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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For the year ended December 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-36464
Agile Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
23-2936302
(I.R.S. Employer
Identification No.)
101 Poor Farm Road
Princeton, New Jersey 08540
(Address including zip code of principal executive offices)
(609) 683-1880
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $0.0001 per share
Trading Symbol(s)
AGRX
Name of exchange on which registered:
The Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ⌧
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ⌧ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth
company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ⌧
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2020 was approximately $196.8 million.
As of February 24, 2021, there were 87,628,904 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2021 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the registrant’s
fiscal year ended December 31, 2020, are incorporated by reference in Part III of this Annual Report on Form 10-K. Except with respect to information specifically incorporated
by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Agile Therapeutics, Inc.
Annual Report on Form 10-K
For the Year Ended December 31, 2020
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes statements that are, or may be deemed, “forward-looking statements.” In
some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the
terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “designed,” “could,” “might,” “will,”
“should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although
not all forward-looking statements contain these words. They appear in a number of places throughout this Annual Report
on Form 10-K and include statements regarding our current intentions, beliefs, projections, outlook, analyses or current
expectations concerning, among other things, our ongoing and planned manufacturing and commercialization of Twirla®,
the potential market acceptance and uptake of Twirla®, the development of our other potential product candidates, the
strength and breadth of our intellectual property, our ongoing and planned clinical trials, the timing of and our ability to
make regulatory filings and obtain and maintain regulatory approvals for our potential product candidates, the legal and
regulatory landscape impacting our business, the degree of clinical utility of our products, particularly in specific patient
populations, expectations regarding clinical trial data, our results of operations, financial condition, liquidity, prospects,
growth and strategies, the length of time that we will be able to continue to fund our operating expenses and capital
expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that
may affect the industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive
dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or
may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have
a reasonable basis for each forward-looking statement contained in this Annual Report on Form 10-K, we caution you that
forward-looking statements are not guarantees of future performance and that our actual results of operations, financial
condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-
looking statements contained in this Annual Report on Form 10-K. In addition, even if our results of operations, financial
condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking
statements contained in this Annual Report on Form 10-K, they may not be predictive of results or developments in future
periods.
Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:
● our ability to successfully commercialize Twirla, our only approved product;
● the rate and degree of market acceptance of Twirla by physicians, patients, third-party payors and others in the
healthcare community;
● our ability to obtain adequate coverage and reimbursement for Twirla in the United States from private and public
third-party payors;
● the size and growth of the markets for Twirla and our product candidates and our ability to serve those markets;
● the effects of the ongoing COVID-19 pandemic on our commercialization efforts, clinical trials, supply chain,
operations and the operations of third parties we rely on for services such as manufacturing, marketing support
and sales support, as well as the effects of the COVID-19 pandemic on our potential customer base;
● regulatory and legislative developments in the United States and foreign countries, which could include, among
other things, a government shutdown;
● our available cash and our ability to obtain additional funding to fund our business plan without delay and to
continue as a going concern;
● the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional
financing;
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● our inability to timely obtain from our third-party manufacturer, Corium, sufficient quantities or quality of Twirla
and our potential product candidates or other materials required for a clinical trial or other tests and studies;
● the ability of Corium to produce commercial supply in quantities and quality sufficient to satisfy market demand
for Twirla;
● the performance and financial condition of Corium or any of the suppliers;
● our ability to design and successfully complete a post-marketing long-term, prospective observational safety study
comparing risks for venous thromboembolism, or VTE, and arterial thromboembolism, or ATE, in new users of
Twirla to new users of oral combined hormonal contraceptives, or CHCs, and new users of Xulane in U.S. women
of reproductive age using CHCs and conduct a small post-marketing commitment, or PMC, study to assess the
residual drug content of Twirla after use;
● our ability to maintain regulatory approval of Twirla and our ability to obtain regulatory approval of our potential
product candidates, and the labeling under any approval we obtain;
● our ability to obtain and maintain intellectual property protection for Twirla and our product candidates;
● the success and timing of our clinical trials or other studies, including post-marketing studies for Twirla;
● our plans to develop our other potential product candidates;
● development of unexpected safety or efficacy concerns related to Twirla;
● our ability to continue to develop and maintain successful sales and marketing capabilities, including our ability to
maintain an effective sales force or failure to build-out and implement an effective health care compliance
program;
● our ability to retain key employees and recruit the additional personnel we will need to support our
commercialization plan for Twirla; and
● our ability to successfully implement our strategy.
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those described in Item 1A “Risk Factors.”
These risks include, but are not limited to, the following:
● We are significantly dependent on the commercial success of Twirla, our only approved product. If we are unable
to successfully commercialize Twirla, our business, financial condition, results of operations, and prospects and
value of our common stock will be materially adversely affected;
● It will be difficult for us to profitably sell Twirla if third-party coverage and reimbursement for such product is
limited, and reimbursement and healthcare containment initiatives and treatment guidelines may constrain our
future revenues;
● If we are unable to develop effective marketing and sales capabilities for Twirla or maintain our agreements with
third parties to market and sell Twirla, we may be unable to generate product revenues;
● Twirla could develop unexpected safety, efficacy or quality concerns, which would likely have a material adverse
effect on us;
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● We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer
if we fail to compete effectively;
● Existing and future legislation may increase the difficulty and cost for us to commercialize Twirla and may affect
the prices we may obtain;
● We have incurred operating losses in each year since our inception and expect to continue to incur substantial
losses for the foreseeable future. Management has concluded that these factors raise substantial doubt about our
ability to continue as a going concern.
● We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing,
we may be unable to commercialize Twirla or to complete the development and commercialization of our other
potential product candidates;
● We remain subject to substantial ongoing regulatory requirements related to Twirla, and failure to comply with
these requirements could lead to penalties, including withdrawal from the market, suspension, or withdrawal of
product approval;
● We have no manufacturing capacity and anticipate continued reliance on Corium, our third party manufacturer, for
the commercialization of Twirla and development of our potential product candidates. We may not have or be able
to obtain sufficient quantities of Twirla or our potential product candidates to meet our required supply for
commercialization or clinical trials, which would could materially harm our business;
● We rely on third parties to conduct aspects of our clinical trials and post marketing studies. If these third parties do
not successfully carry out their contractual duties, meet expected deadlines or comply with applicable regulatory
requirements, we may not be able to maintain regulatory approval for Twirla or be delayed in obtaining or
ultimately not be able to obtain marketing approval for our potential product candidates;
● We may not be able to protect our proprietary technology in the marketplace;
● We may infringe the intellectual property rights of others, which may prevent or delay our commercialization and
product development efforts or increase the costs of commercializing Twirla or our potential product candidates,
when and if approved;
● If we fail to develop and commercialize our current pipeline of additional potential product candidates, our
prospects for future growth and our ability to reach or sustain profitability may be limited or never achieved;
● In order to establish our sales and marketing infrastructure, we will need to grow the size of our organization, and
we may experience difficulties in managing this growth;
● If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to
limit commercialization of Twirla or our potential product candidates, if approved; and
● We expect that our stock price may fluctuate significantly.
Any forward-looking statements that we make in this Annual Report on Form 10-K speak only as of the date of such
statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this
Annual Report on Form 10-K. You should also read carefully the factors described in the “Risk Factors” section of this
Annual Report on Form 10-K to better understand the risks and uncertainties inherent in our business and underlying any
forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this
Annual Report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be
inaccurate, any such inaccuracy may be material. In light of the significant uncertainties in these forward-looking
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statements, you should not regard any of these statements as a representation or warranty by us or any other person that we
will achieve our objectives and plans in any specified timeframe, or at all.
This Annual Report on Form 10-K includes statistical and other industry and market data that we obtained from
industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party
research, surveys and studies generally indicate that their information has been obtained from sources believed to be
reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry
publications and third-party research, surveys and studies are reliable, we have not independently verified such data.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our
forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
Twirla® is one of our trademarks used in this Form 10-K. This Form 10-K also includes trademarks, tradenames, and
service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred
to in this Form 10-K may appear without the ® and ™ symbols, but those references are not intended to indicate, in any
way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to
these trademarks and tradenames.
Item 1. Business
Overview
We are a women’s healthcare company dedicated to fulfilling the unmet health needs of today’s women. We have
remained steadfast in our commitment to innovate in women’s healthcare where there continues to be unmet needs – not
only in contraception – but also in other meaningful women’s health therapeutic areas.
Our first product, Twirla, which was approved in February 2020 and launched in early December 2020, is a once-
weekly prescription combination hormonal contraceptive patch. It delivers a dose of estrogen consistent with commonly
prescribed combined hormonal contraceptives, or CHCs, and lower than the estrogen dose found in other marketed
contraceptive patches. We believe there is a market need for a contraceptive patch that is designed to deliver approximately
30 mcg of estrogen and 120 mcg of progestin in a convenient dosage form that may support compliance in a noninvasive
fashion. Twirla leverages our proprietary transdermal patch technology called Skinfusion®. Skinfusion is designed to
allow drug delivery through the skin while optimizing patch adhesion and patient comfort and wearability, which may help
support compliance.
With the approval of Twirla we are now focused on our advancement as a commercial company. During 2021, we plan
to continue implementing our commercialization plan for Twirla, with the goal of becoming a contraceptive market leader,
and ultimately, pursuing opportunities to broaden our portfolio to address areas of unmet medical need in women’s health.
Our Strategy
Our near-term goal is to establish an initial franchise in the multi-billion-dollar U.S. hormonal contraceptive market
built on approval of Twirla in the U.S. Our resources are currently focused on the commercialization of Twirla. To that end,
we completed the validation of the commercial manufacturing process for Twirla in accordance with our approved
marketing application in the fourth quarter of 2020 and commenced shipment of product to wholesalers in early December
2020. During 2020, we also continued efforts to build out our commercial organization with a number of key hires and new
contractual relationships. We entered into an agreement with inVentiv Commercial Services, a Syneos Health group
company, which we refer to as Syneos Selling Solutions, to provide a contract sales force and related sales services for
Twirla. In the third quarter of 2020, we hired and trained an initial sales team of 73 persons who are engaging with health
care providers on Twirla through both in-person and virtual meetings. In April 2020, we entered into a commercial supply
agreement with Corium for the manufacture and supply of Twirla, which replaced our former
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development agreement. We hired a Chief Medical Officer in August 2020, who is leading an evaluation of our existing
pipeline including potential development costs and timelines. We also expect to explore possible expansion through
business development activities, such as acquiring access to new products through in-licensing, co-promotion or other
collabortive arrangements.
Our current priorities are as follows:
● Continue to implement our commercialization plans for Twirla to ensure a successful launch in the United States,
including maintaining a sales and marketing team and implementing a healthcare compliance program;
● Expand coverage and reimbursement for Twirla in the United States from private and public third-party payors;
● Expand access to Twirla through multiple business channels including third-party payor contracts, retail and
specialty pharmacies, telemedicine and government contracting;
● Maintain and manage the supply chain for Twirla to support commercialization of Twirla across the United States;
● Evaluate the advancement of our existing pipeline and its possible expansion through business development
activities; and
● Complete and submit the proposed protocols for the two FDA-required post-marketing commitment studies.
It should be noted that current public health threats could adversely affect our ongoing or planned business operations.
In particular, the ongoing COVID-19 pandemic has resulted in federal, state and local governments and private entities
mandating various restrictions, including travel restrictions, access restrictions, restrictions on public gatherings, and stay at
home orders. The effect of these orders, government imposed quarantines and measures we have taken, such as
implementing work-at-home policies, may negatively impact productivity, disrupt our business and/or could adversely
affect our commercialization plans and results. We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including personnel at third-
party manufacturing facilities and other third parties with whom we conduct business, were to experience shutdowns or
other business disruptions, our ability to conduct our business in the manner and on the timeline presently planned could be
materially and adversely impacted. It is unknown how long these conditions will last and what the complete effect will be
on us. While to date we have been able to continue to execute our overall business plan, some of our business activities
have been slowed and taken longer to complete and we continue to adjust to the challenges of operating in a largely remote
setting with our employees. We have only recently launched our commercial activities for Twirla and begun engaging with
healthcare providers to promote Twirla. We expect that as we broaden our sales detailing activities in some instances our
sales force may encounter challenges engaging with healthcare providers during this on-going pandemic. Overall, we
recognize the challenges of launching in a pandemic, will continue to closely monitor events as they develop and plan for
alternative and mitigating measures that we can implement if needed.
Twirla
Twirla is our first and only approved product. Twirla received FDA approval on February 14, 2020 as a method of
contraception for use in women of reproductive potential with a BMI < 30 kg/m2 for whom a combined hormonal
contraceptive is appropriate. Based on the reduced efficacy seen with increasing BMI in a Phase 3 clinical trial, Twirla’s
limitation of use instructs healthcare providers to consider Twirla’s reduced effectiveness in women with a BMI ≥ 25 to
<30 kg/m2 before prescribing. Twirla is contraindicated in women with a BMI ≥ 30 kg/m2 because compared to women
with a lower BMI, women in this group had reduced effectiveness and may have a higher risk for VTEs. Twirla’s label also
includes the class-wide boxed warning, contraindications, and warnings and precautions applicable to all combined
hormonal contraceptives, or CHCs.
Twirla is a prescription combined hormonal contraceptive patch that contains the active ingredients ethinyl estradiol, or
EE, which is a synthetic estrogen, and levonorgestrel, or LNG, which is a type of progestin, both of which have an
established history of efficacy and safety in currently marketed combination oral contraceptives. Twirla delivers
approximately 30 micrograms of EE per day, a dose of EE consistent with the dose delivered by many commonly
prescribed oral contraceptives. Twirla is the only contraceptive patch that contains LNG, a widely prescribed progestin.
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Our Skinfusion technology allows Twirla to be the first approved patch capable of delivering a contraceptive dose of LNG
across the skin. The patch is applied once weekly for three weeks, followed by a week without a patch. Twirla is packaged
with three individually wrapped patches per carton to provide for one 28-day cycle of therapy.
Twirla’s approval is primarily based on safety and efficacy data from the Phase 3 SECURE trial. The SECURE trial
was a new approach to clinical trials, and was intentionally designed to include broad enrollment criteria and a patient
population of women likely to use hormonal contraceptives. In this purposefully inclusive trial, efficacy and safety were
evaluated in a diverse study population, one that is more representative of the demographics of women across the US likely
to use hormonal contraception.
The SECURE trial was a multi-center, single-arm, open-label, 13-cycle trial that evaluated the safety, efficacy and
tolerability of Twirla in 2,031 healthy women, aged 18 and over, at 102 experienced investigative sites across the United
States. The trial was designed in consultation with the FDA, and incorporated a number of stringent trial design elements,
including exclusion of treatment cycles not only for use of backup contraception but also for lack of sexual activity.
SECURE had broad entry criteria, placed no limitations on body mass index, or BMI, or other demographic factors during
enrollment, and enrolled a large and diverse population from the United States in order to allow for efficacy to be assessed
across different groups. These entry criteria resulted in the inclusion of a substantial number of women with high BMIs,
who have frequently been underrepresented in prior contraceptive studies. The efficacy measure for SECURE was the Pearl
Index in an intent-to-treat population of subjects 35 years of age and under. The FDA also requested the inclusion of
prespecified efficacy analyses related to BMI and body weight.
As part of Twirla’s approval, and consistent with requirements for another recently approved CHC, the FDA is
requiring us to conduct a long-term prospective, observational post-marketing study comparing the risks for VTE and ATE
in new users of Twirla to new users of other CHCs. The final study report for the Twirla post-marketing study is scheduled
to be submitted to the FDA in November 2032, with interim safety data reporting to the FDA due in November 2026. We
have also agreed to a post-marketing commitment, or PMC, study to assess the residual drug content and strength of Twirla
in a minimum of 25 women. The PMC study is similar to residual drug studies requested of patch developers in the FDA’s
November 2019 draft guidance entitled Transdermal and Topical Delivery Systems—Product Development and Quality
Considerations.
Contraceptive Landscape and Market Opportunity
U.S. Hormonal Contraceptive Market Background
Contraceptive methods, other than sterilization, can be divided into non-hormonal and hormonal alternatives.
Examples of non-hormonal products available in the United States include the diaphragm, male condom, female condom,
and non-hormonal intrauterine device, or IUD. Hormonal contraceptives containing both estrogen and a progestin are
referred to as CHCs, and contraceptives containing only progestin are referred to as P-only. There are several categories of
hormonal contraception products available in the United States, including:
● oral contraceptive;
● vaginal ring;
● transdermal patch;
● hormonal IUD;
● subcutaneous implant; and
● injectable.
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The U.S. hormonal contraceptive market is a multi-billion-dollar market. Data from 2017 to 2019 from the Centers for
Disease Control, or CDC, indicate that approximately 28% of women aged 15 to 49 use some form of hormonal
contraception, which amounts to approximately 20 million U.S. women. The CHC portion of the market, which includes
pills, two transdermal patches, including Twirla, and two vaginal rings, generates significantly greater prescription volume
and sales compared to the P-only portion of the market, consisting of hormonal IUDs, injectables, implants, and P-only
pills.
The U.S. hormonal contraceptive market is a mature market, with many branded and generic products available. For
the past 5 years, sales revenue in the CHC market has been essentially flat, at approximately $4 billion per year; with a
drop in 2020 sales to $3.7 billion, largely due to the introduction of generics to Nuvaring, which was the market leader in
2019. Total prescription volume, or TRx, declined from 2016 to 2020 by 27%, from 90 million to 65 million; however the
number of cycles dispensed (1 cycle = 1 month supply) declined by only 6% over the same time period, as the average TRx
size (cycles/TRx) grew from 1.4 to 1.8 over the same time period. Therefore, the value of a TRx has grown significantly
over the past 5 years, particularly for branded products, where the average revenue per TRx nearly doubled from $144.48
in 2016 to $277.81 in 2020.
Despite the availability of generic contraceptives for over 30 years, branded products have maintained a significant,
though declining, share of CHC sales, with 40% of total sales in 2020. In the five years ended December 2020, the average
annual price increase among the top branded products was 8.8%. The average price per cycle, referred to as the wholesale
acquisition cost, or WAC, for a single 28-day cycle of the top branded products was $131.40 in 2016 and rose to $160.71
by December 2020. The branded CHC transdermal patch (Ortho Evra) was discontinued in October 2014 and the branded
generic CHC transdermal patch (Xulane) is currently priced at $122.15 per cycle. We have established a WAC price for
Twirla at $159.75. The other non-oral form of CHC, the monthly vaginal ring, is currently priced at $162.63 per cycle for
the branded version, Nuvaring, and $138.24 and$148.32 for generic versions. We cannot predict how the manufacturers of
branded or generic products will manage prices going forward.
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The U.S. contraceptive population (defined by the Centers for Disease Control and Prevention as women aged 15-49)
is currently approximately 75 million women and is estimated to grow to nearly 80 million by 2035.
Source: U.S. Census Bureau, 2017 National Dataset (2016 is base population estimate for projections).
Contraceptive Pills
Based on 2017 to 2019 data from the CDC, of women who choose to use a hormonal contraceptive, approximately
55% use a contraceptive pill, vaginal ring or patch, the majority of whom use the contraceptive pill. The remaining 45% of
women using hormonal contraception are split between using injectables, implants, or IUDs. Based on this information, we
believe that contraceptive pills are the most popular choice because:
● patients and physicians are familiar with pills;
● pills were the first to market and have been aggressively promoted for a long period of time;
● historically, pills have been a covered benefit with good reimbursement in private and public healthcare plans; and
● pills are a non-invasive option.
However, compliance remains a significant draw-back with pills. Published studies have shown that the average
woman who uses oral contraceptives misses approximately two to four pills per month, which increases the potential for
unintended pregnancies. We believe that a patch can offer greater convenience than a pill, as it does not require daily
administration and, for certain women, could lead to greater compliance and ease of use.
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Contraceptive Patch Market Experience
The Ortho Evra® contraceptive patch, or Evra, was introduced in early 2002 and was the first FDA-approved
contraceptive patch. The initial approved labeling for Evra indicated that it delivered a daily EE dose of 20 micrograms.
Evra had rapid uptake in the contraceptive market and achieved a 10% share of the CHC market by September 2003.
Following FDA approval of Evra, users of Evra began to report thrombotic and thromboembolic events to the FDA.
Johnson & Johnson, the manufacturer of Evra, revised the Evra labeling in November 2005 to include information that EE
exposure with Evra is 60% higher than that of an oral contraceptive containing EE of 35 micrograms, based on area under
the curve, a commonly-used metric for measuring EE exposure in contraceptives. This information was ultimately included
in an addition to the boxed warning that was unique to the Evra label. In 2020, the Xulane label was revised to reflect a
contraindication in women with a BMI ≥ 30 kg/m2 because of the reduced efficacy and increased potential risk for VTEs in
this population. In making this revision, the information about increased estrogen exposure was removed from the boxed
warning but remains in the warnings and precautions and pharmacokinetics sections of the label. The Evra market share
declined rapidly following the 2005 labeling changes, from a peak share of 11% in 2005, to 4% by the end of 2006, to 1.4%
by the end of 2013, where it stabilized, with a 1.5% share of the market based on combined prescriptions for Evra and its
generic equivalent (Xulane®) in 2014. In more recent years, the Xulane share of the CHC market TRx has grown, from a
1.7% share in 2016 to a 2.8% share in 2020.
