the ob/gyn market and a big payer relations team would likely be able to launch Twirla much sooner than Agile could on its own and reach peak sales levels sooner as well.

Overall, I think that Agile is a largely de-risked opportunity that could deliver solid gains over the next few years. My view, however, is that the stock might not really hit its stride until Twirla begins generating sales. Still, though, Agile looks like a reasonably good pick for patient investors.