Agile Therapeutics Inc (NASDAQ:AGRX) Just Proved It's Dramatically Undervalued

Agile Therapeutics Inc (NASDAQ:AGRX) just reported that the FDA has accepted a resubmission of its New Drug Application (NDA) for Twirla, its female contraceptive asset. The company is up around 10% on the news and will open the session on Friday at a little over five dollars a share for a market capitalization of around $145 million.A 10% run is generally seen as a pretty solid move. In this instance, however, we think it is a dramatic lack of response to what is a major bit of news for the company. In turn, we think that an exposure to Agile at current prices, even with the latest move taken into consideration, could be a multi-bagger within 6 to 12 months.For those new to this one, Agile has been trying to get this asset approved in the US for more than half a decade. The company picked up a Complete Response Letter (CRL) on its initial NDA submission back in 2013, as part of which the FDA requested that Agile carries out a brand-new phase 3 trial to clarify certain elements of uncertainty associated with the data that was initially presented.This trial finished late last year and the company put our data from the study in January. On release, Agile lost somewhere in the region of 75% of its market capitalization, despite the company reporting what it referred to as "positive" numbers.Markets interpreted the data differently and sold off to the above-noted degree.So why does our thesis go against the wider market interpretation of the study outcome?The reason that wider markets interpreted the data as negative is that the trial reported a Pearl Index (PI) figure of 4.80 across all patients that completed the trial. The generally accepted threshold for efficacy in this sort of contraception type study is 4.0, with anything below that implying stronger efficacy and anything above it the opposite. In other words, markets don't think the asset will be approved because it didn't register a PI score of 4.0 or below.That's reasonable until you look at the demographics of the study.Of the 2000 patients that took part in the study, 39% were of normal weight. Of the remainder, 25% were overweight and a further 35% were obese. It is widely accepted that contraceptive assets don't work as effectively in overweight patients as they do in healthy weight patients.Here's a link to an FDA report on this concept. Most contraceptive studies are geared towards enrolling lower weight patients to counteract this impact. Agile's wasn’t. Remove the overweight and obese patients from the study and the PI figure comes in at 3.03. Take out the obese patients alone (to leave the healthy weight and the overweight patients) and PI comes in at 3.94.In other words, this asset works and, in a population of healthy weight patients, works incredibly well. It is also safe and well tolerated – what initially looks like a high dropout rate is only really due to patients decided not to continue based on personal decisions.What all this means, then, is that the phase 3 trial that Agile conducted in response to the CRL produced very positive data and markets just haven't realized it yet. With the agency now having accepted the resubmission, Agile, with Twirla, has a clear path to FDA approval and commercialization in the US.And it's targeting a massive market.Analysts suggest this one could hit peak revenues of $400 million annually, with the company targeting a total market worth $3.7 billion in the US alone. For perspective, we once again refer to the company's current market capitalization of just $145 million.So what's next?Now it is all about PDUFA, which the agency has set for December 26, 2017. We wouldn’t be surprised to see this one trading for a 100% or more premium on its current price as and when this date comes around.We will be updating our subscribers as soon as we know more. For the latest updates on AGRX, sign up below!Image courtesy of Sarah Mirk via FlickrDisclosure: We have no position in AGRX and have not been compensated for this article.