The FDA has maintained, in spite of the wording in the labeling for Evra, which has been discontinued, and its
approved branded generic, that none of the epidemiologic studies provides a definitive answer regarding the relative risk of
VTE with Evra compared to combined oral contraceptive use or whether the increased risk that some studies demonstrated
is directly attributable to Evra. In spite of the labeling changes, and Johnson & Johnson ceasing promotion of Evra in 2007,
the generic equivalent of Evra (Xulane) generated sales of $331.5 million in 2020. On February 26, 2021, Amneal
Pharmaceuticals, Inc. announced that it had received approval by the FDA for Zafemy, a generic version of Ortho Evra.
With its approval on February 14, 2020, Twirla is now the only transdermal contraceptive option currently available to
women that delivers a low dose of estrogen. We believe that the rapid uptake and acceptance of Evra upon its introduction
and its (and Xulane’s) continued sales over the past several years demonstrate a market opportunity for multiple choices in
transdermal contraceptive patches.
Twirla Potential Market Share
Three of our market research studies have included an allocation exercise to estimate the potential uptake of Twirla and
peak market share. In all of these studies, ObGyns and nurse practitioners, or NPs, indicated their allocation of
contraceptive prescriptions before and after reviewing a product profile like Twirla that reflects the safety and efficacy
results from our SECURE clinical trial. In the 2010 study, which was conducted prior to the implementation of the ACA,
ObGyns estimated use of a product like Twirla in 17% of their CHC patients. A proprietary calibration model developed by
the research firm was applied to the peak share estimate, to adjust for physician overstatement, resulting in an estimated
peak market share of 9% of the CHC market. In the study completed in December 2016, ObGyns, NPs, and physicians
assistants, or PAs, estimated use of Twirla in 22% of their CHC patients, which was also calibrated to adjust for
overstatement, resulting in an estimated peak market share of 14% of the CHC market. This estimate was confirmed in our
most recent study completed in September of 2019, in which ObGyns and NPs/PAs estimated use of Twirla in 20% of their
CHC patients, calibrated to 14% of the CHC market.
We continue to evaluate the commercial opportunity for Twirla. We believe that the potential new CHC users who are
within Twirla’s approved indication represent a significant population of women. Based on the Company’s market research,
analysis of the current and expected future U.S. contraceptive market, and review of other product launches in the category,
the Company estimates that Twirla can potentially achieve a peak market share of 5-8%. As we pursue the
commercialization of Twirla, we will continue to analyze the contraceptive market and update our market research for
Twirla.
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Twirla Commercialization Strategy
Our top priority is the successful commercialization of Twirla. Promptly after approval by the FDA in February 2020,
we began implementation of our plan to market Twirla. During 2020, we validated our commercial manufacturing process,
initiated work with managed care and patient payors to gain market access for Twirla, hired and trained an initial sales team
through our contract sales partner, Syneos Selling Solutions, entered into distribution agreements with the three largest
wholesalers in the United States and commenced commercial shipments of product to wholesalers in December 2020. In
2021, we intend to continue implementation of our commercial strategy for Twirla with a focus on promotional activities
and expanding market access through multiple business channels, including third-party payor contracts, retail and specialty
pharmacies, telemedicine, and government contracts.
Twirla Promotion Strategy
We have a limited number of sales and marketing employees and primarily rely on third-party agencies with
experience in commercializing pharmaceutical products to advance the commercialization of Twirla. Our marketing efforts
are initially focused on Obstetrician-gynecologists in the United States, and we plan to use a significant number of samples
in the early stage of commercial launch to gain patient trial and acceptance. We believe that we can deploy a focused sales
force effort targeting the ObGyn, NP and PA prescribers who are responsible for approximately 70% of branded CHC
prescriptions. In areas of the country where it is not efficient to deploy a sales representative, and/or depending on the
evolution of the COVID-19 pandemic, remote promotion can be used to reach prescribers. We plan to complement these
efforts by expanding the channels we utilize to drive awareness of Twirla during the pandemic and will focus on promotion
with key prescribers and customers groups, including consumers and commercial managed care plans.
We plan to use both branded and unbranded campaigns to create awareness of Twirla and available contraceptive
options among consumers. We believe there are cost-effective means to reach our target demographic of females ages 18 to
34 years, who tend to engage in online activities to a high degree and are more likely to seek health information online and
through social networks. Traditional mass-market direct-to-consumer advertising on television may not be required to reach
these consumers. Marketing tactics aimed at today’s female consumer need to be optimized for mobile technology because
smartphones and text messaging are the preferred means of communication. We believe that a focused consumer promotion
plan that uses digital media, potential social media advertising, and other mass-market advertising vehicles will generate
consumer awareness and demand for Twirla. In the third quarter of 2020, we launched our unbranded educational
awareness campaign, entitled I’m So Done. We rolled out our branded campaign in early 2021.
Twirla Coverage and Reimbursement Strategy
After approval of Twirla by the FDA, we began meeting with formulary decision makers as appropriate to secure
positions for Twirla that minimize access barriers for prescribers and patients, and since then we estimate that we have been
able to achieve formulary access for approximately forty to forty-five percent (40-45%) of the estimated covered lives by
commercial third-party payors. Third-party payors are increasingly challenging the prices charged for pharmaceutical
products. The United States government and other third-party payors are increasingly limiting both coverage and level of
reimbursement for new drugs, in addition to questioning their safety and efficacy. In this challenging environment, we plan
to continue our efforts to expand formulary access to Twirla during 2021 through contracting strategies and engaging with
formulary boards on the clinical profile of Twirla. We believe that it is important in this category for women to have equal
access to all methods, dosing regimens and hormonal options so that they and their provider can select the choice that is the
most appropriate to meet their lifestyle and family planning goals.
Our Pipeline: Twirla Line Extensions and Potential Product Candidates
Twirla is our first and only approved product, and, to date, substantially all of our resources have been committed to
obtaining approval of Twirla and initiating our commercialization of Twirla. While seeking approval of Twirla and
preparing for commercial launch, we halted all work on our pipeline. We have initiated a full evaluation of our pipeline to
establish a plan to advance the development of Twirla line extensions and other potential product candidates.
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Our potential product pipeline consists of two types of product candidates: Twirla line extensions and other
transdermal contraceptive product candidates. These potential product candidates are designed to address market needs and
offer additional non-daily contraceptive options. Prior market research conducted in December 2016 indicated our potential
line extension product candidates may be commercially viable and could garner a share of the contraceptive market. We
have conducted an Advisory Board meeting with contraceptive experts and initiated a new market research program to
update our previous insights and to advise on the pipeline programs.
The hormonal contraceptive market has a long history of manufacturers successfully using line extensions to extend
the lifecycle of a brand, often by gaining additional exclusivity periods for the product extension under the provisions of
the Hatch-Waxman Act and/or with additional patents. Our lifecycle strategy with Twirla is to introduce line extensions that
will have exclusivity for some time period, either due to our intellectual property estate, or due to Hatch-Waxman
exclusivity. The line extensions in our pipeline include using our Skinfusion technology to allow a 28-day regimen where
women will experience shorter, lighter withdrawal bleeding, as well as extending the cycle beyond the typical 28-day
regimen to allow women to experience fewer withdrawal bleeds each year. In addition, the potential line extension product
candidates in our pipeline will utilize a unique aspect in the regimen, where a smaller patch, or SmP, that delivers a lower
dose of both EE and LNG will be worn during the final seven days of each cycle, rather than having a patch-free week, to
allow for withdrawal bleeding while minimizing hormonal fluctuations and potentially the side effects that accompany
changes in hormone levels. These regimens are protected by patents issued to us in 2015.
Our potential Twirla line extensions include the following:
● AG200-15 Extended Regimen (ER) is an 84-day extended cycle regimen utilizing our approved Twirla TDS
product designed to allow a woman to have four (4) episodes of withdrawal bleeding per year. There are several
currently approved oral contraceptives that provide an 84- or 91-day extended cycle regimen, and in 2020, these
products totaled 5% of CHC cycles dispensed. However, there is no approved contraceptive patch product offering
an extended cycle regimen. AG200-15ER is designed to address the limitations of the currently approved oral
contraceptive extended regimens by providing a more convenient, weekly TDS dosing schedule. We are currently
evaluating the required development plan required for FDA approval of this regimen.
● AG200-15 SmP is a 28-day regimen designed to provide users with shorter, lighter withdrawal bleeds and
potentially improve contraceptive efficacy. AG200-15 SmP may also provide benefit in patients with sensitivity to
abrupt changes in hormone levels. 28-day regimen CHCs that use a shortened hormone-free interval, or SHFI, by
delivering hormones beyond the traditional 21 days comprised 16% of CHC-TRx volume and 43% of CHC sales
in 2020, demonstrating high acceptability among patients and providers. AG200-15 SmP is designed to provide a
simplified 28-day regimen through use of the same drug product as Twirla for the first three weeks of the cycle,
and a smaller lower-dose patch, or SmP, in the fourth week, which will allow patients to continuously apply
patches without interruption. AG200-15 SmP requires additional patch formulation development work on the SmP
prior to potentially conducting a pharmacokinetic study.
● AG200-15 ER SmP is a 91-day extended cycle regimen utilizing our approved Twirla TDS and the SmP that is
designed to allow a woman to have four (4) shorter, lighter withdrawal bleeding episodes per year. By extending
the length of the contraceptive cycle, AG200-15 ER SmP is designed to potentially minimize breakthrough
bleeding and spotting, which are commonly reported events with patients using an extended regimen contraceptive
product. AG200-15 ER SmP utilizes the approved Twirla TDS during the 12-week (84-day) active phase of the
cycle and the SmP during week 13 of the cycle. AG200-15 ER SmP requires additional patch formulation
development work on the SmP prior to potentially conducting a pharmacokinetic study.
Our other potential product candidate is a progestin-only (P-only) contraceptive patch described below:
● AG890 is a P-only contraceptive patch, intended for use by women of reproductive potential to prevent pregnancy.
The intended population would be women who are unable or unwilling to take estrogen, including those who are
breastfeeding or who are at greater risk of VTE, such as women who smoke, are over 35 years of age, or who are
obese. Currently, the P-only market consists of pills and several non-oral options, including IUS/IUDs, implants,
and injections. AG890 is intended to fulfill an unmet medical need for a non-daily, easily reversible form of
contraception in the P-only target population. Previously, we conducted a Phase 1 clinical trial with AG890
containing LNG. In addition, the National Institutes of Health, through a clinical trial agreement with us,
conducted a Phase 1/2 trial with LNG-containing AG890. This Phase 1/2 study was a
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multicenter study to evaluate the pharmacokinetics, safety, and mechanisms of potential contraceptive efficacy of
AG890. We are evaluating our analysis of the data from this trial as well as other potential progestins to be
utilized for further development. Additional formulation development work for progestin and dose selection is
required, along with additional studies to determine the optimal formulation and dose to advance to Phase 3.
We do not expect to be required to conduct preclinical toxicology studies for any of these potential product candidates.
Based upon a number of factors, including, but not limited to, our available capital resources and feedback from the FDA,
we continue to review the clinical path and the budgetary requirements for each of these three potential product candidates.
Competition
The industry for contraceptive products is characterized by intense competition and strong promotion of proprietary
products. We face potential competition from many different sources, including large pharmaceutical companies, specialty
pharmaceutical and generic drug companies, and medical device companies. Any product candidates that we successfully
develop and commercialize will compete with existing products and new products that may become available in the future.
We face competition from a variety of non-permanent birth control products. There are non-hormonal barrier methods,
such as the contraceptive sponge, diaphragm, cervical cap or shield and condoms. Then, there are hormonal methods,
which is the category for Twirla and our potential product candidates, such as oral contraceptives, injections, implants,
hormonal IUDs and vaginal ring and transdermal contraceptive products.
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The following table is the FDA Birth Control Chart, which outlines the 18 unique forms of birth control and compares
the effectiveness of each method.
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Although there are more than 250 CHC products currently available, including brands and generics, just 14 branded
products make up approximately 40% of total market revenue. Our potential competitors include large, well-established
pharmaceutical companies, and specialty pharmaceutical sales and marketing companies. The branded products with
established market presence include Nuvaring®, marketed by Merck, and Annovera®, marketed by Therapeutics MD, the
Loestrin® franchise, marketed by Allergan (formerly known as Actavis), consisting of three oral contraceptives, Minastrin®
24, LoLoestrin® and Taytulla®, and Beyaz®, Yaz®, Yasmin® and Natazia® marketed by Bayer. Xulane, a branded generic
to Ortho Evra, generated $331.5 million in sales for Mylan in 2020. On February 26, 2021, Amneal Pharmaceuticals, Inc.
announced that it had received approval by the FDA for Zafemy, a second generic version of Ortho Evra. Additionally,
several generics manufacturers currently market and continue to introduce new generic contraceptives, including Sandoz,
Glenmark, Lupin, Amneal, Mylan, Aurobindo, Xiromed, and Afaxys. Based on the market experience of other non-oral
CHC dosage forms, including Evra and Nuvaring, we believe there is a continuing demand for an innovative transdermal
contraceptive patch that can provide convenience in a low-dose transdermal format.
There are other contraceptive products recently approved or in development that may compete with Twirla and our
other potential product candidates. Phexxi®, a prescription non-hormonal vaginal gel approved for use as an on-demand
contraceptive, was developed by Evofem and launched in August of 2020. Nextstellis™, a combined oral contraceptive
containing drosperinone and a new form of estrogen, estetrol (E4), was developed by Mithra Pharmaceuticals and is
licensed to Mayne Pharmaceuticals for marketing in the U.S. and Australia. Mayne has indicated they will recruit a new
women’s health team in the U.S. and expect to launch Nextstellis in the first half of 2021. The Population Council has a
transdermal gel contraceptive and a vaginal ring contraceptive, both containing segesterone acetate (the same progestin
contained in Annovera) and ethinyl estradiol in Phase 2 development. Bayer has an IUD containing both LNG and an
NSAID (a non-steroidal anti-inflammatory), to reduce pain upon insertion in Phase 2. Bayer also signed a license
agreement in January of 2020 with Dare Bioscience for U.S. commercial rights to Ovaprene, a hormone-free monthly
contraceptive vaginal ring, which is in Phase 2 development. Allergan has a P-only patch for which they received a CRL
from the FDA in 2013.
We are aware of only one other CHC transdermal patch, which is not approved in the U.S. Apleek was developed by
Luye Pharma and Bayer, and it was approved in the United Kingdom in 2014. Luye acquired the global rights to Apleek
from Bayer AG in August 2018. Apleek contains the active ingredients EE and gestodene, a third-generation progestin.
There are no contraceptives containing gestodene approved in the U.S. We believe that if this product were to obtain FDA
approval, the approved labeling is likely to contain the same language that products containing third generation progestins
contain, which language states that these contraceptives have a two-fold increase in risk of VTE as compared with
contraceptives containing second generation progestins.
Manufacturing
We do not own any manufacturing facilities and rely on Corium for all aspects of the manufacturing of Twirla. We,
along with Corium, have made a significant investment in a proprietary process to manufacture Twirla. We believe we have
developed a robust process to reliably manufacture Twirla on a commercial scale. We believe that the technical challenges
and know-how involved in manufacturing, including proprietary chemistry, production to scale and use of custom
equipment and reproducibility, present significant barriers to entry for other pharmaceutical companies who might
potentially want to replicate our Skinfusion technology.
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Strategic Agreements
Agreement with Corium
In April 2020, we entered into a manufacturing and commercialization agreement with Corium, which we refer to as
the Corium Agreement, and which replaced our previous development agreement. Pursuant to the Corium Agreement,
Corium will manufacture and supply all of our product requirements for Twirla at certain specified rates. Under the terms
of the Corium Agreement, Corium is to be the exclusive supplier of Twirla for ten years. The Corium Agreement includes a
quarterly minimum purchase commitment and a fixed price per unit for two years depending on annual purchase volume.
The Corium Agreement terminates automatically after ten years, but may be terminated for any reason upon the written
mutual agreement of both parties; provided, however, that the parties must confer in good faith regarding possible mutual
termination. In the event of such termination, we may still effect purchase orders after the notice of termination is given and
until the time any such termination becomes effective.
Agreement with Syneos Selling Solutions
In April 2020, we entered into a project agreement with inVentiv Commercial Services, LLC, or inVentiv, a Syneos
Health Group Company, which we refer to as the Syneos Agreement, under our Master Services Agreement with inVentiv.
Pursuant to the Syneos Agreement, inVentiv, through its affiliate Syneos Selling Solutions, will provide a field force of
sales representatives to provide certain detailing services, sales operation services, compliance services and training
services with respect to Twirla to us in exchange for an up-front implementation fee and a fixed monthly fee.
The Syneos Agreement terminates automatically on the second anniversary of the date of the first activity undertaken
by Syneos Selling Solutions to detail Twirla, referred to as the Deployment Date, unless earlier extended upon the mutual
written agreement of both parties. We may terminate the Syneos Agreement for any reason upon timely notice after the
first anniversary of the Deployment Date; provided, however, that if we terminate the Syneos Agreement prior to the
eighteen month anniversary of the Deployment Date, we will be obligated to pay Syneos Selling Solutions a termination
fee, the amount of which varies depending on the date of termination.
Pricing and Reimbursement
In the United States, decisions regarding the extent of coverage and the amount of reimbursement to be provided for
pharmaceutical products are made on a payor-by-payor basis. The principal decisions about reimbursement for new
medicines by the U.S. Government are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency
within the U.S. Department of Health and Human Services. As a result, coverage determinations are often a time-
consuming and costly process that requires companies to provide scientific and clinical support for the use of approved
products to multiple stakeholders which may include Group Purchasing Organizations (GPO’s), Pharmacy Benefit
Managers (PBM’s), individual payer health plans, as well as government payors and federal purchasers including CMS, the
Veterans Administration, Department of Defense and state Medicaid managed and Fee For Service plans, with no assurance
on the level of coverage or that adequate reimbursement will be obtained. Third-party payors are increasingly challenging
the prices charged for pharmaceutical products.
Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs
or private payors and by any future relaxation of laws, enforcement policies or administrative determinations with respect
to the importation of drugs into the United States from other countries where they may be sold at lower prices.
In the United States, third-party payors include federal health care programs, such as Medicare, Medicaid, TRICARE,
and Veterans Health Administration programs; managed care providers, private health insurers and other organizations.
Several of the U.S. federal health care programs require that drug manufacturers extend discounts or pay rebates to certain
programs in order for their products to be covered and reimbursed. For example, the Medicaid Drug Rebate Program
requires pharmaceutical manufacturers of covered outpatient drugs to enter into and have in effect a national rebate
agreement with the federal government as a condition for coverage of the manufacturer’s covered
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outpatient drug(s) by state Medicaid programs. The amount of the rebate for each product is based on a statutory formula
and may be subject to an additional discount if certain pricing increases more than inflation. State Medicaid programs and
Medicaid managed care plans can seek additional “supplemental” rebates from manufacturers in connection with states’
establishment of preferred drug lists. A further requirement for Medicaid coverage is that the manufacturer enter into a
Federal Supply Schedule, or FSS, agreement with the Secretary for Veterans Affairs to extend discounted pricing to the VA,
DOD and other agencies.
Similarly, in order for a covered outpatient drug to receive federal reimbursement under the Medicaid programs or to
be sold directly to U.S. government agencies, the manufacturer must extend discounts on the covered outpatient drug to
entities that are enrolled and participating in the 340B drug pricing program, which is a federal program that requires
manufacturers to provide discounts to certain statutorily-defined safety-net providers. The 340B discount for each product
is calculated based on certain Medicaid Drug Rebate Program metrics that manufacturers are required to report to CMS.
There has been recent negative publicity and increasing legislative and public scrutiny around pharmaceutical drug
pricing in the U.S. Moreover, U.S. government authorities and third-party payors are increasingly attempting to limit or
regulate drug prices and reimbursement. These dynamics may give rise to heightened attention and potential negative
reactions to pricing decisions for Twirla and products for which we may receive regulatory approval in the future, possibly
limiting our ability to generate revenue and attain profitability.
The United States government and other third-party payors are increasingly limiting both coverage and level of
reimbursement for new drugs, in addition to questioning their safety,efficacy and clinical value. Consolidation among
managed care entities has increased the negotiating power of these entities. Third-party payors increasingly use closed
formularies, which might not include all of the approved products for a particular indication, to control costs by negotiating
discounted prices in exchange for formulary inclusion. Third-party payors have traditionally used differential co-pays to
attempt to drive patients to use either generic products or products for which they have a contract with the manufacturer.
Typically, a third-party payor’s formulary is organized into between three and six tiers. Each tier is then associated with a
set range of co-pay amounts or a percent of the drug costs, with products in the lower tiers having a lower co-pay.
Reimbursement for female contraceptive products was changed by the enactment of the the Patient Protection and
Affordable Care Act (PPACA), which was signed into law on March 23, 2010 and further updated on March 30,2010 to
become the Affordable Care Act (ACA). On January 20, 2012, U.S. Department of Health and Human Services announced
a final rule on health insurance coverage that provided for no cost sharing for FDA-approved contraceptives and
contraceptive services for women of reproductive age if prescribed by health care providers, as part of women's preventive
health services guidelines adopted by the Health Resources and Services Administration (HRSA) for the ACA. The final
rule applied to all new health insurance plans in all states beginning August 1, 2012.
