Agile Therapeutics (NASDAQ:AGRX), like almost all small-cap biotech stocks, is having a really bad Monday. Shares of the early commercial-stage company are down 11.7% as of 10:46 a.m. EDT.
The culprit? The entire market is taking a step backwards today in response to the rapid spread of the novel coronavirus. Small-cap biotechs like Agile are taking a particularly hard hit because of their need to tap the public markets for capital on a regular basis. In short, it may become much harder to raise capital via secondary offerings if the global economy does indeed slip into a recession due to this deadly respiratory illness.
The steep plunge in crude oil prices is only adding to investors' unease.
Less than a month ago, Agile got the green light from the Food and Drug Administration for its weekly contraceptive patch dubbed Twirla. Not long thereafter, the company raised roughly $45 million in gross proceeds through a public offering of its common stock to fund Twirla's commercial launch. While this capital raise was a step in the right direction from a liquidity standpoint, Agile may still not have enough in the bank to fully fund Twirla's commercialization. In other words, the company will more than likely need to issue another offering within the next 12 months. Agile, after all, isn't expected to become cash flow positive anytime soon. The problem is that there's no telling what kind of shape the capital markets will be in a year from now.
Is this double-digit drop a buying opportunity? It all depends on your view of Twirla. If demand is strong, Agile should be an outstanding growth stock over the long term. Then again, there's always a big question mark when it comes to small-cap biopharmas undertaking the commercialization of their first product. More often than not, things don't go smoothly. As such, this stock arguably only belongs in your portfolio if you are very comfortable with risk and volatility.