In May 2015, several government agencies, including the U.S. Department of Health and Human Services, or HHS,
the Department of Labor, or DOL, and the U.S. Department of Treasury, or Treasury, jointly issued a clarification in the
form of an FAQ which clarified the requirements for coverage of contraceptives under the ACA. This clarifying guidance
went into effect in January 2016. The FAQ states that plans and issuers must cover without cost-sharing at least one form of
contraception in each of the 18 current methods that the FDA has identified for women in its current Birth Control Guide.
The patch is identified as a specific method in the FDA Birth Control Guide, and therefore insurers must cover at least one
patch product with no cost-sharing to the patient. Under the FAQ, health plans are allowed to utilize reasonable medical
management techniques within a method to control costs, such as covering a generic at no cost but charging a copay for the
equivalent brand. However, if using medical management techniques within a method, plans must have a transparent
waiver process where, if a provider determines that a particular FDA-approved item, including contraception, is medically
necessary for an individual, then the plan must cover that item without cost sharing. While the FAQ is clear that a waiver
process is required, plans have implemented the requirement inconsistently on a national basis.
On January 20, 2017, the Trump administration signed an Executive Order directing federal agencies with authorities
and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of
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any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers,
health insurers, or manufacturers of pharmaceuticals or medical devices, among others. The Biden administration revoked
the Trump administration Executive Order on January 28, 2021. Congress also could consider subsequent legislation to
repeal and replace elements of the ACA. Additionally, in October 2017, the Department of Health and Human Services,
jointly with the Department of Labor and the Treasury, issued two interim final rules outlining exemption processes for
employers not wanting to offer contraceptive coverage based on their religious beliefs or sincerely held moral convictions.
In July 2020, the Supreme Court reversed lower court injunctions applicable to these rules, effectively permitting
implementation. However, the Biden administration potentially may elect to exercise its authorities under ACA differently
from the previous administration, and it is, therefore, difficult to determine the full effect of the ACA or any other
healthcare reform efforts on our business.
Before the ACA was passed, many states had enacted contraceptive equity laws that required plans to treat
contraceptives in the same way they covered other services. In addition, since the ACA was passed, a number of states have
enacted laws that basically codify in state legislation the ACA benefit rules (requiring all plans regulated by the state to
cover, without cost-sharing, each of the 18 FDA-approved contraceptive methods and in some cases have gone further and
required coverage of all FDA approved contraceptives). Federal law applies to all plans while state law applies to only
individual plans and fully-insured group plans. Currently, 30 states and the District of Columbia require insurance plans to
cover contraceptives, with a wide range of coverage and cost-sharing requirements, and exemptions among these mandates.
We continue to monitor healthcare reform efforts and agency implementation as well as state contraceptive legislation.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries extensively
regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling,
advertising, promotion, distribution, marketing, import and export of pharmaceutical products such as those we are
developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with
subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial
resources.
FDA Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its
implementing regulations. FDA has also issued many guidance documents which outline its interpretation of its governing
laws and regulations. Over the last year, the number of guidance documents has increased, as FDA issued a number of
guidances, which are continually evolving, to assist companies navigating the COVID-19 pandemic. The process of
obtaining regulatory approvals and subsequent compliance with appropriate federal, state, local and foreign statutes and
regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S.
requirements at any time during the product development process, approval process or after approval, may subject an
applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending NDAs,
withdrawal of an approval, imposition of a clinical hold or termination, issuance of Warning, Untitled, or Cyber Letters,
requests for product recalls, product seizures or detention, total or partial suspension or restriction of production, marketing
or distribution, injunctions, fines, debarment, refusal to allow the import or export of product, adverse publicity,
modification of promotional materials or labeling, refusals of government contracts, exclusion from participation in federal
and state healthcare programs, restitution, disgorgement, imprisonment, consent decrees and corporate integrity
agreements, or civil or criminal penalties.
The process required by the FDA before a drug may be marketed in the United States generally involves the following:
● Completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s
Good Laboratory Practice, or GLP, regulations;
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● Submission to the FDA of an Investigational New Drug Application, or IND, which must become effective before
human clinical trials may begin;
● Approval by an independent Institutional Review Board, or IRB, for each clinical site before each trial may be
initiated;
● Performance of human clinical trials, including adequate and well-controlled clinical trials, in accordance with
Current Good Clinical Practices, or cGCPs to establish the safety and efficacy of the proposed drug product for
each indication;
● Submission to the FDA of an NDA;
● Satisfactory completion of an FDA advisory committee review, if applicable;
● Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is
produced to assess compliance with FDA requirements for product manufacturing and to assure that the facilities,
methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, as well as the
potential for completion of an FDA inspection of selected clinical sites to determine cGCP compliance; and
● FDA review and approval of the NDA.
Preclinical Studies and IND Submission
Preclinical studies include laboratory evaluation of drug substance chemistry, pharmacology, toxicity and drug product
formulation, as well as animal studies to assess potential safety and efficacy. An IND sponsor must submit the results of the
preclinical tests and preclinical literature, together with manufacturing information, analytical data and any available
clinical data or literature, among other things, to the FDA as part of an IND, unless the sponsor is relying on prior FDA
findings of safety or efficacy of the drug product, in which case, some of the above information may be omitted. Some
preclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after
receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical
trials and places the trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical
trials to commence.
Clinical Trials
Clinical trials involve the administration of an investigational new drug to human subjects under the supervision of
qualified investigators in accordance with cGCP requirements, which includes the requirements that all research subjects
provide their informed consent in writing for their participation in any clinical trial, and the review and approval of the
study by an IRB. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the
trial procedures, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated and a statistical
analysis plan. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as
part of the IND. In addition, an IRB for each clinical trial site participating in the clinical trial must review and approve the
plan for any clinical trial before it commences, and the IRB must continue to oversee the clinical trial while it is being
conducted, including any changes.
Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined. In
Phase 1, the drug is initially introduced into healthy human subjects or subjects with the target disease or condition and
tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an initial
indication of its effectiveness. In Phase 2, the drug typically is administered through controlled studies to a limited subject
population with the target disease or condition to identify possible adverse effects and safety risks, to preliminarily evaluate
the efficacy of the drug for specific targeted diseases or conditions and to determine dosage
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tolerance and optimal dosage. In Phase 3, the drug is administered to an expanded subject population, generally at
geographically dispersed clinical trial sites, in two adequate and well-controlled clinical trials to generate enough data to
statistically evaluate the efficacy and safety of the product candidate for approval, to establish the overall risk-benefit
profile of the product candidate and to provide adequate information for the labeling of the product candidate. In the case of
a 505(b)(2) NDA, which is a marketing application in which sponsors may rely on investigations that were not conducted
by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for
whom the investigations were conducted, some of the above-described studies and preclinical studies may not be required
or may be abbreviated. Bridging studies may be needed, however, to demonstrate the applicability of the studies that were
previously conducted by other sponsors to the drug that is the subject of the marketing application. In addition to the above
traditional kinds of data required for the approval of an NDA, the 21st Century Cures Act provides for FDA acceptance of
additional kinds of data such as such as patient experience data, real world evidence for already approved products, and, for
appropriate indications sought through supplemental marketing applications, data summaries.
In addition, under the Pediatric Research Equity Act, or PREA, an NDA or supplement to an NDA for a new active
ingredient, indication, dosage form, dosage regimen or route of administration must contain data that are adequate to assess
the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing
and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own
initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval
of the product for use in adults, or full or partial waivers from the pediatric data requirements. We have obtained a waiver
from the conduct of a PREA study.
The manufacture of investigational drugs for the conduct of human clinical trials is subject to FDA product
manufacturing requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States
are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational
drug products outside of the United States is subject to regulatory requirements of the receiving country as well as U.S.
export requirements under the FDCA.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and the IRB
and more frequently if serious adverse events occur. Information about certain clinical trials, including a description of the
study and study results, must be submitted within specific timeframes to the National Institutes of Health, or NIH, for
public dissemination on their ClinicalTrials.gov website. Failure to submit the required information to ClinicalTrials.gov
can result in monetary penalties. Marketing application applicants must also report certain investigator financial interests to
the FDA.
Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all.
Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a
finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or
terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s
requirements or if the drug has been associated with unexpected serious harm to subjects. Additionally, some clinical trials
are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety
monitoring board or committee. This group regularly reviews accumulated data and advises the study sponsor regarding the
continuing safety of trial subjects, potential trial subjects, and the continuing validity and scientific merit of the clinical
trial. We may also suspend or terminate a clinical trial based on evolving business objectives or competitive climate.
U.S. Marketing Approval
Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies,
including negative or ambiguous results as well as positive findings, together with detailed information relating to the
product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of
an NDA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA is
subject to a substantial application user fee. These user fees must be filed at the time of the first submission of the
application, even if the application is being submitted on a rolling basis. A user fee for the Twirla contraceptive patch
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was submitted with the original NDA. Application resubmissions by the same applicant do not require a new application
fee. Under the PDUFA guidelines that are currently in effect, the FDA has agreed to certain performance goals regarding
the timing of its review of an application. The FDA’s standard review goal is to act on 90% of all Non-New Molecular
Entity applications within ten months of FDA receipt of the application. These time periods may be extended by the FDA
should an applicant submit new information to the agency during the course of the FDA’s review of the marketing
application. The time period is also only a goal and may not be met by the FDA.
The FDA conducts a preliminary review of all original NDAs within the first 60 days after submission, before
accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may
request additional information rather than accept an NDA for filing. In this event, the application must be submitted again
with the additional information and is also subject to review before the FDA accepts it for filing.
Once the submission is accepted for filing, the FDA begins an in-depth substantive review to determine, among other
things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or
held, as well as the manufacturing processes and controls, meet standards designed to ensure the product’s continued safety,
quality and purity.
The FDA may refer a marketing application to an external advisory committee for questions pertaining to issues such
as clinical trial design, safety and efficacy, and public health questions. An advisory committee is a panel of independent
experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to
whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of
an advisory committee, but it typically follows such recommendations and considers such recommendations carefully when
making decisions.
Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured, referred to
as a Pre-Approval Inspection. The FDA will not approve an application unless it determines that the manufacturing
processes and facilities are in compliance with the FDA’s requirements for product manufacturing and adequate to assure
consistent production of the product within required specifications by the manufacturer and all of its subcontractors and
contract manufacturers. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial
sites to assure compliance with cGCP. Also, as part of its regulatory review, the FDA verifies the data contained in the
NDA.
The testing and approval process for a drug product requires substantial time, effort and financial resources, and may
take several years to complete. Data obtained from preclinical and clinical testing are not always conclusive and may be
susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant
approval of a marketing application on a timely basis, or at all.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and
inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in
some cases, a CRL. A CRL indicates that the review cycle of the application is complete, and the application is not ready
for approval. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval
of the drug product and may require additional clinical or preclinical testing, or other information in order for the FDA to
reconsider the application.
If an application receives a CRL, the applicant may resubmit the application, addressing all of the FDA-cited
deficiencies, withdraw the application, or request the opportunity for a hearing. If the applicant resubmits the application,
the application is subject to an initial FDA review. Within 30 days of receipt, the FDA will review a resubmission to
determine whether it constitutes a complete response that addresses all deficiencies identified in a complete response letter.
The agency then issues a letter to the applicant, stating whether the agency agrees that the resubmission is a complete
response. If the FDA does not agree that the resubmission is a complete response, the review clock will not start until a
complete response is received. If the agency agrees that the resubmission is a complete response, the FDA will classify the
resubmission as either Class 1 or 2. The FDA aims to review Class 1 resubmissions within two months of receipt or Class 2
resubmissions within six months of receipt. Class 1 resubmissions are resubmissions of an NDA following a complete
response letter that include minor updates or data reanalysis. Class 2 resubmissions include more
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complex or extensive updates to the NDA. As with the PDUFA timelines for original submissions, these are also subject to
extension if the sponsor submits new information. Resubmitted applications may also be subject to FDA inspection of
clinical and manufacturing sites, as well as review by FDA advisory committees. Following its review of a resubmitted
NDA, the FDA may issue an approval letter or another CRL.
Even if an applicant resubmits with the required additional information, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s
satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with
specific prescribing information for specific indications.
Even if the FDA approves a product candidate, it may limit the approved indications for use of the product candidate
and require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning.
The FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Moreover, the FDA
may require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess certain aspects of a
drug’s safety and efficacy after approval, require testing and surveillance programs to monitor the product after
commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms.
For example, the FDA may require a risk evaluation and mitigation strategy, or REMS, as a condition of approval or
following approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The REMS plan
could include medication guides, physician communication plans, assessment plans, and elements to assure safe use, such
as restricted distribution methods, patient registries or other risk minimization tools. A REMS could materially affect the
potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the
results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product,
such as adding new indications, manufacturing changes, and additional labeling claims, are subject to further testing
requirements, submission of a supplemental application, and FDA review and approval. Further, should new safety
information arise, additional testing, product labeling or FDA notification may be required.
Hatch-Waxman Act
Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request
marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of
investigations of safety and efficacy. A 505(b)(2) NDA is an application that contains full reports of investigations of safety
and efficacy but where at least some of the information required for approval comes from investigations that were not
conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person
by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the
FDA’s prior findings of safety and efficacy for an existing product, or published literature, in support of its application.
Section 505(j) establishes an abbreviated approval process for a generic version of an approved drug product through the
submission of an Abbreviated New Drug Application, or ANDA. An ANDA provides for marketing of a generic drug
product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance
characteristics and intended use, among other things, to a previously approved product. ANDAs are termed “abbreviated”
because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and
efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the
same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same
amount of active ingredients into a subject’s bloodstream in the same amount of time as the innovator drug and can often be
substituted by pharmacists under prescriptions written for the reference listed drug. In seeking approval for a drug through
an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s drug or a method of
using the drug. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the
FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations publication, commonly known as the Orange
Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an ANDA
or 505(b)(2) NDA. In an effort to clarify which patents must be listed in the Orange Book, in January 2021, Congress
passed the Orange Book Transparency Act of 2020, which largely codifies FDA’s existing practices into the FDCA.
Upon submission of an ANDA or a 505(b)(2) NDA, an applicant must certify to the FDA that: (1) no patent
information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has
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expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the
manufacture, use or sale of the drug product for which the application is submitted. Generally, the ANDA or 505(b)(2)
NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant
challenges a listed patent through the last type of certification, also known as a Paragraph IV certification. If the applicant
does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA or
505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.
If the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must
send notice of the Paragraph IV certification to the NDA and patent holders within a specified timeframe. The NDA and
patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. If
the Paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the
Paragraph IV certification, the FDA may not make an approval effective until the earlier of 30 months from the receipt of
the notice of the Paragraph IV certification, the expiration of the patent, when the infringement case concerning each such
patent was favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a
court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA
applicant files a Paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month
stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of an ANDA
or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant
makes and the reference drug sponsor’s decision to initiate patent litigation.
The Hatch-Waxman Act establishes periods of regulatory exclusivity for certain approved drug products, during which
the FDA cannot approve (or in some cases accept) an ANDA or 505(b)(2) application that relies on the branded reference
drug. For example, the holder of an NDA, including a 505(b)(2) NDA, may obtain five years of exclusivity upon approval
of a new drug containing new chemical entities, or NCEs, that have not been previously approved by the FDA. A drug is a
new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which
is the molecule or ion responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA
may not accept for review an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously
approved active moiety. However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a
certification of patent invalidity or non-infringement.
The Hatch-Waxman Act also provides three years of marketing exclusivity to the holder of an NDA (including a
505(b)(2) NDA) for a particular condition of approval, or change to a marketed product, such as a new formulation for a
previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was
essential to the approval of the application and was conducted/sponsored by the applicant. This three-year exclusivity
period protects against the FDA making an ANDA and 505(b)(2) NDA approval effective for the condition of the new
drug’s approval. As a general matter, the three-year exclusivity does not prohibit the FDA from approving ANDAs or
505(b)(2) NDAs for generic versions of the original, unmodified drug product. Five-year and three-year exclusivity will not
delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to
conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials
necessary to demonstrate safety and efficacy.
Our NDA for Twirla was submitted under Section 505(b)(2), and we expect that some of our other drug candidates will
utilize the Section 505(b)(2) regulatory pathway. Even though several of our drug products utilize active drug ingredients
that are commercially marketed in the United States in other dosage forms, we need to establish the safety and efficacy of
those active ingredients in the formulation and dosage forms that we are developing. All approved products, both innovator
and generic, are listed in the FDA’s Orange Book.
Recently, Congress, the Trump administration, and administrative agencies took certain measures to increase drug
competition and thus, decrease drug prices. By example, in 2019, the FDA introduced a proposed rule and in 2020 the FDA
finalized guidance to facilitate drug importation. Congress also passed a bill requiring sponsors of NDA approved products
to provide sufficient quantities of drug product on commercially reasonable market based terms to entities developing
generic and similar drug products. This bill also included provisions on shared and individual REMS for generic drug
products.
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Combination Drug/Device Regulation
Twirla and our potential product candidates are considered to be drug-device combination products by the FDA. While
our potential product candidates, as a whole, are subject to the NDA approval process, drug-device combination products
require compliance with additional FDA regulations. For instance, drug-device combination products must comply with the
drug cGMPs, as well as some of the device Quality System Regulations, or QSRs. These dual requirements will require
additional effort, FDA reporting, and monetary expenditure to ensure that Twirla and our potential product candidates
comply with all applicable regulatory requirements.
U.S. Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by
the FDA, including, among other things, requirements relating to manufacturing recordkeeping, periodic reporting, product
sampling and distribution, advertising and promotion, reporting of adverse experiences with the product and drug
shortages, and compliance with any post-approval requirements imposed as a condition of approval, such as Phase 4
clinical trials, REMS and surveillance to assess safety and efficacy after commercialization. After approval, most changes
to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and
approval. There are also continuing, annual prescription drug program user fee requirements for any approved products. In
addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required
to register their establishments with the FDA and state agencies, and list drugs manufactured at their facilities with the
FDA. Recently, the information that must be submitted to FDA regarding manufactured products was expanded through
the Coronavirus Aid, Relief, and Economic Security, or CARES, Act to include the volume of drugs produced during the
prior year.
Drug sponsors and manufacturers are subject to periodic announced and unannounced inspections by the FDA and
these state agencies for compliance with FDA and state requirements for product manufacturing and other requirements.
Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being
implemented, or FDA notification. FDA regulations also require investigation and correction of any deviations from FDA
requirements for product manufacturing and impose reporting and documentation requirements upon the sponsor and any
third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time,
money and effort in the area of production and quality control to maintain FDA requirements for product manufacturing
compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory
revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to
assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
consequences include, among other things:
● Restrictions on the marketing, distribution or manufacturing of the product, complete withdrawal of the product
from the market or requests for product recalls;
● Fines, or Untitled, Cyber or Warning Letters or holds on or termination of post-approval clinical trials;
● Refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of
product license approvals;
● Product seizure or detention, or refusal to permit the import or export of products;
● Injunctions or the imposition of civil or criminal penalties including disgorgement, restitution, fines and
imprisonment;
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● Consent decrees, corporate integrity agreements or exclusion from federal healthcare programs;
● Debarment;
● Mandated modification of promotional materials and labeling and the issuance of corrective information; or
● The FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or
other communications containing warnings or other safety information about the product.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.
Although physicians, in the practice of medicine, may prescribe approved drugs for unapproved indications,
pharmaceutical companies and third parties engaged on their behalf to promote their drug products are prohibited from
marketing or promoting their drug products for uses outside the approved label, a practice known as off-label promotion.
The FDA and other agencies enforce the laws and regulations prohibiting the promotion of off-label uses, and a company
that is found to have improperly promoted off-label uses may be subject to significant liability, including criminal and civil
penalties under the FDCA and False Claims Act, exclusion from participation in federal healthcare programs, mandatory
compliance programs under corporate integrity agreements, debarment and refusal of government contracts.
In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription
Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level and
reporting regarding drug samples. Both the PDMA and state laws limit the distribution of prescription pharmaceutical
product samples and impose requirements to ensure accountability in distribution.
Moreover, the Drug Quality and Security Act imposes obligations on manufacturers of pharmaceutical products related
to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain
information regarding the drug product to individuals and entities to which product ownership is transferred, are required to
label drug product with a product identifier and are required to keep certain records regarding the drug product. The
transfer of information to subsequent product owners by manufacturers is also required to be done electronically.
Manufacturers must also verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under
this legislation, manufactures have drug product investigation, quarantine, disposition, and FDA and trading partner
notification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as
products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be
reasonably likely to result in serious health consequences or death. Other persons and entities within the drug supply chain
are also subject to Drug Quality and Security Act requirements.
FDA’s requirements with respect to drug manufacturing, marketing and distribution are continually evolving. FDA
and Congress may pass new laws, regulations, and policies, as was done in March 2020 with the Coronavirus Aid, Relief,
and Economic Security Act, or CARES Act. The CARES Act included various provisions regarding FDA drug shortage
reporting requirements, as well as provisions regarding supply chain security, such as risk management plan requirements,
and the promotion of supply chain redundancy and domestic manufacturing. This and any future changes in law may
require that we change our internal processes and procedures to ensure continued compliance.
U.S. Fraud and Abuse, Data Privacy and Security and Transparency Laws and Regulations
In addition to FDA restrictions on marketing of pharmaceutical products, federal and state fraud and abuse laws restrict
business practices in the biopharmaceutical industry. These laws include, among other things, anti-kickback, physician
payment transparency and false claims laws and regulations as well as data privacy and security laws and regulations.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully
offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to
induce or in return for purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any
item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term “remuneration” has
been interpreted broadly to include anything of value. Additionally, the intent standard under the
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Anti-Kickback Statute and criminal healthcare fraud statutes was also amended by the ACA to a stricter standard such that
a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have
committed a violation. In addition, the ACA provided that the government may assert that a claim including items or
services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes
of the federal civil False Claims Act. The Anti-Kickback Statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a
number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. Practices
that involve remuneration that may be alleged to be intended to induce prescribing, purchases, or recommendations may be
subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a
statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute.
Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its
facts and circumstances. On December 2, 2020, the U.S. Department of Health and Human Services Office of Inspector
General, or OIG, published further modifications to the federal Anti-Kickback Statute. Under the final rule, OIG removed
safe harbor protections under the Anti-Kickback Statute for rebates paid from drug manufacturers to Medicare Part D
prescription drug plan sponsors or their pharmacy benefit managers and added safe harbor protections under the Anti-
Kickback Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others.
Pursuant to an order entered by the U.S. District Court for the District of Columbia, the portion of the rule eliminating safe
harbor protection for certain rebates related to the sale or purchase of a pharmaceutical product from a manufacturer to a
plan sponsor under Medicare Part D has been delayed to January 1, 2023. Implementation of the this change and new safe
harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager
service fees are currently under review by the Biden administration and may be amended or repealed.
The federal civil False Claims Act prohibits, among other things, any person or entity from knowingly presenting, or
causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal government or knowingly
making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the
federal government. A claim includes “any request or demand” for money or property presented to the U.S. government.
Claims may be pursued by whistleblowers through qui tam actions, even if the government declines to intervene. Intent to
deceive is not necessary to establish civil liability, which may be predicated on reckless disregard for the truth. The federal
government continues to use the False Claims Act, and the accompanying threat of significant liability, in investigations
against pharmaceutical and health care companies. These investigations have involved, for example, allegations of
providing free product to customers with the expectation that the customers would bill federal programs for the free
product, as well as the promotion of products for unapproved uses and reporting false pricing information. Potential
liability under the federal False Claims Act includes treble damages and significant per claim penalties. The False Claims
Act has been used to assert liability on the basis of kickbacks and other improper referrals, improperly reported government
pricing metrics such as Best Price or Average Manufacturer Price, improper promotion of off-label uses not expressly
approved by the FDA in a drug’s label, and allegations as to misrepresentations with respect to the services rendered. The
criminal federal False Claims Act imposes criminal fines or imprisonment against individuals or entities who make or
present a claim to the government knowing such claim to be false fictitious or fraudulent. Additionally, the civil monetary
penalties statute, which, among other things, imposes fines against any person who is determined to have presented, or
caused to be presented, claims to a federal healthcare program that the person knows, or should know, is for an item or
service that was not provided as claimed or is false or fraudulent.
The Affordable Care Act authorized the imposition of civil monetary penalties on manufactures participating in the
340B program for failure to charge the statutory ceiling price, and required HHS to promulgate regulations establishing the
standards for implementing this Civil Monetary Penalty, or CMP, authority. CMS’ final CMP rule went into effect
January 1, 2019.
The Affordable Care Act included a provision requiring certain providers and suppliers of items and services to
Federal Health Care Programs to report and return overpayments within sixty days after they are “identified” (the
“Overpayment Statute”). The law prohibits a recipient of a payment from the government from keeping an overpayment
when the government mistakenly pays more than the amount to which the recipient is entitled even if the overpayment is
not caused by any conduct of the recipient. In 2014 and 2016, the CMS released regulatory guidance (in the form of final
rules) to Medicare providers, suppliers and managed care and prescription drug plans regarding how to comply with the
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Overpayment Statute. Although these Medicare providers, suppliers and plans have faced federal False Claims Act liability
since 2010 for failures to comply with the Overpayment Statute, these final rules interpreting the Overpayment Statute
provide guidance regarding how to comply with applicable obligations, and guidance to government regulators and
enforcement authorities regarding monitoring and prosecuting suspected violations. These final rules are not directly
applicable to manufacturers, except if a manufacturer is a direct recipient of payment by an agency such as a research grant
but may impact their customers and potential customers who are Medicare providers, suppliers, and plans.
The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created federal criminal
statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by
means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the
custody or control of, any healthcare benefit program, including private third party payors and knowingly and willfully
falsifying, concealing or covering up by trick, scheme or device a material fact or making any materially false, fictitious or
fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services relating to
healthcare matters. Also, many states have similar fraud and abuse statutes or regulations that apply to items and services
reimbursed under Medicaid and other state programs, or, in several states, that apply regardless of the payor.
In addition, we may be subject to data privacy and security regulation by both the federal government and the states in
which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical
Health Act, or HITECH, and their respective implementing regulations, including the final omnibus rule published on
January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually
identifiable health information, known as protected health information. Among other things, HITECH makes security
standards and certain privacy standards directly applicable to business associates, defined as persons or organizations of
covered entities, other than members of the covered entity’s workforce, that create, receive, maintain or transmit protected
health information on behalf of a covered entity for a function or activity regulated by HIPAA. HITECH also strengthened
the civil and criminal penalties that may be imposed against covered entities, business associates and individuals, and gave
state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal
HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, other federal and
state laws, such as the California Consumer Privacy Act, may regulate the privacy and security of information that we
maintain, many of which may differ from each other in significant ways and may not be preempted by HIPAA. Further, a
new California privacy law, the California Privacy Rights Act, or CPRA, was passed by California voters on November 3,
2020. The CPRA will create additional obligations with respect to processing and storing personal information that are
scheduled to take effect on January 1, 2023 (with certain provisions having retroactive effect to January 1, 2022). Other
federal and state laws may govern the privacy and security of health information in certain circumstances, many of which
differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. For
instance, the California Consumer Privacy Act may govern the privacy and security of health and other information in
certain circumstances, many of which differ from each other in significant ways and may not be preempted by HIPAA, thus
complicating compliance efforts. Other states, such as Virginia, also are enacting state specific privacy laws.
Additionally, federal physician payment transparency laws, including the federal Physician Payment Sunshine Act
created under Section 6002 of the ACA and its implementing regulations, require that manufacturers of drugs for which
payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, report
annually to the government information related to payments or other “transfers of value” made or distributed to or at the
request of covered recipients, such as, but not limited to, physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, and certified registered
nurse anesthetists and teaching hospitals, as well as ownership and investment interests held by physicians and their
immediate family.Manufacturers must submit reports by the 90th day of each calendar year. Disclosure of such information
is made on a publicly available website.
There are also an increasing number of analogous state laws that regulate price increases, require manufacturers to file
reports with states on pricing and marketing information, and to track and report gifts, compensation, other remuneration
and items of value provided to healthcare professionals and healthcare entities. Many of these laws contain ambiguities as
to what is required in order to comply with such laws. For example, several states have enacted legislation requiring
pharmaceutical companies to, among other things, establish and implement commercial compliance programs,
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file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other
activities, or register their sales representatives. Certain state laws also regulate manufacturers’ use of prescriber-
identifiable data. These laws may affect our future sales, marketing and other promotional activities by imposing
administrative and compliance burdens. In addition, given the lack of clarity with respect to these laws and their
implementation, our reporting actions once we commercialize could be subject to the penalty provisions of the pertinent
state and federal authorities.
If our operations are found to be in violation of any of the laws or regulations described above or any other laws that
apply to us, we may be subject to a variety of penalties, depending upon the law found to have been violated, potentially
including criminal and significant civil monetary penalties, damages, fines, imprisonment, exclusion from participation in
government healthcare programs, corporate integrity agreements, refusal of government contracts, contract debarment and
the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business
and our results of operations. To the extent that any of our products are sold in a foreign country, we may be subject to
similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including
safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of
payments or transfers of value to healthcare professionals.
Coverage and Reimbursement Generally
The commercial success of Twirla and our other potential product candidates and our ability to commercialize any
approved product candidates successfully will depend in part on the extent to which governmental payor programs at the
federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide
coverage for and establish adequate coverage of and reimbursement levels for our potential product candidates.
Government authorities, private health insurers and other organizations generally decide which drugs they will pay for and
establish reimbursement levels for healthcare. In particular, in the United States, private health insurers and other third-
party payors often provide reimbursement for products and services based on the level at which the government provides
reimbursement through the Medicare or Medicaid programs for such products and services. In the United States, the E.U.
and other potentially significant markets for our potential product candidates, government authorities and third-party payors
are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and
innovative products and therapies, which often has resulted in average selling prices lower than they would otherwise be.
Further, the increased emphasis on managed healthcare in the United States and on country and regional pricing and
reimbursement controls in the E.U. will put additional pressure on product pricing, reimbursement and utilization, which
may adversely affect our future product sales and results of operations. These pressures can arise from rules and practices
of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and
healthcare reform, pharmaceutical coverage and reimbursement policies and pricing in general. Patients who are prescribed
treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to
reimburse all or part of the associated healthcare costs. Sales of our potential product candidates will therefore depend
substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by health
maintenance organizations, managed care, pharmacy benefit and similar healthcare management organizations, or
reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers and
other third-party payors.
Third-party payors are increasingly imposing additional requirements and restrictions on coverage and limiting
reimbursement levels for medical products, including pharmaceuticals. For example, federal and state governments
reimburse covered prescription drugs at varying rates generally below average wholesale price. These restrictions and
limitations influence the purchase of healthcare services and products. Third-party payors are developing increasingly
sophisticated methods of controlling healthcare costs. Third-party payors may limit coverage to specific drug products on
an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication.
Certain third-party payors routinely impose additional requirements before approving reimbursement of a prescription,
including prior authorization and the requirement to try another therapy first. Third-party payors are increasingly
challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in
addition to their safety and efficacy. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate
the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain FDA approvals. Our
potential product candidates may not be considered medically necessary or cost-effective.
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Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate
will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient
to realize an appropriate return on our investment in drug development for a product candidate. Legislative proposals to
reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our
potential product candidates, exclusion of our potential product candidates from coverage or the requirement for payment
of increased manufacturer rebates on units dispensed. The cost containment measures that healthcare payors and providers
are instituting and any healthcare reform could significantly reduce our revenues from the sale of any approved product
candidates. We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate
reimbursement for our potential product candidates in whole or in part.
Healthcare Reform
Legislative proposals to reform healthcare or reduce costs under government healthcare programs may result in lower
reimbursement for our potential product candidates or exclusion of our potential product candidates from coverage. There
have been a number of legislative and regulatory changes to the healthcare system that could affect our ability to profitably
sell our potential product candidates, if approved. Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,
improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of
these efforts and has been significantly affected by major legislative initiatives.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain
aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various
portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court; the
former Trump Administration issued various Executive Orders eliminating cost sharing subsidies and various provisions
that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices; and Congress has introduced several
pieces of legislation aimed at significantly revising or repealing the ACA. The United States Supreme Court is expected to
rule on a legal challenge to the constitutionality of the ACA in early 2021. The implementation of the ACA is ongoing, the
law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program,
and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to
continue, with unpredictable and uncertain results.
In addition, in August 2011, President Obama signed into law the Budget Control Act of 2011, as amended, which,
among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending
reductions to Congress. The Joint Select Committee on Deficit Reduction did not achieve its targeted deficit reduction of at
least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reductions to several government
programs. These reductions include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which
went into effect on April 1, 2013 and, as amended, will stay in effect through 2030. Pursuant to the Coronavirus Aid,
Relief, and Economic Security Act, also known as the CARES Act, as well as subsequent legislation, these reductions have
been suspended from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Proposed legislation, if
passed, would extend this suspension until the end of the pandemic. These and other healthcare reform initiatives may
result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our
financial operations. We expect that additional state and federal healthcare reform measures will be adopted in the future,
any of which could limit the amounts that federal and state governments will pay for healthcare products and services,
which could further limit the prices we are able to charge, or the amounts of reimbursement available, for our potential
product candidates if they are approved.
On January 20, 2017, the then-new administration signed an Executive Order directing federal agencies with
authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any
provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health
insurers, or manufacturers of pharmaceuticals or medical devices among others. Additionally, in October 2017, the
Department of Health and Human Services, jointly with the Department of Labor and the Treasury, issued two interim rules
outlining exemption processes for employers not wanting to offer contraceptive coverage based on their religious beliefs or
sincerely held moral convictions. In July 2020, the Supreme Court reversed lower court injunctions
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preventing implementation of these rules. Congress also could consider subsequent legislation to repeal and replace
elements of the ACA that are repealed. Therefore, it is difficult to determine the full effect of the ACA or any other
healthcare reform efforts on our business.
Congress has indicated that it will continue to seek new legislative and/or administrative measures to control drug
costs. The FDA also released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing
guidance for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS
finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan
sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.
The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain
fixed fee arrangements between pharmacy benefit managers and manufacturers. Although a number of these, and other
proposed measures may require authorization through additional legislation to become effective, and the Biden
administration may reverse or otherwise change these measures, Congress has indicated that it will continue to seek new
legislative measures to control drug costs.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage
importation from other countries and bulk purchasing.
The Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or
authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or
candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business
in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to
comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect
all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of
internal accounting controls for international operations. Activities that violate the FCPA, even if they occur wholly outside
the United States, can result in criminal and civil fines, imprisonment, disgorgement, oversight and debarment from
government contracts.
Foreign Regulation
We currently have no plans to seek approval for Twirla outside of the United States. In order to market any product
outside of the United States, we would need to comply with numerous and varying regulatory requirements of other
countries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization,
commercial sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to
obtain the necessary approvals by the comparable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from country to country and can
involve additional product testing and additional administrative review periods. The time required to obtain approval in
other countries might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one
country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one
country may negatively impact the regulatory process in others.
Research and Development
Conducting research and development is central to our business model. We have invested and expect to continue to
invest significant time and capital in our research and development operations. Our research and development expenses
were $13.5 million, $9.9 million, and $9.8 million for the years ended December 31, 2020, 2019, and 2018, respectively. In
2021, we expect to continue to incur research and development expenses as we evaluate the advancement of our existing
pipeline and its possible expansion.
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Intellectual Property
We strive to protect the proprietary technologies that we believe are important to our business, including seeking and
maintaining patent protection intended to cover our Skinfusion® technology, its methods of use, related technologies and
other inventions that are important to our business. As more fully described below, our patents and patent applications are
directed to our Skinfusion technology or aspects thereof including certain transdermal delivery systems having an active
adhesive matrix and methods of using such transdermal delivery systems for controlling fertility. We also rely on
manufacturing trade secrets and careful monitoring of our proprietary information to protect aspects of our business that are
not amenable to, or that we do not consider appropriate for, patent protection.
Our success will depend significantly on our ability to obtain new patents and maintain existing patents and other
proprietary protection for commercially important technology, inventions and know-how related to our business, defend
and enforce our patents, preserve the confidentiality of our trade secrets and operate without infringing valid and
enforceable patents and other proprietary rights of third parties.
A third party may hold intellectual property, including patent rights, which are important or necessary to the
development of our potential product candidates. It may be necessary for us to use the patented or proprietary technology
of third parties to commercialize our potential product candidates, in which case we would be required to obtain a license
from these third parties on commercially reasonable terms. If we were not able to obtain a license on commercially
reasonable terms, our business could be harmed, possibly materially.
We plan to continue to expand our intellectual property estate by filing patent applications directed to novel and
nonobvious transdermal contraceptive products. The active pharmaceutical ingredients, or API, in our potential product
candidates are generic and therefore our patents do not include claims directed solely to the API. We anticipate seeking
additional patent protection in the United States and internationally for additional transdermal delivery systems and their
methods of use.
The patent positions of pharmaceutical companies like us are generally uncertain and involve complex legal, scientific
and factual questions. In addition, the coverage claimed in a patent application can be significantly reduced before the
patent is issued, and the patent’s scope can be modified after issuance. Consequently, we do not know whether any of our
potential product candidates will remain protected by enforceable and valid patents. We cannot predict whether the patent
applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued
patents will provide sufficient proprietary protection from competitors. Any patents that we hold may be challenged,
circumvented or invalidated by third parties.
Because patent applications in the United States and certain other jurisdictions generally are maintained in secrecy for
18 months, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we
cannot be certain of our entitlement to patent rights in the inventions covered in our issued patents and pending patent
applications. Moreover, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark
Office, USPTO, to determine priority of invention, or in post-grant challenge proceedings in the USPTO or foreign patent
offices such as oppositions, reexamination, inter-partes review, post grant review, or a derivation proceeding, that challenge
our entitlement to an invention or the patentability of one or more claims in our patent applications or issued patents. Such
proceedings could result in substantial cost, even if the eventual outcome is favorable to us.
More specifically, Twirla® is a transdermal contraceptive hormone delivery system. The system is a patch for
application to the skin and contains two API, the hormones LNG, which is a synthetic progestin, and EE, a synthetic
estrogen. The API are formulated with a combination of skin penetration enhancers, which promote penetration through the
dermis and into the bloodstream, such that effective blood levels of the active agents are achieved to suppress ovulation and
thereby prevent pregnancy. One of our other potential product candidates, AG890, is similar to Twirla, except that it
contains only a single API, LNG.
In both our Twirla product candidate line and in AG890, the active adhesive system consists of the active ingredients
in a polyacrylate adhesive polymer matrix comprising the permeation enhancers dimethylsulfoxide, ethyl
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lactate, capric acid and lauryl lactate. The active blend is coated onto a release liner, and a backing layer is added on top of
the active blend. The peripheral adhesive system, also called the overlay, comprising three layers is added onto the backing
layer. The overlay comprises a polyisobutylene adhesive layer, an acrylic adhesive layer, and an overlay covering. The
overlay covering is a commercially available silk-like polyester fabric. The adhesive components of the overlay, in addition
to their adhesive function, create an in situ seal with the disposable release liner, trapping evaporable solvents in the active
blend, thereby extending the usable shelf life of the product candidate and contributing to the comfort and effectiveness of
the transdermal system during use. Prior to use of any of our potential product candidates, the release liner is removed by
the user and discarded. The patch is then applied to the skin.
Eight U.S. patents, issuing from two patent families, have been or are being submitted to the FDA for listing in the
Orange Book upon approval of Twirla. These patents include claims directed to transdermal delivery systems having an
active adhesive matrix and claims directed to methods of controlling fertility by applying such transdermal delivery
systems, and in all cases including a skin permeation enhancer. One of our eight issued U.S. patents expired November 22,
2020. Four will expire March 14, 2021. Two will expire July 10, 2028. The eighth will expire August 26, 2028.
U.S. Patent No. 7,045,145 is directed to the adhesive matrix of the transdermal delivery system used in Twirla and
expires in March 2021; product-by-process claims cover patches manufactured by drying wet formulations of the active
adhesive matrix. U.S. Patent No. 7,384,650, U.S. Patent No. 8,221,784, and U.S. Patent No. 8,221,785 are all directed to
the dry final product formulation of the transdermal delivery system used in Twirla and expire in March 2021. U.S. Patent
No. 8,221,784 covers both Twirla and AG890. Foreign counterparts to these patents have been granted in China, Hong
Kong, India, Israel, and Mexico. U.S. Patent No. 8,883,196 is directed to a method of controlling fertility by applying
Twirla or AG890 once each week for three weeks followed by a one-week rest interval, or in an extended regimen without
a rest interval for a selected number of weeks and expired November 22, 2020.
U.S. Patent Nos. 8,246,978, 8,747,888, and 9,050,348 are directed to structural features of the transdermal delivery
system used in Twirla and AG890 patch design for transdermal delivery of hormones or of other drugs. As such, these
patents protect a platform technology for delivery of LNG, EE, other hormones, and other drugs. These patents expire in
July and August 2028. Foreign counterparts have been granted in Australia, Brazil, Canada, Eurasia, Switzerland,
Germany, Spain, France, United Kingdom, Hong Kong, Ireland, India, Italy, Japan, Netherlands, New Zealand and Japan.
U.S. Patent Nos. 9,198,876, 9,192,614, 9,198,919 and 9,198,920 and related patents and patent applications are
directed to various novel dosing regimens, each of which employs transdermal delivery of contraceptive doses of EE and
LNG during a “treatment interval” and transdermal delivery of low dose EE and low dose LNG during a “withdrawal
interval”. Foreign counterparts are granted in Europe and Canada. We expect these patents will be relevant to two of the
products in our pipeline, AG200-SP and AG200-ER, as well as other new potential regimens. These patents expire in
October 2029
U.S. Patent No. 9,364,487 is directed to a composition and device for transdermal delivery of LNG for P-only therapy.
The composition contains an anti-oxidant to protect the progestin against oxidative degradation caused by other
components of the composition. Foreign counterparts are pending or granted in Canada, Europe, Hong Kong, India, Japan
and Mexico. We expect this patent to be relevant to at least one product in our pipeline, AG890. These patents expire in
November 2032.
We have patent applications pending in the United States and certain foreign jurisdictions directed to novel
formulations and methods designed to improve efficacy and modulate side effects of administration, as well as to provide
personalized dosing based on body weight or BMI. We also have a pending United States patent application directed to
packaging for transdermal systems containing certain skin permeation enhancers.
Regulatory Exclusivity
Our NDA for Twirla was submitted under Section 505(b)(2) of the FDCA. Even though Twirla utilizes API that were
previously approved in the United States, Twirla utilizes LNG in a new dosage form, specifically a transdermal
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patch, and we provided new clinical data essential to approval in our NDA to establish the safety and efficacy of Twirla.
Therefore, we received three years of U.S. marketing exclusivity for Twirla under the Hatch Waxman Act. The exclusivity
prohibits the FDA from approving ANDAs and 505(b)(2) NDAs for the conditions of the Twirla approval. We will
consider whether we are going to pursue patent term restoration, however, we do not expect to receive patent term
restoration because, as explained above, Twirla is not the first approval of the API.
Employees
As of December 31, 2020, we had 28 full time employees, including nine in research and development and nineteen in
selling, general and administrative roles. None of our employees are represented by a labor union or subject to a collective
bargaining agreement. We have not experienced a work stoppage and consider our relations with our employees to be good.
Corporate Information
We were incorporated in Delaware in December 1997. Our offices are located at 101 Poor Farm Road, Princeton, New
Jersey 08540, and our telephone number is (609) 683-1880.
Available Information
Our corporate website address is www.agiletherapeutics.com. Information contained on or accessible through our
website is not a part of this Annual Report on Form 10-K, and the inclusion of our website address in this annual report is
an inactive textual reference only. We make our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and all amendments to those reports available free of charge on our website as soon as reasonably
practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission, or SEC.
Since the aggregate market value of our voting stock held by non-affiliates was less than $250 million on June 30,
2020, we are a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act. As a “smaller reporting
company” with less than $100 million in annual revenues we are a non-accelerated filer under the rules of the SEC, and an
auditor attestation report over Internal Controls over Financial Reporting does not need to be included in the 2020 Form 10-
K.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth
below as well as the other information contained in this Annual Report on Form 10-K and in our other public filings in
evaluating our business. Any of the following risks could materially and adversely affect our business, financial condition
or results of operations. The risks described below are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently view to be immaterial may also materially adversely affect our business,
financial condition or results of operations. In these circumstances, the market price of our common stock would likely
decline.
Risks Related to the Commercialization of Twirla
We are significantly dependent on the commercial success of Twirla, our only approved product. If we are unable to
successfully commercialize Twirla, our business, financial condition, results of operations, and prospects and value of
our common stock will be materially adversely affected.
Twirla is the first and only product that we are commercializing. The rest of our pipeline of potential product
candidates are in earlier stages of clinical development and will require additional clinical studies and product development
and funding in order to advance towards commercialization, which could take considerable time. Our ability to generate
revenues and become profitable will depend in large part on the commercial success of Twirla. Potential prescribers of
Twirla include physicians, nurse practitioners, or NPs, physician’s assistants, or PAs, and
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pharmacists. Registered Pharmacists are authorized to prescribe contraceptives in some states, and other states have
pending legislation that would allow pharmacists to prescribe contraceptives. If Twirla does not gain an adequate level of
acceptance among prescribers, patients and third party payors, we may not generate significant product revenues or become
profitable. Market acceptance of Twirla by prescribers, patients and third-party payors will depend on a number of factors,
some of which are beyond our control, including:
● Availability of adequate coverage or reimbursement of Twirla by third parties, such as insurance companies and
other payors, and by government healthcare programs, including Medicare, Medicaid and state health insurance
exchanges;
● Efficacy, safety and other potential advantages of Twirla in relation to alternative treatments;
● Relative convenience and ease of administration of Twirla;
● Prevalence and severity of adverse events associated with Twirla;
● Cost of Twirla in relation to alternative treatments, including generic products;
● Extent and strength of our third-party manufacturer and supplier support and ability to meet our market demand;
● Extent and strength of our marketing and distribution support;
● Limitations, warnings, or contraindications contained in Twirla’s FDA approved labeling, including safety
warnings and precautions, contraindications and limitations on the use of Twirla for women based on BMI. By
example, Twirla’s label includes the class-wide boxed warning, contraindications, and warnings and precautions
applicable to all combined hormonal contraceptives, or CHCs. Twirla also includes a boxed warning that Twirla is
contraindicated in women with a BMI ≥ 30 kg/m2, and that compared to women with a lower BMI, women with a
BMI ≥ 30 kg/m2 had reduced effectiveness and may have a higher risk for venous thromboembolic events.
Twirla’s label also contains a limitation of use to consider Twirla’s reduced effectiveness in women with a BMI of
≥25 to ≤30 kg/m2 before prescribing.
For example, prescribers and patients may not be immediately receptive to a transdermal contraceptive system, as
opposed to a pill or any other method, and may be slow to adopt it as an accepted treatment for the prevention of
pregnancy. In addition, even though we believe Twirla has advantages over other treatment options, because no adequate
head-to-head trials comparing the safety and efficacy of Twirla to the competing approved patch or other contraceptive
products have been conducted, we cannot make claims that Twirla is safer or more effective than the currently approved
patch product, or other contraceptive products, without conducting a supportive head-to-head postmarketing study.
Moreover, we will not be able to make any other Twirla marketing or promotional claims to the extent that they are
inconsistent with the Twirla FDA-approved label or are not otherwise supported. The availability of numerous inexpensive
generic forms of contraceptive products may also limit acceptance of Twirla among prescribers, patients and third-party
payors. If Twirla does not achieve an adequate level of acceptance among prescribers, patients and third-party payors, we
may not generate significant product revenues or become profitable, and the value of our common stock may suffer.
We may not be able to successfully commercialize Twirla, and the revenue that we generate from its sales, if any, may be
limited.
The commercial success of Twirla will depend upon the contraceptive market landscape as well as acceptance and
uptake of Twirla by prescribers, patients and third-party payors.
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Risks related to the contraceptive market landscape include:
● The prescription contraceptive market could experience a decrease in growth or negative growth if fewer women
choose to use hormonal contraception;
● Price pressures from third party payors, including managed care organizations and government-sponsored health
systems, could limit our revenue;
● The proportion of the contraceptive market comprised of generic products could continue to increase, making the
introduction of a branded contraceptive difficult and expensive;
● The perceived safety of hormonal contraceptives could be negatively affected by media reports of adverse effects
and advertisements for mass tort lawsuits due to adverse effects;
● Competition in the contraceptive market could increase, with the introduction of new contraceptives, including the
potential of a new generic or branded competitive contraceptive patch;
● Competition from generic contraceptive products could increase as additional generic contraceptives receive FDA
approval;
● Healthcare reform activities, including, without limitation, the repeal, reform or replacement of the Patient
Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010 or,
collectively, the Affordable Care Act, or ACA, and its effects on pharmaceutical coverage, reimbursement and
pricing, could limit our revenue;
● Access to the prescriber universe, particularly obstetrics and gynecology physicians, could be limited, decreasing
our ability to promote Twirla efficiently; and
● Our ability to access pharmacists in states where they are authorized by law to prescribe contraceptives could be
limited, decreasing our ability to promote Twirla.
The degree of acceptance and uptake of Twirla by prescribers, patients and third-party payors will depend upon a
number of factors, including:
● The level of contraceptive effectiveness of Twirla demonstrated in our clinical trials;
● The incidence and severity of adverse effects associated with Twirla;
● Limitations, warnings, or contraindications contained in Twirla’s FDA approved labeling, including safety
warnings and precautions, contraindications, and limitations on the use of Twirla for women based on BMI;
● Acceptability to patients of the appearance and feel of Twirla;
● Willingness of prescribers to prescribe a contraceptive patch based on the labeling and prior experience with the
generic contraceptive patch already on the market;
● Willingness of prescribers to prescribe a contraceptive patch in light of safety issues and restrictive labeling of the
generic contraceptive patch already on the market;
● The cost of Twirla to the patient, as compared to other contraceptive products and methods;
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● Our ability to obtain and maintain sufficient third-party coverage or reimbursement for Twirla from private health
insurers, government healthcare programs (including Medicare, Medicaid and 340B Clinics) and other third-party
payors; and
● The effectiveness of our or any future collaborators’ sales and marketing strategies.
In addition, we may face additional generic or other drug product competition sooner than we anticipate for Twirla or
our potential product candidates, which would potentially limit their commercial success. For example, on February 26,
2021, Amneal Pharmaceuticals, Inc. announced that it had received approval by the FDA for Zafemy, a generic version of
Ortho Evra, a combined contraceptive patch previously marketed by Johnson & Johnson. Zafemy represents the second
generic version of Orth Evra after Xulan, which is marketed by Mylan. Because Zafemy was just approved, it is not
possible to predict what the effect of its commercial availability will be on our efforst to market Twirla. Upon approval by
the FDA, we received three years of FDA marketing exclusivity for Twirla. The FDCA provides a period of three years of
marketing exclusivity for an NDA, Section 505(b)(2) NDA or supplement to an existing NDA for a drug product that
contains a previously approved active moiety, if new clinical investigations, other than bioavailability or bioequivalence
studies, were conducted or sponsored by the applicant and are determined by the FDA to be essential to the approval of the
application. This three-year marketing exclusivity, however, does not protect drug products from all competition. For
instance, it does not protect against the approval of a full NDA. It also would only protect against the approval of a product
that contains the same conditions of approval as Twirla. Therefore, the three-year exclusivity for Twirla may not adequately
protect us from competition. Competition that Twirla and our potential product candidates may face from generic or similar
versions of the same or similar products could materially and adversely impact our future revenue, profitability and cash
flows and substantially limit our ability to obtain a return on the investments we have made in Twirla or our potential
product candidates.
If Twirla does not achieve an adequate level of acceptance by prescribers, third-party payors and patients, we may not
generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate prescribers,
patients and third-party payors on the benefits of Twirla may require significant resources and may never be successful.
Even if we are able to demonstrate and maintain a competitive advantage over our competitors and become profitable, if
the market for hormonal contraceptives fails to achieve expected future growth or decreases, we may not be able to
generate sufficient revenue or sustain profitability. Our ability to generate sufficient revenue from Twirla will also be
dependent on our ability to support the commercial demand for Twirla and we cannot assure that we and Corium will be
able to manufacture sufficient quantities of Twirla in order to meet commercial demand.
It will be difficult for us to profitably sell Twirla if third-party coverage and reimbursement for such product is limited,
and reimbursement and healthcare containment initiatives and treatment guidelines may constrain our future revenues.
Market acceptance and sales of Twirla will depend on coverage and reimbursement policies and may be affected by
future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and
health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for
approved medications. A primary trend in the U.S. healthcare industry is cost containment. Government authorities and
these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for
particular medications, including branded innovator products. We cannot be sure that coverage or reimbursement will be
available for Twirla and, if coverage is available, we cannot be sure of the level of reimbursement. Even when a payor
determines that a product is eligible for reimbursement, the payor may set a reimbursement rate that is too low to support a
profitable sales price for the product. Subsequent approvals of competitive products could result in a detrimental change to
the reimbursement of our products. Reimbursement may impact the demand for, or the price of, Twirla. Numerous generic
products may be available at lower prices than branded therapy products, such as Twirla, which may also reduce the
likelihood and level of reimbursement for Twirla. If coverage and reimbursement are not available or are available only at
limited levels, we may not be able to successfully commercialize Twirla, which could adversely impact our business,
financial condition, results of operations and prospects and the value of our common stock. Increasingly, third party-payors
attempt to contain healthcare costs in ways that are likely to impact our development of products, including:
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● Failing to approve or challenging the prices charged for healthcare products;
● Introducing reimportation schemes from lower-priced jurisdictions;
● Limiting both coverage and the amount of reimbursement for new therapeutic products; for example, Express
Scripts has excluded most branded and all newly approved hormonal contraceptive products, including
Twirla, from its national preferred formulary;
● Denying or limiting coverage for products that are approved by the regulatory agencies but are considered to
be experimental or investigational by third party-payors; and
● Refusing to provide coverage when an approved product is used for off-label indications.
If we are unable to develop effective marketing and sales capabilities for Twirla or maintain our agreements with third
parties to market and sell Twirla, we may be unable to generate product revenues.
At present, we have a limited number of marketing personnel and rely on a contract sales organization in the United
States. In April 2020, we entered into an agreement with inVentiv Commercial Services, a Syneos Health group company,
which we refer to as Syneos Selling Solutions, to provide a contract sales force and related sales services for Twirla. In the
third quarter of 2020, we hired and trained an initial sales team of 73 persons and they have commenced detailing Twirla to
health care providers through both live and virtual meetings. At the time of the commercial launch of Twirla, our sales and
marketing team have worked together for only a limited period of time. We cannot guarantee that we will be successful in
marketing Twirla in the United States.
We may not be able to continue to develop our own marketing capabilities or a contract sales force in a cost-effective
manner or realize a positive return on this investment. In addition, we will have to compete with other pharmaceutical and
biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts
to commercialize Twirla in the United States include:
● Our or our contractor’s inability to recruit and retain adequate numbers of effective sales and marketing personnel;
● The inability of sales personnel to obtain access to or persuade adequate numbers of prescribers to prescribe
Twirla;
● The lack of complementary products to be offered by sales personnel, which may put us at a competitive
disadvantage relative to companies with more extensive product lines;
● The costs associated with training sales and marketing personnel on legal and regulatory compliance matters and
monitoring their actions;
● Liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory
requirements; and
● Unforeseen costs and expenses associated with creating an independent sales and marketing organization or
engaging a contract sales organization.
If we are not successful in retaining sales and marketing personnel or in continuing to build and maintain a sales and
marketing infrastructure, or if we do not successfully enter into appropriate collaboration arrangements, we could have
difficulty commercializing Twirla, which could adversely affect our business, operating results and financial condition.
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If we intend to commercialize Twirla outside the United States, we will likely enter into collaboration agreements with
pharmaceutical partners, and we may have limited or no control over the sales, marketing and distribution activities of
these third parties. Our future revenues may depend on the success of the efforts of these third parties.
To the extent that we rely on, or partner with, third parties to commercialize Twirla, we may receive less revenue than
if we commercialized these products ourselves. In addition, we would have less control over the sales efforts of any other
third parties involved in our commercialization efforts. We, however, will remain responsible for the conduct of any
contract sales force, which could expose us to legal and regulatory enforcement actions and liability. In the event that we
are unable to partner with a third-party marketing and sales organization, our ability to generate product revenues may be
limited in the United States, internationally or both.
If estimates of the size of the potential market for Twirla are overstated or data we have used to identify physicians is
inaccurate, our ability to earn revenue to support our business could be materially adversely affected.
We have relied on a number of external sources, as well as market research funded by us and internal analyses and
calculations, to estimate the potential market opportunity for Twirla in the United States. We have not independently
verified the externally sourced information used to develop the estimates for the potential market for Twirla, and their
accuracy and completeness cannot be assured. Similarly, our internal analyses and calculations are based upon analysis of
the current and expected future U.S. contraceptive market and management’s understanding and assessment of numerous
inputs and market conditions, including, but not limited to, the addressable market segment for CHCs and the
reimbursement status of contraceptives under the federal Affordable Care Act and similar state laws. These understandings
and assessments necessarily require assumptions subject to significant judgment and may prove to be inaccurate. As a
result, our estimates of the size of the potential market for Twirla could prove to be overstated, perhaps materially.
In addition, we are relying on third party data to identify the healthcare providers who prescribe contraception in the
U.S. and to determine how to deploy resources to market to those healthcare providers; however, we may not be marketing
to the appropriate physicians and may therefore be limiting our market opportunity.
We may develop estimates with respect to market opportunities for potential product candidates in the future, and such
estimates would be subject to similar risks. Even if we obtain regulatory approval for one or more potential product
candidates, we may be unable to commercialize the product on a scale sufficient to generate significant revenue, which
could have a material adverse effect on our business, financial condition, results of operations and prospects and the value
of our common stock.
The proportion of the contraceptive market that is made up of generic products could continue to increase, making
introduction of a branded contraceptive difficult and expensive.
The proportion of the U.S. market that is made up of generic products has been increasing over time. For example, in
2005, generic contraceptive products held 49% of prescription volume and 36% of sales and, by 2019, those values had
risen to 88% and 43%, respectively. Recently, Congress and the FDA have taken steps to increase generic competition in
the market. A primary trend in the U.S. healthcare industry is cost containment. Government authorities and third-party
payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications
including branded innovator products. If this trend continues, it may be more difficult to commercialize Twirla as a
branded contraceptive at a price that will maximize our revenue and profits. Also, there may be additional marketing costs
to commercialize Twirla in order to overcome the trend towards generics and to gain access to reimbursement by payors. If
we are unable to introduce Twirla at a price that is commensurate with that of current branded contraceptive products, or
we are unable to gain reimbursement from payors for Twirla, or if patients are unwilling to pay any price differential
between Twirla and a generic contraceptive, our revenues will be limited. For example, in light of the introduction of the
branded generic version of the Ortho Evra product by Mylan Inc. in April 2014, and the subsequent discontinuation of
distribution of Ortho Evra in October 2014 by Janssen we may have to take additional measures in order to be competitive
and gain market share. We may increase the rebates available to commercial payors or we may provide incentives to
consumers covered by non-governmental payors, such as coupons or rebates, in order to make up for the difference in the
co-payment for Twirla and the generic patch product.
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Prescribers, patients and payors may not adopt a new contraceptive patch due to concerns based upon the prior
experience with or perception of the previously marketed contraceptive patch and its currently marketed generic
equivalent product.
The Ortho Evra® contraceptive patch, or Evra, was introduced in early 2002 and was the first FDA-approved
contraceptive patch. The following is a brief history of the Evra market experience:
● Evra had rapid uptake in the contraceptive market, achieving a 10% share of the CHC market by September 2003.
The initial approved labeling for Evra indicated that it delivered a daily EE dose of 20 micrograms.
● Following the approval of Evra, the manufacturer of Evra and the FDA began receiving reports of thrombotic and
thromboembolic events.
● A pharmacokinetic study was conducted in 2005 and later published in the Journal of Clinical Pharmacology
comparing Evra to an oral contraceptive, which demonstrated that Evra was delivering higher serum
concentrations of EE compared to an oral contraceptive with an EE dose of 35 micrograms. A pharmacokinetic
study evaluates how the body handles a given drug over time; these studies are conducted by measuring the
amount of time it takes for the drug to be absorbed, distributed and eliminated throughout the body.
● Johnson & Johnson, the manufacturer of Evra, revised the Evra labeling in November 2005 to include information
that EE exposure with Evra is 60% higher than that of an oral contraceptive containing EE of 35 micrograms,
based on area under the curve, a commonly-used metric for measuring EE exposure in contraceptives. This
information was ultimately included in a unique boxed warning and bolded warning in the Evra labeling.
● The FDA held a Joint Meeting of the Advisory Committees for Reproductive Health Drugs and Drug Safety and
Risk Management on December 9, 2011. The Committees concluded that users of Evra have an increased risk of
venous thromboembolism, or VTE compared to users of second-generation contraceptives, such as those
containing LNG. The Committees, through a vote, concluded that the benefits of Evra outweighed the risks, but
that the current package insert did not adequately reflect the risk/benefit profile.
● A subsequent change to the labeling for Evra was implemented in August 2012.
● The Evra market share declined rapidly following the labeling changes, from a peak share of 11% in 2005, to 4%
by the end of 2006, to 1.4% by the end of 2013.
● In April 2014, the Evra label was revised to provide revised dosage form and strength information. However, this
revision did not affect the unique boxed warning and bolded warning in the Evra label.
● The approval of a generic equivalent to Evra, Xulane was announced by Mylan Inc. in April 2014. Subsequently,
in October 2014, Janssen discontinued distribution of Evra and currently over 99% of patch prescriptions are filled
with the generic.
We have conducted pharmacokinetic studies of Twirla to demonstrate that it delivers a daily EE dose of approximately
30 micrograms, which is less than that delivered by Xulane, according to its FDA approved label. However, because none
of our completed Phase 3 clinical trials studied Twirla in a head-to-head comparison with Xulane, we will not be able to
make comparative claims regarding the EE exposure, safety, or efficacy of Twirla as compared to Xulane without
conducting a supportive head-to-head post-marketing study. As a result, uptake and usage of Twirla and our related
revenues could ultimately be limited.
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Twirla could develop unexpected safety, efficacy or quality concerns, which would likely have a material adverse effect
on us.
Twirla was approved in the U.S. based on the SECURE clinical trial, in which patients were enrolled for 13 cycles of
treatment. Twirla will now be used by larger numbers of patients, potentially for longer periods of time, and we and others
(including regulatory agencies and private payors) will endeavor to collect extensive information on the efficacy and safety
of Twirla by monitoring its use in the marketplace. In addition, we will endeavor to conduct a long-term post marketing
safety study required by the FDA to compare the risks for venous thromboembolism (VTE) and arterial thromboembolism
(ATE) in new users of Twirla to new users of oral CHCs and new users of Xulane in U.S. women of reproductive age.
Further, we may conduct additional trials in connection with lifecycle management programs for Twirla. New safety or
efficacy data from both market surveillance and our post-marketing clinical trials may result in negative consequences
including:
● Modification to product labeling or promotional statements, such as additional boxed or other warnings
contraindications, or limitations, or the issuance of “Dear Doctor Letters” or similar communications to healthcare
professionals or the public regarding safety or efficacy concerns;
● Imposition of additional post-marketing clinical trial requirements, distribution restrictions or other risk
management measures, such as a risk evaluation and mitigation strategy, REMS, which could include elements to
assure safe use;
● Suspension or withdrawal of regulatory approval;
● Suspensions or termination of ongoing clinical trials or refusal by regulators to approve pending marketing
applications or supplements to approved applications;
● Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements
with respect to Twirla;
● Costly and time-consuming corrective actions; and
● Voluntary or mandatory product recalls or withdrawals from the market and costly product liability claims.
Furthermore, the discovery of significant problems with a product similar to Twirla that implicate (or are perceived to
implicate) the entire class of products could have an adverse impact on our ability to commercialize Twirla. Any of these
circumstances could reduce Twirla’s market acceptance and could inhibit or delay our ability to commercialize Twirla or
gain and/or sustain market share, any of which could adversely affect sales of Twirla.
We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we
fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely competitive. We have significant competition with
contraceptive products already in the marketplace, many of which have substantially greater name recognition, commercial
infrastructures and financial, technical and personnel resources than we have. Any new product that competes with a
previously approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability or
safety to be commercially successful. In addition, new products developed by others could emerge as competitors to Twirla.
If we are not able to compete effectively against our current and future competitors, our business may not grow, and our
financial condition and operations may suffer.
Our potential competitors include, but are not limited to, large, well-established pharmaceutical companies, and
specialty pharmaceutical sales and marketing companies. These companies include Organon & CO., a new company
created by Merck & Co., Inc., or Merck, which markets Nuvaring®, TherapeuticsMD, Inc., or TherapeuticsMD, which has
licensed and markets Annovera®, a recently approved contraceptive ring, Allergan, Inc., or Allergan, which markets
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several branded and generic contraceptives including Minastrin® 24, LoLoestrin®, and Taytulla®, Bayer AG, or Bayer,
which markets Beyaz®, Yaz®, Yasmin®, and Natazia®, and Mylan N.V., which markets Xulane®, a generic version of
Ortho Evra. On February 26, 2021, Amneal Pharmaceuticals, Inc. announced that it had received approval by the FDA for
Zafemy, a second generic version of Ortho Evra. Additionally, several generic manufacturers currently market and
continue to introduce new generic contraceptives, including Sandoz International GmbH, Glenmark Pharmaceuticals Ltd.,
Lupin Pharmaceuticals, Inc., and Amneal Pharmaceuticals, Inc.
There are other contraceptive product candidates in development that, if approved, would potentially compete with
Twirla. Specifically, Bayer has a contraceptive patch approved in the European Union, or E.U. Bayer entered into a license
and distribution agreement for the sale of this contraceptive patch in Europe with Gedeon Richter Ltd. Other companies
that have new hormonal contraceptive product candidates in various stages of development include Allergan (progestin-
only vaginal ring for which they received a CRL from the FDA), The Population Council in collaboration with Antares
Pharma, Inc. (transdermal gel contraceptive in Phase 2), Mithra Pharmaceuticals SA (combination oral contraceptive in
Phase 3), and Panterhei Bioscience (combination oral contraceptive in Phase 2).
Sales of Twirla may be adversely affected by the consolidation among wholesale drug distributors and the growth of
large retail drug store chains.
The network through which we will sell Twirla and our potential product candidates, if and when approved, has
undergone significant consolidation marked by mergers and acquisitions among wholesale distributors and the growth of
large retail drugstore chains. As a result, a small number of large distributors control a significant share of the market. In
2018, three companies generated about 95% of all revenues from drug distribution in the United States, and in 2019, the top
five chain pharmacy companies owned about 35% of all retail pharmacy outlets. Consolidation of drug wholesalers and
retailers, as well as any increased pricing pressure that those entities face from their customers, including the U.S.
government, may increase pricing pressure and place other competitive pressures on drug manufacturers, including us.
Existing and future legislation may increase the difficulty and cost for us to commercialize Twirla and may affect the
prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and
proposed changes regarding the healthcare system that could restrict or regulate post-approval activities and affect our
ability to profitably sell Twirla.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and
promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted,
or whether the FDA’s regulations, guidance or interpretations will change, or what the impact of such changes on our
ability to market of Twirla may be.
In March 2010, President Obama signed into law the ACA, a sweeping law intended to broaden access to health
insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new
transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the healthcare
industry and impose additional healthcare policy reforms. The ACA, among other things, increased the Medicaid rebates
owed by manufacturers under the Medicaid Drug Rebate Program for both branded and generic drugs, extended the rebate
program to certain individuals enrolled in Medicaid managed care organizations, addressed new methodologies by which
rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are line extension
products and expanded the 340B drug discount program (excluding orphan drugs) to other entities. Further, the ACA
imposed a significant annual tax on companies that manufacture or import branded prescription drug products. Substantial
new provisions affecting compliance have also been enacted, which may require us to modify our business practices with
regard to healthcare practitioners.
Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of
controlling healthcare costs and those methods are not always specifically adapted for new technologies or new drug
products. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory
changes to the health care system that could impact our ability to sell our products profitably. In particular, in
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2010, the ACA, among other things, subjected biologic products to potential competition by lower-cost biosimilars;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for drugs that are inhaled, infused, instilled, implanted or injected; increased the minimum Medicaid rebates
owed by most manufacturers under the Medicaid Drug Rebate Program; extended the Medicaid Drug Rebate program to
utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; subjected manufacturers to new
annual fees and taxes for certain branded prescription drugs; created a new Medicare Part D coverage gap discount
program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of
2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible
beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under
Medicare Part D; and provided incentives to programs that increase the federal government’s comparative effectiveness
research.
Of particular relevance to our business is the ACA requirement that all health plans, with limited exceptions, cover
certain preventive services for women with no cost-sharing, which means no deductible, no co-insurance and no co-
payments by the patient. Contraceptive methods and counseling, including all FDA-approved contraceptive methods as
prescribed, are included in the ACA mandate, and this has come to be known as the “contraceptive mandate.” Under the
ACA, payors are only required to cover one favored product within each contraceptive “method” without imposing any
cost-sharing obligations on the patient. For example, the introduction of a generic contraceptive patch product with a price
that will likely be lower than the price of Twirla makes it less clear that Twirla would have a preferred position, such as
coverage without a co-insurance payment, under the ACA contraceptive mandate. Other products within the same method
may also be covered, but payors are allowed to use reasonable medical management techniques, such as the application of
cost-sharing obligations. An amendment was issued that provided an exemption to the contraceptive mandate for group
health plans established or maintained by religious employers. However, the contraceptive mandate has remained
controversial, with several legal challenges filed around the country. In June 2014, the U.S. Supreme Court ruled that
owners of certain private companies can object to the contraceptive mandate on religious grounds and in November 2015,
the Court agreed to hear arguments from non-profit organizations requesting similar treatment. In October 2017, the U.S.
Department of Health and Human Services announced it will seek to issue regulations that will allow all companies to
qualify for the exemption from the contraceptive mandate on the basis of religious and moral grounds. While there is an
injunction against the administration prohibiting it from implementing these rules, the ultimate outcome of that litigation,
which is currently in front of the Supreme Court, cannot be predicted. The ACA appears likely to continue to apply
pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens
and operating costs. Further, on January 20, 2017, the Trump administration signed an Executive Order directing federal
agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the
implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals,
healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices, among others; this Executive
Order was overturned by President Biden on January 28, 2021. There are several proposals to reform the federal healthcare
laws being advocated and it is still unclear whether such reform efforts will succeed and if so, which proposals will
ultimately be successful. Further, the Biden administration may choose to change or reverse regulatory decisions made by
the previous administration. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform
efforts on our business.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.
On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by
Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at
least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s
automatic reduction in funding to several government programs. This includes aggregate reductions of Medicare payments
to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will stay in effect through 2030 unless
additional Congressional action is taken. Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known
as the CARES Act, as well as subsequent legislation, these cuts have been suspended from May 1, 2020 through March 31,
2021. Proposed legislation, if passed, would extend this suspension until the end of the pandemic. On January 2, 2013,
President Obama signed into law the American Taxpayer Relief Act of 2012, which among other things, further reduced
Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and
increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
We expect that additional federal healthcare reform measures will be
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adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare
products and services, and in turn could significantly reduce the projected value of Twirla and our potential product
candidates and reduce our profitability.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain
aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various
portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court; the
former Trump Administration issued various Executive Orders eliminating cost sharing subsidies and various provisions
that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare
providers, health insurers, or manufacturers of pharmaceuticals or medical devices; and Congress has introduced several
pieces of legislation aimed at significantly revising or repealing the ACA. The United States Supreme Court is expected to
rule on a legal challenge to the constitutionality of the ACA in early 2021. The implementation of the ACA is ongoing, the
law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program,
and may also increase our regulatory burdens and operating costs. Litigation and legislation related to the ACA are likely to
continue, with unpredictable and uncertain results.
Moreover, the Drug Quality and Security Act imposes obligations on manufacturers of pharmaceutical products related
to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain
information regarding the drug product to individuals and entities to which product ownership is transferred, are required to
label the drug product with a product identifier and are required to keep certain records regarding the drug product. The
transfer of information to subsequent product owners by manufacturers is required to be done electronically. Manufacturers
must also verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under this legislation,
manufacturers have drug product investigation, quarantine, disposition, and FDA and trading partner notification
responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products that are the
subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to
result in serious health consequences or death.
Other measures have also been taken by Congress, the previous administration, and administrative agencies to increase
drug competition and thus, decrease drug prices. By example, the Medicare Modernization Act contains provisions that call
for the promulgation of regulations that expand pharmacists’ and wholesalers’ ability to import cheaper versions of an
approved drug and competing products from Canada, where there are government price controls. Further, the Medicare
Modernization Act provides that these changes to U.S. importation laws will not take effect unless and until the Secretary
of HHS certifies that the changes will pose no additional risk to the public’s health and safety and will result in a significant
reduction in the cost of products to consumers. On September 23, 2020, the Secretary of HHS made such certification to
Congress, and on October 1, 2020, the FDA published a final rule that allows for the importation of certain prescription
drugs from Canada. Under the final rule, States and Indian Tribes, and in certain future circumstances pharmacists and
wholesalers, may submit importation program proposals to the FDA for review and authorization. Since the issuance of the
final rule, several industry groups have filed federal lawsuits challenging multiple aspects of the final rule, and authorities
in Canada have passed rules designed to safeguard the Canadian drug supply from shortages. On September 25, 2020,
CMS stated drugs imported by States under this rule will not be eligible for federal rebates under Section 1927 of the Social
Security Act and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes.
Since these drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average
Drug Acquisition Cost for these drugs. Separately, the FDA also issued a final guidance document outlining a pathway for
manufacturers to obtain an additional National Drug Code (NDC) for an FDA-approved drug that was originally intended
to be marketed in a foreign country and that was authorized for sale in that foreign country. Since the issuance of the final
rule, on November 23, 2020, several industry groups filed federal lawsuits in the U.S. District Court for the District of
Columbia, requesting injunctive relief to prevent certification from the Secretary of HHS from taking effect and
challenging multiple aspects of the final rule. This litigation has not progressed. If implemented, drug importation may
materially and adversely affect the price we receive for any of our products or future product candidates. The market
implications of these rules and guidance are unknown at this time. Additionally, a law was enacted in 2019 requiring
sponsors of NDA approved products to provide sufficient quantities of drug product on commercially reasonable market
based terms to entities developing generic and similar drug products. New legislative and regulatory efforts could
ultimately have an adverse impact on our business and results of operation.
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At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain
product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage
importation from other countries and bulk purchasing.
Third-party coverage and reimbursement and healthcare cost containment initiatives and treatment guidelines may
constrain our future revenues.
Our ability to successfully market Twirla will depend in part on the level of coverage and reimbursement that
government authorities, private health insurers and other organizations provide for Twirla and contraceptives in general.
Countries in which Twirla is sold through reimbursement schemes under national health insurance programs frequently
require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any
subsequent price increases. In certain countries, including the United States, government-funded and private medical care
plans can exert significant indirect pressure on prices. We may not be able to sell Twirla profitably if adequate prices are
not approved or coverage and reimbursement are unavailable or limited in scope. Increasingly, third party payors attempt to
contain healthcare costs in ways that are likely to impact our development of products including:
● Failing to approve or challenging the prices charged for healthcare products;
● Introducing reimportation schemes from lower-priced jurisdictions;
● Limiting both coverage and the amount of reimbursement for new therapeutic products;
● Denying or limiting coverage for products that are approved by the regulatory agencies but are considered to be
experimental or investigational by third party payors; and
● Refusing to provide coverage when an approved product is used for off-label indications.
Risks Related to Our Financial Position and Need for Capital
We have incurred operating losses in each year since our inception and expect to continue to incur substantial losses for
the foreseeable future. Management has concluded that these factors raise substantial doubt about our ability to
continue as a going concern.
We have incurred losses in each year since our inception in December 1997. Our net loss was $51.9 million,
$18.6 million and $19.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31,
2020, we had an accumulated deficit of approximately $312.2 million. Based on our current business plan and on-going
commercialization of Twirla, we believe that our cash, cash equivalents and marketbale securities as of December 31, 2020
will be sufficient to meet our projected operating requirements through the end of 2021. Our cash, cash equivalents and
marketable securities will not be sufficient to fund our current and planned operations through the 12 months following the
date on which this Annual Report on Form 10-K is filed, which raises substantial doubt about our ability to continue as a
going concern. Substantial doubt about our ability to continue as a going concern may create negative reactions to the price
of our common stock and we may have a more difficult time obtaining financing in the future.
Specialty pharmaceutical product development is a speculative undertaking, involves a substantial degree of risk and is
a capital-intensive business. We expect to incur expenses without corresponding revenues until we are able to sell Twirla in
significant quantities, which may not happen. We have devoted most of our financial resources to research and
development, including our non-clinical development activities and clinical trials. We will require additional capital to fund
our operating needs beyond 2021, including among other items, the commercialization of Twirla and advancing the
development of our other potential product candidates. We may not be able to obtain sufficient additional funding to
continue our operations at planned levels and be forced to reduce, or even terminate, our operations. To date, we have
financed our operations primarily through sales of common stock, convertible preferred stock and convertible promissory
notes and to a lesser extent, through term loans and government grants. Our potential product candidates will
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also require the completion of regulatory review, significant marketing efforts and substantial investment before they can
provide us with any revenue.
We expect that our expenses will increase as we commercialize Twirla. As a result, we expect to continue to incur
substantial losses for the foreseeable future. We are uncertain when or if we will be able to achieve or sustain profitability.
If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Any failure to
become and remain profitable could impair our ability to sustain operations and adversely affect the price of our common
stock and our ability to raise additional capital. We are significantly dependent on the success of Twirla, and if we do not
achieve the commercial success of Twirla and/or are unable to obtain additional funding, we will need to reassess our
operating capital needs and may be unable to continue our operations at planned levels and be forced to reduce, or even
terminate, our operations.
We have never been profitable. Currently, we have only one product available for commercial sale, Twirla, and we may
never become profitable.
We have never been profitable and do not expect to be profitable in the foreseeable future. Except for Twirla, we have
no other products currently available for commercial sale. To date, we have generated very limited revenue from product
sales. As we commercialize Twirla or even if we are able to commercialize any other potential product candidate, there can
be no assurance that we will generate significant revenues or ever achieve profitability. Our ability to generate product
revenue depends on a number of factors, including our ability to:
● Maintain an acceptable price for Twirla, and our other potential product candidates, if approved, and obtain
adequate coverage and reimbursement from third party payors;
● Obtain commercial quantities of Twirla, and our other potential product candidates, if approved, at acceptable cost
levels from our third-party manufacturer;
● Successfully market and sell Twirla, and our other potential product candidates, if approved, in the United States
and abroad; and
● Successfully receive regulatory approval for our other potential product candidates.
In addition, because of the numerous risks and uncertainties associated with product commercialization and product
candidate development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able
to achieve or maintain profitability. In addition, our expenses could increase beyond our current expectations and resources
if we are required to provide increased rebates to managed care payors, need to increase our manufacturing capacity sooner
than planned, experience disruptions in our manufacturing capabilities, or need to alter our marketing strategy. We
anticipate incurring significant costs associated with the commercialization of Twirla and our other potential product
candidates, if approved.
Our ability to become and remain profitable depends on our ability to generate revenue in excess of our increasing
costs. Even accounting for revenues from the sale of Twirla, and our other potential product candidates, if approved, we
may not become profitable and may need to obtain additional funding to continue operations. If we fail to become
profitable or obtain additional funding or are unable to sustain profitability on a continuing basis, then we may be unable to
continue our operations at planned levels and be forced to reduce our operations. Even if we do achieve profitability, we
may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain
profitable would decrease the value of our company and could impair our ability to raise additional capital, expand our
business or continue our operations.
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Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our
loan agreement and we may be required to repay the outstanding indebtedness in an event of default, which could have
a materially adverse effect on our business.
In February 2020, we entered into the Perceptive Credit Agreement for a senior secured term loan facility of up to
$35.0 million, which was amended in February 2021 to add a fourth tranche of $10.0 million, which is subject to the same
interest rate and 1% fee payable upon the drawing of a tranche as set forth in the credit agreement. A first tranche of
$5.0 million was funded on execution of the Perceptive Credit Agreement. A second tranche of $15.0 million was funded
as a result of the approval of Twirla by the FDA. Another $25.0 million will be available in two separate tranches upon the
achievement of certain revenue milestones. The facility will be interest only until the third anniversary of the closing date.
The Perceptive Credit Agreement subjects us to various customary affirmative and negative covenants, including
requirements as to financial reporting and insurance, and restrictions on our ability to dispose of our business or property,
change our line of business, liquidate or dissolve, enter into any change in control transaction, merge or consolidate with
any other entity or acquire all or substantially all the capital stock or property of another entity, incur additional
indebtedness, incur certain types of liens on our property, including our intellectual property, pay any dividends or other
distributions on our capital stock other than dividends payable solely in capital stock or redeem our capital stock. Our
business may be adversely affected by these restrictions on our ability to operate our business. The Perceptive Credit
Agreement also subjects us to financial covenants in respect of minimum liquidity and minimum product revenue.
The loans provided under the Perceptive Credit Agreement are secured by substantially all of our property. We are
currently required to make interest-only payments through February 2023. Loans under the Perceptive Credit Agreement
currently bear interest at rate of 10.25% per annum plus one-month LIBOR, and mature on February 10, 2024.
The Perceptive Credit Agreement contains certain customary Events of Default, which include, among others, non-
payment of principal, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency
events, material judgments, certain regulatory-related events and events constituting a Change of Control (as defined in the
Perceptive Credit Agreement). We may not have enough available cash or be able to raise additional funds through equity
or debt financings to repay such indebtedness at the time any such event of default occurs. In that case, we may be required
to delay, limit, reduce or terminate our potential product candidate development or commercialization efforts or grant to
others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Perceptive could also exercise its rights as collateral agent to take possession and dispose of the collateral securing the loan
for its benefit, which collateral includes substantially all of our property. Our business, financial condition and results of
operations could be materially adversely affected as a result of any of these events.
We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we
may be unable to commercialize Twirla or to complete the development and commercialization of our other potential
product candidates.
Our operations have consumed substantial amounts of cash since our inception. From our inception to December 31,
2020, we have cumulative net cash flows used by operating activities of $274.6 million. We will need to obtain additional
capital to fund our future operations, including the commercialization of Twirla. We will need to obtain additional
financing to develop and commercialize our other potential product candidates and to complete the development of any
additional product candidates we might acquire. Moreover, our fixed expenses such as rent, interest expense and other
contractual commitments are substantial and are expected to increase in the future.
Our future funding requirements will depend on many factors, including, but not limited to:
● Our ability to successfully commercialize Twirla, and our other potential product candidates, if approved;
● Our ability to have commercial product successfully manufactured consistent with FDA regulations;
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● Amount of sales and other revenues from Twirla and our other potential product candidates that we may
commercialize, if any, including the selling prices for such products and the availability of adequate third-party
coverage and reimbursement;
● Sales and marketing costs associated with commercializing Twirla, and our other potential product candidates, if
approved, including the cost and timing of expanding our marketing and sales capabilities;
● Time and cost necessary to obtain regulatory approvals for our other potential product candidates that may be
required by regulatory authorities;
● Progress, timing, scope and costs of our clinical trials, including the ability to timely enroll subjects in our
ongoing, planned and any other clinical trials;
● Terms and timing of any potential future collaborations, licensing or other arrangements that we may establish;
● Cash requirements of any future acquisitions or the development of other potential product candidates;
● Time and cost necessary to respond to technological and market developments;
● Costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
● Costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements
or other arrangements that we may establish;
● Costs associated with the expansion of our commercial manufacturing process for Twirla and/or the establishment
of a backup supplier;
● Costs associated with the hiring of new employees and maintaining our contract sales force; and
● Costs associated with the leasing of additional office space.
Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private
equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution
arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If
adequate funds are not available, we may be required to delay or reduce the scope of our commercialization efforts or one
or more of our research or development programs. We may seek to access the public or private capital markets whenever
conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we
raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with
third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or potential product
candidates or grant licenses on terms that may not be favorable to us.
Our ability to fund our operations through the period of time necessary to successfully commercialize Twirla could be
adversely affected based on our inability to manufacture sufficient quantities of Twirla, the failure of Twirla to gain
acceptance in the marketplace, our inability to successfully compete with other contraceptive products, our inability to
receive reimbursement coverage from third-party payors, and the need to provide higher rebates in order to gain a
competitive formulary status. We may not be able to obtain sufficient additional funding to continue our operations at
planned levels and be forced to reduce, or even terminate, our operations. Adequate additional funding may not be
available to us on acceptable terms, or at all. If we are unable to raise additional capital when needed or on attractive terms,
or if we are unable to enter into strategic collaborations, we then may be unable to complete the commercialization of
Twirla and may also be required to further cut operating costs, delay, reduce or eliminate our research and development
programs or future commercialization efforts or even terminate our operations, which may involve seeking bankruptcy
protection. Our forecast of the period of time through which our financial resources will be adequate to support our
operating requirements is a forward-looking statement and involves risks and uncertainties, and
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actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors”
section. We have based this estimate on a number of assumptions that may prove to be wrong and changing circumstances
beyond our control may cause us to consume capital more rapidly than we currently anticipate. If we choose to accelerate
elements of our commercial plan or we encounter any unforeseen events that affect our business plan, we may choose to
raise additional funds to provide us with additional working capital. Our inability to obtain additional funding when we
need it could seriously harm our business and we may be unable to continue our operations at planned levels and be forced
to reduce, or even terminate, our operations.
Raising additional capital may cause dilution to our existing stockholders or restrict our operations.
We may seek additional capital through a combination of private and public equity offerings, debt financings and
strategic collaborations. The sale of additional equity or convertible debt securities could result in the issuance of additional
shares of our capital stock and could result in dilution to our stockholders. The incurrence of indebtedness would result in
increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability
to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating
restrictions that could adversely impact our ability to conduct our business. We cannot guarantee that future financing will
be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital in
sufficient amounts or on terms acceptable to us, we will be prevented from pursuing research and development efforts. This
could harm our business, operating results and financial condition and cause the price of our common stock to fall.
Risks Relating to Maintaining Regulatory Compliance and Approval of Twirla
We remain subject to substantial ongoing regulatory requirements related to Twirla, and failure to comply with these
requirements could lead to penalties, including withdrawal from the market, suspension, or withdrawal of product
approval.
Twirla is subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage,
distribution, import, export, safety surveillance, advertising, marketing promotion, recordkeeping, reporting of adverse
events and other post-market information, and further development, including ongoing requirements for costly post-
marketing studies, including Phase 4 clinical trials or post-market surveillance. For example, as part of the FDA’s approval
of Twirla, the FDA has required us to conduct a long-term post-marketing safety study to assess and describe the risks of
Twirla, including the risk of VTE and ATE compared to oral CHCs and Xulane. This study is similar to one recently
required by FDA for another contraceptive product. We will also conduct a second small post-marketing study, required by
FDA, to assess Twirla’s residual drug content, strength, and adhesion. The results generated in these post-approval clinical
trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about side
effects or efficacy of a product. Failure to comply with post-market study requirements can also result in enforcement
action or FDA removal of the product from the market.
Other post-approval requirements include registration with the FDA, listing of our drug products, payment of annual
fees, as well as continued compliance with cGCPs for any clinical trials that we conduct post-approval. Application holders
must notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product manufacturing
changes. In addition, manufacturers of drug products and their facilities are subject to continual review and routine
inspections by the FDA and other regulatory authorities for compliance with the FDA’s manufacturing requirements
relating to quality control, quality assurance and corresponding maintenance of records and documents. If we are found to
be noncompliant with applicable requirements, the FDA and other government authorities may issue a Warning Letter or
Untitled Letter, or take other regulatory action such as a product seizure and detention, withdrawal of product approval,
requests for a recall, refusal to allow the import or export of the product, criminal or civil penalties, injunction against or
restriction of product manufacture or distribution, consent decrees, disgorgement, restitution, clinical holds or terminations
of clinical trials, FDA debarment, debarment from government contracts or refusal of orders under existing contracts,
exclusion from federal healthcare programs, corporate integrity agreements, or imprisonment.
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The FDA has the authority to require a REMS after approval, which may impose further requirements or restrictions
on the information that patients must be provided, distribution or use of an approved drug, such as limiting prescribing to
certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet
certain safe-use criteria or requiring treated patients to enroll in a registry.
With respect to sales and marketing activities by us and our contracted sales force or any future collaborative partner,
advertising and promotional materials must comply with the FDA’s rules in addition to other applicable federal and local
laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product
samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act and is subject to
certain requirements. We may also be subject, directly or indirectly through our customers and partners, to various fraud
and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws,
which impact, among other things, our proposed sales, marketing and scientific/educational efforts. If we participate in the
U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other
government drug programs, we will be subject to complex laws and regulations regarding reporting and payment
obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair
competition laws. Similar requirements exist in many of these areas in other countries.
In addition, our product labeling, advertising and promotional materials for Twirla will be subject to regulatory
requirements and continuing review by the FDA, Department of Justice, Department of Health and Human Services’ Office
of Inspector General, state attorneys general, members of Congress and the public. The FDA strictly regulates the
promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses
that are not approved by the FDA as reflected in the product’s approved labeling, a practice known as off-label promotion.
Physicians may nevertheless prescribe the products to their patients in a manner that is inconsistent with the approved label.
If we or any third parties contracted to promote our product on our behalf are found to have promoted such off-label uses,
we may become subject to significant liability and government fines. The FDA and other agencies actively enforce laws
and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-
label uses may be subject to significant sanctions. The federal government has levied large civil and criminal fines against
companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The
FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified
promotional conduct is changed or curtailed.
In the United States, engaging in the impermissible promotion of our products for off-label uses can also subject us to
false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines, agreements
with governmental authorities that materially restrict the manner in which we promote or distribute drug products through,
for example, corporate integrity agreements, and debarment, suspension or exclusion from participation in federal and state
healthcare programs. These false claims statutes include the federal civil False Claims Act, which allows any individual to
bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or
fraudulent claims or causing others to present such false or fraudulent claims, for payment by a federal program such as
Medicare or Medicaid. If the government decides to intervene and prevails in the lawsuit, the individual will share in the
proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case
alone. Since 2004, these False Claims Act lawsuits against pharmaceutical companies have increased significantly in
volume and breadth, leading to several substantial civil and criminal settlements regarding certain sales practices promoting
off-label drug uses involving fines that are as much as $3.0 billion. This growth in litigation has increased the risk that a
pharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, as well as criminal and
civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare,
Medicaid and other federal and state healthcare programs. If we do not lawfully promote our approved products, we may
become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a
material adverse effect on our business, financial condition, results of operations and prospects.
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If we or a regulatory agency discover previously unknown problems with Twirla or with a potential product candidate,
once approved, such as adverse events of unanticipated severity or frequency, data integrity issues with regulatory filings,
advertising and promotion, problems with the facility where the product is manufactured or we or our manufacturers or
others working on our behalf fail to comply with applicable regulatory requirements after marketing approval, we may be
subject to reporting obligations as well as the following administrative or judicial sanctions:
● Restrictions on the marketing, distribution or manufacturing of the product, withdrawal of the product from the
market, or requests for product recalls;
● Issuance of Warning Letters, Cyber Letters or Untitled Letters;
● Mandated modification to promotional materials and labeling requirements or provision of corrective information
to healthcare providers;
● FDA or regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other
communications containing warnings and other safety information about the product;
● Entry into a consent decree or corporate integrity agreement, which can include imposition of various fines,
reimbursement for inspection costs, required due dates for specific actions and penalties for noncompliance;
● Clinical holds or termination of clinical trials;
● Injunctions or the imposition of civil or criminal penalties, imprisonment, monetary fines disgorgement or
restitution;
● Suspension or withdrawal of regulatory approval;
● Suspension of any ongoing clinical trials;
● Refusal to approve pending applications or supplements to approved applications filed by us, or suspension or
revocation of product license approvals;
● Debarment;
● Exclusion from participation in federal healthcare programs or refusal of government contracts;
● Suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or
● Product seizure or detention or refusal to permit the import or export of product.
The occurrence of any event or penalty described above may inhibit our ability to commercialize Twirla, or our
potential product candidates, if approved, and generate revenue. Adverse regulatory action, whether pre- or post-approval,
can also potentially lead to product liability claims and increase our product liability exposure.
Moreover, the FDA’s policies may change, and additional government regulations may be enacted that could prevent,
limit or delay the sale and promotion of Twirla, or marketing approval and the sale and promotion of our potential product
candidates, if approved. If we are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any obtained marketing
approval, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
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Our relationships with physicians, customers and payors will be subject to applicable anti-kickback, fraud and abuse
and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from
government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any
products that we commercialize. Our arrangements with third-party payors, including government healthcare programs, and
customers will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may
constrain the business or financial arrangements and relationships through which we market, sell and distribute Twirla.
Restrictions under applicable federal and state healthcare laws and regulations include the following:
● The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully
soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or
reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service
for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
● The federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam
actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal
government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or
conceal an obligation to pay money to the federal government;
● The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created federal criminal
statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters;
● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its
implementing regulations, impose obligations on covered healthcare providers, health plans and healthcare
clearinghouses, as well as their business associates that create receive, maintain or transmit individually
identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy,
security and transmission of individually identifiable health information;
● The federal physician payment transparency requirements and applicable regulations require manufacturers of
drugs, devices, biologics and medical supplies to report certain information to the Department of Health and
Human Services including information related to payments and other transfers of value made to physicians and
teaching hospitals and the ownership and investment interests held by physicians and their immediate family
members; and
● Analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply to sales or
marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-
party payors, including private insurers; state laws that require pharmaceutical companies to comply with the
pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by
the federal government in addition to requiring drug manufacturers to report information related to payments to
physicians and other healthcare providers or marketing expenditures and drug pricing; and state laws, such as the
California Consumer Privacy Act, governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.
Compliance with these and other federal and state laws applicable to the sale, marketing, and distribution of
commercial drug products will require that we expend time and financial resources to maintain compliance. Additionally,
the risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not
been fully interpreted by the relevant government or regulatory authorities or the courts, and their provisions are open to a
variety of interpretations. Moreover, healthcare reform legislation has strengthened these laws. For example, the ACA,
among other things, amended the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes;
such that a person or entity no longer needs to have actual knowledge of these statutes or
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specific intent to violate them. In addition, the ACA provides that the government may assert that a claim including items
or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes
of the false claims statutes.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and
regulations are costly. It is possible that governmental authorities will conclude that our business practices may not comply
with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and
regulations. If our operations, including anticipated activities conducted by our sales team in the sale of Twirla are found to
be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to a
variety of different consequences, depending upon which law we are found to have violated, including significant civil,
criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as
Medicare and Medicaid, corporate integrity agreements, refusal of government contracts, contract debarment and the
curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect
to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or
administrative sanctions, including exclusions from government funded healthcare programs.
Risks Related to Manufacturing and Our Reliance on Third Parties
We have no manufacturing capacity and anticipate continued reliance on Corium, our third-party manufacturer, for the
commercialization of Twirla and development of our potential product candidates, as a sole source provider. We may not
have or be able to obtain sufficient quantities of Twirla or our potential product candidates to meet our required supply
for commercialization or clinical trials, which could materially harm our business.
Corium is a biopharmaceutical company that focuses on the development, manufacture, and commercialization of
specialty transdermal products. In addition to partnering with other companies to manufacture transdermal products,
Corium also engages in the research and development of its own proprietary transdermal drug delivery products. We rely
on Corium, our third-party manufacturer, to produce commercial supplies and samples of Twirla. We have not back-up or
alternative manufacturer of Twirla. We may also rely on them for clinical and commercial supplies and samples of our
potential product candidates, if approved. We do not own or operate, and have no plans to establish, any manufacturing
facilities for Twirla or our potential product candidates. We lack the resources and the capabilities to manufacture Twirla or
any of our potential product candidates on a clinical or commercial scale.
As a third-party manufacturer, Corium’s business operations are completely beyond our control, and we have no
influence over whether Corium changes its management or its business operations or discontinues them entirely. For
example, in 2018 Corium was acquired by Gurnet Holding Company, or GHC. Following completion of the transaction,
Corium became a private company, wholly owned by GHC. Corium has announced that it plans to continue its operations
in Grand Rapids, Michigan, where commercial supplies of Twirla are being manufactured.
Furthermore, we do not control the manufacturing process of Twirla, and are completely dependent on Corium for
compliance with the FDA’s manufacturing regulatory requirements for the manufacture of Twirla, our potential product
candidates and our other future products, if and when approved. As a manufacturer, Corium or other contract manufacturers
that we may use are subject to routine inspection by regulatory authorities, including the FDA. If Corium or other contract
manufacturers that we may use cannot successfully manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA, they may receive adverse inspectional findings, may need to undertake costly and time
consuming corrective actions, and may not be able to maintain regulatory approval for their manufacturing facilities.
In addition, while our contracts with our manufacturers generally contain provisions to help ensure that quality
standards and compliance with laws and regulations are maintained, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If in the future, the FDA
withdraws its approval of Corium’s facilities for the manufacture of Twirla, or if Corium experiences quality or other
regulatory issues, we may need to find alternative manufacturing facilities that would also require FDA approval, which
would significantly impact our ability to develop and sustain our market share of Twirla and to develop, and obtain,
regulatory approval for and market our potential product candidates, if approved. Moreover, if our contract manufacturer
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cannot successfully manufacture materials that conform to our specifications and the strict regulatory requirements of the
FDA, we may be subject to regulatory enforcement actions such as adverse inspectional findings, Warning Letters, Untitled
Letters, recall requests, withdrawal of product or investigational approvals, clinical holds or termination of clinical trials,
refusals to approve pending applications, disgorgement, restitution, exclusion from federal healthcare programs, product
seizures and detention, consent decrees, corporate integrity agreements, criminal and civil penalties, including
imprisonment, refusal to permit import or export of the product and injunction against or restriction of manufacture or
distribution. If our contract manufacturer experiences issues in its manufacturing process or is unable to produce
commercial supplies in adequate quantity and quality, our commercialization of Twirla could be delayed. An inability of
our contract manufacturer to produce supplies in adequate quantity and quality of Twirla and our potential product
candidates could also delay our ability to conduct clinical trials. This may adversely impact our ability to fulfil our post-
marketing study requirements for Twirla and obtain regulatory approval of our potential product candidates.
The machinery and process to produce the commercial supply of Twirla is located within one manufacturing site and is
customized to the particular manufacturing specifications of Twirla. If this customized equipment malfunctions at any time
during the production process, the time it may take Corium to secure replacement parts, to undertake repairs and to
revalidate the equipment and process or to identify new third-party manufacturers could limit our ability to meet the
commercial demand for Twirla. Similar manufacturing conditions may also apply to our potential product candidates. This
may increase the risk that the third-party manufacturer may not manufacture Twirla in accordance with the applicable
regulatory requirements, that we may not have sufficient quantities of Twirla or our potential product candidates or that we
may not have such quantities at an acceptable cost, any of which could delay, prevent, or impair the commercialization of
Twirla and the development of our potential product candidates.
Additionally, if Corium or any third-party manufacturer with whom we contract fails to perform its obligations, we
may be forced to manufacture the materials ourselves, for which we may not have the capabilities or resources, or enter
into an agreement with a different third-party manufacturer, which we may not be able to do so on reasonable terms, if at
all. In either scenario, our commercial supply of twirla and clinical trials supply for other potential product candidates
could be delayed significantly as we establish alternative supply sources. In some cases, the technical skills required to
manufacture our products or product candidates may be unique or proprietary to the original contract manufacturer and we
may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills to a back-up or
alternate supplier, or we may be unable to transfer such skills at all. In addition, if we are required to change contract
manufacturers for any reason, we will be required to verify that the new contract manufacturer maintains facilities and
procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as
through a manufacturing comparability study, that any new manufacturing process will produce our products or product
candidates according to the specifications previously submitted to the FDA or another regulatory authority. The delays
associated with the verification of a new contract manufacturer could negatively affect our ability to commercialize our
products, including Twirla, and develop our other potential product candidates in a timely manner or within budget.
Furthermore, a contract manufacturer may possess technology related to the manufacture of our products or product
candidates that such contract manufacturer owns independently. This would increase our reliance on such contract
manufacturer or require us to obtain a license from such contract manufacturer in order to have another contract
manufacturer manufacture our products or product candidates. In addition, changes in manufacturers often involve changes
in manufacturing procedures and processes, which could require that we conduct bridging or comparability studies between
our prior clinical or commercial supply and that of any new manufacturer. We may be unsuccessful in demonstrating the
comparability of newly manufactured products or product candidates to prior manufactured products or product candidates
which could require the conduct of additional clinical trials.
Although we have manufacturing agreements with Corium for the commercial supply of Twirla, Corium and several of
its suppliers of raw materials will likely be single source providers to us for a significant period of time. In particular,
Corium manufactures Twirla using EE and LNG and components that it purchases from third parties, most of which are
single source suppliers of the applicable material. We do not have any control over the process or timing of the acquisition
of these raw materials by Corium. Corium’s failure to timely obtain, or a disruption in the supply of, these raw materials
could lead to an inability to adequately supply the commercial market with finished product of Twirla and in turn adversely
affect our business. While, to date, Corium has not experienced any disruption to its supply chain for the raw materials
needed to manufacture Twirla, we cannot predict how the ongoing COVID-19 pandemic will affect Corium’s ability to
obtain raw materials in the future.
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Because we outsource all of our manufacturing processes, there is no guarantee that there will be sufficient supplies to
fulfill our requirements or that we may obtain such supplies on acceptable terms. Although Corium intends to enter into
agreements with critical manufacturers, component fabricators and secondary service providers to secure commercial
supply of Twirla, not all of such suppliers and service providers will be under contract. Any delays in obtaining adequate
supplies of our potential product candidates, including on account of the COVID-19 pandemic or U.S. government
utilization of its Defense Production Act authorities, could limit our ability to meet clinical and commercial demand for
Twirla.
In addition, in the event Twirla achieves significant market share, Corium may not possess adequate manufacturing
capabilities to meet market demand for Twirla. If it becomes necessary to engage an additional third-party manufacturer to
produce Twirla, we may need to license certain manufacturing know-how from Corium, and our commercial supply will be
limited while the new third-party manufacturer develops the necessary know-how to manufacture Twirla and while we
obtain regulatory approval for the addition of a new manufacturer and processes.
Reliance on a third-party manufacturer subjects us to risks that would not affect us if we manufactured Twirla and our
potential product candidates ourselves, including:
● Reliance on the third party for regulatory compliance and quality assurance;
● Reduced control over the manufacturing process for Twirla and our potential product candidates;
● The possible breach of the manufacturing agreements by the third party because of factors beyond our control;
● The possibility of termination or nonrenewal of the agreements by the third party because of our breach of the
manufacturing agreement or based on their own business priorities;
Twirla and our potential product candidates may compete with other products and product candidates for access to
manufacturing resources and facilities. There are a limited number of manufacturers that operate in compliance with the
FDA’s manufacturing requirements and that are both capable of manufacturing for us and willing to do so. If our existing
third-party manufacturer, or the third parties that we may engage in the future to manufacture a product for commercial sale
or for our clinical trials, should cease to continue to manufacture our products or potential product candidates for any
reason, we likely would experience delays in obtaining sufficient quantities of our products or potential product candidates
for us to meet commercial demand or to advance our clinical trials while we identify and qualify alternative suppliers. If for
any reason we are unable to obtain adequate supplies of our products or potential product candidates or the components
used to manufacture them, it will be more difficult for us to develop our potential product candidates and compete
effectively.
Our third-party manufacturer is subject to regulatory requirements, covering manufacturing, testing, quality control
and record keeping relating to Twirla and our potential product candidates, and is subject to ongoing inspections by various
regulatory agencies. In addition to the above-described regulatory actions, failures by our third-party manufacturer to
comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity while we
seek to secure another third-party manufacturer that meets all applicable regulatory requirements.
If the manufacturing facilities of Corium are not maintained in a manner that is compliant with FDA’s manufacturing
requirements, we may need to find alternative manufacturers and suppliers, which could result in supply interruptions
of Twirla and our potential product candidates, additional costs and lost revenues.
Corium’s facilities used for the manufacture of Twirla and our potential product candidates must be maintained in a
manner compliant with the FDA’s manufacturing requirements, including obtaining favorable inspection reports. We do not
control the manufacturing process and are dependent on Corium for compliance with the FDA’s requirements for
manufacture of Twirla and our potential product candidates. If Corium cannot successfully manufacture material
components and finished products that conform to our specifications and the FDA’s strict regulatory requirements, they and
we may be subject to regulatory action, including adverse inspectional findings, Warning Letters, Untitled Letters, product
recall requests, withdrawal of product or investigational approvals, non-approval of marketing applications,
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clinical holds or termination of clinical trials, disgorgement, restitution, exclusion from federal healthcare programs,
detentions or seizures, refusal to allow the import or export of a product, injunction against or restriction of manufacture or
distribution, consent decrees, corporate integrity agreements, criminal and civil penalties, including imprisonment, and
Corium may not be able to maintain FDA approval for its manufacturing facilities or acceptance of its manufacturing data
in regulatory filings. If Corium’s facilities cannot maintain compliance with FDA requirements, we may need to find and
successfully qualify alternative manufacturing facilities, which could result in supply interruptions of Twirla and our
potential product candidates and substantial additional costs as a result of such delays, including costs with respect to
finding alternative manufacturing facilities, and lost revenues. There is further no guarantee that the FDA would approve
these alternative facilities.
We rely on third parties to conduct aspects of our clinical trials and post marketing studies. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines or comply with applicable regulatory
requirements, we may not be able to maintain regulatory approval for Twirla or be delayed in obtaining or ultimately
not be able to obtain marketing approval for our potential product candidates.
We currently rely and plan to continue to rely on CROs and clinical trial sites for most aspects of our post-marketing
study and any other clinical trials of our potential product candidates, such as trial conduct, data management, statistical
analysis and electronic compilation of our FDA submission. We may enter into agreements with additional CROs and
clinical trial sites to obtain additional resources and expertise in an attempt to accelerate our progress with regard to new or
ongoing clinical and preclinical programs. Entering into relationships with CROs and clinical trial sites involves substantial
cost and requires extensive management time and focus. In addition, typically there is a transition period between
engagement of a CRO and clinical trial sites and the time the CRO and sites commences work. As a result, delays may
occur, which may materially impact our ability to meet our desired post-marketing and clinical development timelines and
ultimately have a material adverse impact on the commercialization of Twirla, our ability to maintain our marketing
authorization for Twirla, our operating results, financial condition or future prospects. For example, as part of Twirla’s
approval, the FDA is requiring that we conduct a post-marketing study comparing the risks for venous thromboembolism
(VTE) and arterial thromboembolism (ATE) in new users of Twirla to new users of oral CHCs and new users of Xulane in
U.S. women of reproductive age. The FDA has also required a second small post-marketing study to assess Twirla’s
residual drug content, strength, and adhesion. We plan to engage the services of a CRO to design, enroll, and complete this
study, which will likely involve thousands of subjects and hundreds of clinical trial sites and will require substantial time
and resources. If the CRO cannot enroll subjects and complete the trial in a timely manner, we may be unable to complete
the study required by the FDA and subsequently may lose our marketing authorization for Twirla or be subject to other
enforcement actions, and be forced to suspend commercial activities regarding the product.
As CROs and clinical investigators are not our employees, we cannot control whether or not they devote sufficient
time and resources to our clinical trials for which they are engaged to perform, and whether they comply with the
applicable regulatory requirements, known as Current Good Clinical Practices, or cGCPs, which are regulations and
guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or
EEA, and comparable foreign regulatory authorities for all of our products and potential product candidates in clinical
trials, which include requirements related to the conduct of the study, subject informed consent, and IRB approval.
Regulatory authorities enforce these cGCPs through routine inspections of trial sponsors, principal investigators and trial
sites. Although we may rely on third parties for the execution of our trials, we are nevertheless responsible for ensuring that
each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and
our reliance on CROs and clinical trial sites does not relieve us of our regulatory responsibilities. If we, any of our CROs,
or clinical trial sites fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed
unreliable and the FDA, European Medicines Agency or comparable foreign regulatory authorities may require us to
perform additional clinical trials before approving our marketing applications for potential product candidates in
development, or to perform additional post marketing studies for approved products or determine that data from the post
marketing study is not sufficient to support maintaining marketing authorization for the product at issue. We cannot assure
you that, upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical
trials or post marketing studies complies with cGCP regulations.
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In addition, our clinical trials must be conducted with product and potential product candidates’ materials produced in
compliance with the FDA’s manufacturing regulations. Our failure to comply with these regulations may require us to
discontinue or repeat clinical trials, which could delay the regulatory approval process for our potential product candidates
or impact our ability to meet our post-market study requirements. If the CROs or clinical trial sites we engage do not
successfully carry out their contractual duties or obligations, conduct the clinical trials in accordance with all regulatory
requirements and the applicable protocols, or meet expected deadlines, or if they need to be replaced, or the quality or
accuracy of the data they provide is compromised due to a failure to adhere to regulatory requirements or for other reasons,
then our development programs may be extended, delayed or terminated, we may not be able to obtain marketing approval
for or successfully commercialize our potential product candidates, or we may not be able to meet our post-market study
requirements. Failure to comply with clinical trial regulatory requirements may further subject us to regulatory action,
including Warning Letters, Untitled Letters, adverse inspectional findings, clinical holds or termination of clinical trials,
non-approval of marketing applications, criminal and civil penalties, including imprisonment, injunction against
manufacture or distribution and debarment. As a result, our financial results and the commercial prospects for Twirla or our
potential product candidates could be harmed and our costs could increase.
We may rely on third parties to perform many essential services for any products that we commercialize, including
services related to government price reporting, customer service, accounts receivable management, cash collection, and
pharmacovigilance and adverse event reporting. If these third parties fail to perform as expected or to comply with legal
and regulatory requirements, our ability to commercialize our potential product candidates will be significantly
impacted and we may be subject to regulatory sanctions.
We may retain third-party service providers to perform a variety of functions related to Twirla, key aspects of which
will be out of our direct control. These service providers may provide key services related to customer service, accounts
receivable management, and cash collection. If we retain a service provider, we would substantially rely on it as well as
other third-party providers that perform services for us. If these third-party service providers fail to comply with applicable
laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us, or
encounter physical or natural damage at their facilities, our ability to deliver product to meet commercial demand would be
significantly impaired and we may be subject to regulatory enforcement action.
In addition, we may engage third parties to perform various other services for us relating to pharmacovigilance and
adverse event reporting, safety database management, fulfillment of requests for medical information regarding Twirla and
related services. If the quality or accuracy of the data maintained by these service providers is insufficient, or these third
parties otherwise fail to comply with regulatory requirements, we could be subject to regulatory sanctions.
We may further contract with a third party to calculate and report pricing information mandated by various government
programs. If a third party fails to timely report or adjust prices as required, or errors in calculating government pricing
information from transactional data in our financial records, it could impact our discount and rebate liability, and
potentially subject us to regulatory sanctions or False Claims Act lawsuits.
Risks Related to Intellectual Property Rights
We may not be able to protect our proprietary technology in the marketplace.
We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and
trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer
only limited protection. Our success depends in large part on our ability and any future licensee’s ability to maintain our
patents and to obtain additional patent protection in the United States and other countries with respect to our proprietary
technology and products. We believe we will be able to obtain, through prosecution of our pending patent applications,
additional patent protection for our proprietary technology. If we are compelled to spend significant time and money
protecting or enforcing our patents, designing around patents held by others or licensing or acquiring, potentially for large
fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed. If we are
unable to effectively protect the intellectual property that we own, other companies may be able to offer for sale the same
or similar products containing the generically available active pharmaceutical ingredients in Twirla and our potential
product candidates, which could materially adversely affect our competitive business position and harm our
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business prospects. Our patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to
stop competitors from marketing the same or similar products or limit the length of the term of patent protection that we
may have for our potential product candidates. Even if our patents are unchallenged, they may not adequately protect our
intellectual property, provide exclusivity for our potential product candidates or prevent others from designing around our
claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an
adverse impact on our business.
The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in
pharmaceutical patents in the United States and many jurisdictions outside of the United States is not consistent. For
example, in many jurisdictions the support standards for pharmaceutical patents are becoming increasingly strict. Some
countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws
in the United States and other countries may diminish the value of our intellectual property or create uncertainty. In
addition, publication of information related to our current product and potential product candidates and potential products
may prevent us from obtaining or enforcing patents relating to this product and potential product candidates and potential
products, including without limitation transdermal delivery systems and methods of using such transdermal delivery
systems. Our product and potential product candidates contain generically available active pharmaceutical ingredients. As a
result, new chemical entity patents directed to the active pharmaceutical ingredients in our product and potential product
candidates, which are generally believed to offer the strongest form of patent protection, are not available for our potential
product candidates.
Patents that we own or may license in the future do not necessarily ensure the protection of our intellectual property for
a number of reasons, including without limitation the following:
● The active pharmaceutical ingredients in Twirla and our potential product candidates are generic and therefore our
patents do not include claims directed solely to the active pharmaceutical ingredients;
● Our patents may not be broad or strong enough to prevent competition from other products that are identical or
similar to Twirla or our potential product candidates using the same active pharmaceutical ingredients;
● There can be no assurance that the term of patent protection will be long enough for our company to realize
sufficient economic value under the patents following commercialization of Twirla, or our potential product
candidates, if approved;
● Our issued patents and pending patent applications that may issue as patents in the future may not prevent entry
into the U.S. market or other markets of generic versions of Twirla or our other potential product candidates;
● Our patents may face paragraph IV challenges from potential generic or 505(b)(2) applicants, asserting that our
applicable patents are invalid, unenforceable, or will not be infringed by the manufacture, use, or sale of the
competitive drug product;
● We do not at this time own or control issued foreign patents in all markets that would prevent generic entry into
some markets for Twirla or our potential product candidates;
● We may be required to disclaim part of the term of one or more patents;
● There may be prior art of which we are not aware that may affect the validity or enforceability of one or more
patent claims;
● There may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a
patent claim, but which, nonetheless, ultimately may be found to affect the validity or enforceability of a patent
claim;
● There may be other patents issued to others that will affect our freedom to operate;
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● If our patents are challenged, a patent office or a court could determine that they are invalid or unenforceable;
● There might be changes in the law that governs patentability, validity and infringement of our patents that
adversely affects the scope or enforceability of our patent rights;
● A court could determine that a competitor’s technology or product that is the same as or similar to, Twirla or our
potential product candidates does not infringe our patents; and
● Our patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be
subject to compulsory licensing.
Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in
a non-infringing manner. Our competitors may seek to market generic, similar or strength modified versions of any
approved products by submitting abbreviated new drug or 505(b)(2) NDA applications to the FDA in which our
competitors claim that our patents are invalid, unenforceable or not infringed. Alternatively, our competitors may seek
approval to market their own products that are the same as, similar to or otherwise competitive with Twirla or our potential
product candidates. In these circumstances, we may need to defend or assert our patents, by means including filing lawsuits
alleging patent infringement. In any of these types of proceedings, a court or government agency with jurisdiction may find
our patents invalid, unenforceable or not infringed. We may also fail to identify patentable aspects of our research and
development before it is too late to obtain patent protection. Even if we have valid and enforceable patents, these patents
still may not provide protection against competing products or processes sufficient to achieve our business objectives.
The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In
that regard, third parties may challenge our patents in the courts or patent offices in the United States and abroad. Such
challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held
unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or
identical technology and products, or limit the duration of the patent protection of our technology and potential products. In
addition, given the amount of time required for the development, testing and regulatory review, and commercial launch of
new products, patents protecting any approved product we may have might expire or be held invalid or unenforceable
before our company can realize sufficient economic value following commercialization.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent
applications and the enforcement or defense of our issued patents.
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The
Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way
patent applications are prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the
United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application
will be entitled to that patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO
and may become involved in post-grant proceedings including reexamination, post-grant review, inter partes review, or
derivation or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination
in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights,
which could adversely affect our competitive position.
The USPTO has developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of
the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did
not become effective until March 16, 2013. However, the full impact of the Leahy-Smith Act, as well as the courts’
treatment of any appeals to related proceedings, remain unclear. Accordingly, the full impact that the Leahy-Smith Act will
have on the operation of our business is not clear. However, the Leahy-Smith Act and its implementation could increase the
uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued
patents, as well as our ability to bring about timely favorable resolution of any disputes involving our patents and the
patents of others.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee
payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced
or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several
stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance
with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the
applicable rules, there are situations in which noncompliance can result in unenforceability, invalidity, abandonment or
lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Noncompliance events that could result in unenforceability, invalidity, abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment
of fees and failure to properly legalize and submit formal documents. If we or any future licensors fail to maintain the
patents and patent applications covering Twirla or our potential product candidates, our competitive position would be
adversely affected.
We may infringe the intellectual property rights of others, which may prevent or delay our commercialization and
product development efforts or increase the costs of commercializing Twirla, or our potential product candidates, when
and if approved.
Our commercial success depends significantly on our ability to operate without infringing the patents and other
intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that
Twirla or our current or future potential product candidates infringe. There also could be patents that we believe we do not
infringe, but that we may ultimately be found to infringe.
Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of
discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying
discoveries were made and patent applications were filed. There may be currently pending applications of which we are
unaware that may later result in issued patents that Twirla or our current or future potential product candidates infringe. For
example, pending applications may exist that claim or can be amended to claim subject matter that Twirla or our current or
future potential product candidates infringe. Competitors may file continuing patent applications claiming priority to
already issued patents in the form of continuation, divisional or continuation-in-part applications, in order to maintain the
pendency of a patent family and attempt to cover Twirla or our potential product candidates.
Third parties may assert that we are employing their proprietary technology without authorization and may sue us for
patent or other intellectual property infringement or misappropriation. These lawsuits are costly and could adversely affect
our results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent
infringement, we would need to demonstrate that our product, potential product candidates or methods either do not
infringe the claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to
do this. Proving invalidity or unenforceability is difficult. For example, in the United States, proving invalidity requires a
showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we
are successful in these proceedings, we may incur substantial costs and the time and attention of our management and
scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In
addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that any
third-party patents are valid, enforceable and cover our product, potential product candidates, or their use, the holders of
any of these patents may be able to block our ability to commercialize Twirla or our potential product candidates unless we
acquire or obtain a license under the applicable patents or until the patents expire. We may not be able to enter into
licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure
licenses or alternative technology could result in delays in the introduction of our product or potential product candidates or
lead to prohibition of the manufacture or sale of our product or potential product candidates by us. Even if we are able to
obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We
could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in
any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’
fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from
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commercializing our product or potential product candidates or force us to cease some of our business operations, which
could materially harm our business. Any claims by third parties that we have misappropriated their confidential
information, know-how or trade secrets could have a similar negative impact on our business. In addition, any uncertainties
resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the
funds necessary to continue our operations.
We may be subject to claims that we or our employees have misappropriated the intellectual property, including know-
how or trade secrets, of a third party, or that claim ownership of what we regard as our own intellectual property.
Many of our employees, consultants and contractors were previously employed at or engaged by biotechnology
companies or other pharmaceutical companies, including our competitors or potential competitors. Some of these
employees, consultants and contractors, including each member of our senior management, executed proprietary rights,
non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure
that our employees, consultants and contractors do not use the intellectual property and other proprietary information or
know-how or trade secrets of others in their work for us, we may be subject to claims that we or these employees,
consultants and contractors have used or disclosed such intellectual property, including know-how, trade secrets or other
proprietary information. Litigation may be necessary to defend against these claims. We are not aware of any threatened or
pending claims related to these matters or concerning agreements with our senior management, or other of our employees,
consultants and contractors, but litigation may be necessary in the future to defend against such claims. If we fail in
defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, or
personnel or access to consultants and contractors. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the
development of intellectual property to execute agreements assigning such intellectual property to us, we may be
unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as
our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in
prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual
property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in
substantial costs and be a distraction to our management and scientific personnel.
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We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets to protect our proprietary technological advances and know-how, especially where we do not
believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on
confidentiality agreements with our employees, consultants, contractors, outside scientific collaborators, sponsored
researchers and other advisors, including the third parties we rely on to manufacture Twirla and our potential product
candidates, to protect our trade secrets and other proprietary information. However, any party with whom we have executed
such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets.
Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an
adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation
could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently
discover our trade secrets and proprietary information. Further, the FDA, as part of its Transparency Initiative, previously
took steps to increase the public disclosure of information regarding FDA-regulated products, including information that
we may consider to be trade secrets or other proprietary information. It is not clear at the present time how the FDA’s
disclosure policies may change in the future, if at all. Failure to obtain or maintain trade secret protection could enable
competitors to use our proprietary information to develop products that compete with our products or cause additional,
material adverse effects upon our competitive business position and financial results.
Any lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time
consuming and may adversely impact the price of our common stock.
We may be required to initiate litigation to enforce or defend our intellectual property rights. These lawsuits can be
very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property
rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating
expenses and reduce the resources available for development activities or any future sales, marketing or distribution
activities.
In infringement litigation, any award of monetary damages we receive may not be commercially valuable.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information and trade secrets could be compromised by disclosure during
litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue
such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a
perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their
patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we
can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
In addition, our patents and patent applications in the United States and other jurisdictions could face other challenges,
such as derivation or interference proceedings, opposition proceedings, inter partes review, reexamination proceedings,
third party submissions of prior art, and other forms of post-grant challenges. In the United States, for example, post-grant
review, which is similar to opposition proceedings available in many countries other than the U.S., was newly established
by the Leahy-Smith Act. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the
scope or preventing the issuance of, any of our patents and patent applications subject to challenge. Any of these
challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would
divert our management and scientific personnel’s time and attention.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or
developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse
effect on the market price of our common stock.
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Risks Related to the Development of Our Additional Potential Product Candidates
If we fail to develop and commercialize our current pipeline of additional potential product candidates, our prospects for
future growth and our ability to reach or sustain profitability may be limited or never achieved.
A key element of our long-term strategy is to develop, obtain regulatory approval for and commercialize our portfolio
of potential product candidates in addition to Twirla. To do so, we plan to utilize our proprietary transdermal delivery
technology, Skinfusion®, to develop additional potential product candidates. We may not be successful in our efforts to
develop our portfolio of additional potential product candidates, and any potential product candidates we do develop may
not produce commercially viable products that safely and effectively treat their indicated conditions. To date, our efforts
have identified additional potential product candidates, including AG200 15 Extended Regimen (ER), an 84-day extended
cycle regimen utilizing our approved Twirla TDS product designed to allow a woman to have four (4) episodes of
withdrawal bleeding per year, AG200 15 SmP, a 28 day regimen designed to provide users with shorter, lighter withdrawal
bleeds and potentially improve contraceptive efficacy, AG200 15 ER SmP, a 91-day extended cycle regimen utilizing our
approved Twirla TDS and the SmP that is designed to allow a woman to have four (4) shorter, lighter withdrawal bleeding
episodes per year, and AG890, which is a progestin-only contraceptive patch intended for use by women who are unable or
unwilling to take estrogen. The results of preclinical studies and early clinical trials of our product candidates may not be
predictive of the results of later-stage clinical trials. In addition, initial success in clinical trials may not be indicative of
results obtained when such trials are completed. There is typically an extremely high rate of attrition from the failure of
product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show
the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A
number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to
lack of efficacy or emergence of unacceptable safety issues, notwithstanding promising results in earlier trials. Most
product candidates that commence clinical trials are never approved as products and there can be no assurance that any of
our future clinical trials will ultimately be successful or support further clinical development of any of our product
candidates. Product candidates that appear promising in the early phases of development may fail to reach the market for
several reasons, including:
•
•
•
preclinical studies or clinical trials may show the product candidates to be less effective than expected (e.g., a
clinical trial could fail to meet its primary endpoint(s)) or to have unacceptable side effects or toxicities;
failure to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;
failure to receive the necessary regulatory approvals;
• manufacturing issues, formulation issues, pricing or reimbursement issues or other factors that make a product
candidate uneconomical; and
•
the proprietary rights of others and their competing products and technologies that may prevent one of our product
candidates from being commercialized.
In addition, differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult
to extrapolate the results of earlier clinical trials to later clinical trials. Moreover, clinical data are often susceptible to
varying interpretations and analyses, and many companies that have believed their product candidates performed
satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products.
Additionally, from time to time, we may publish interim or preliminary data from our clinical studies. Interim data
from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially
change as patient enrollment continues and more patient data become available. Preliminary data also remain subject to
audit and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, interim and preliminary data should be viewed with caution until the final data are
available. Material adverse changes between preliminary or interim data and final data could significantly harm our
business prospects.
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Moreover, in the past we have and in the future we may conduct clinical trials that utilize an “open-label” trial design.
An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the
investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials
test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials
are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are
aware when they are receiving treatment. Open-label clinical trials may be subject to a “patient bias” where patients
perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. In
addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the
physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the
information of the treated group more favorably given this knowledge. The results from an open-label trial may not be
predictive of future clinical trial results with any of our product candidates for which we include an open-label clinical trial
when studied in a controlled environment with a placebo or active control.
The potential product candidates in our pipeline will require additional product development efforts to optimize patch
formulations and dosing. In addition, we will need to conduct additional clinical trials to establish the safety and efficacy of
these potential product candidates, which will be expensive and potentially require additional capital.
Our development programs may initially show promise in identifying potential product leads yet fail to produce
potential product candidates for clinical development. In addition, identifying new treatment needs and potential product
candidates requires substantial technical, financial and human resources on our part. If we are unable to obtain development
partners or additional development program funding, or to continue to devote substantial technical and human resources to
such programs, we may have to delay or abandon these programs. Any potential product candidate that we successfully
identify may require substantial additional development efforts prior to commercial sale, including preclinical studies,
extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All potential product
candidates are susceptible to the risks of failure that are inherent in pharmaceutical product development.
If we experience any of a number of possible unforeseen events in connection with clinical trials related to our potential
product candidates, or Twirla, any potential marketing authorization or commercialization of our potential product
candidates could be delayed or prevented or we may not be able to meet our post-marketing study requirements for
Twirla.
We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our
ability to receive marketing authorization or commercialize our potential product candidates, may prevent us from meeting
our Twirla post-marketing study requirements, or which may adversely impact our commercialization of Twirla including:
● clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to
conduct additional clinical trials or abandon product development programs, or we may be required to modify the
Twirla label, or regulators may withdraw Twirla approval or impose other conditions or restrictions, such as
REMS;
● the number of patients required for clinical trials of our product and potential product candidates may be larger
than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop
out of these clinical trials at a higher rate than we anticipate;
● we may enroll patients at clinical trial sites in countries that are inexperienced with clinical trials in general;
● our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations
to us in a timely manner, or at all;
● regulators, institutional review boards or independent ethics committees may not authorize us or our investigators
to commence a clinical trial or conduct a clinical trial at a prospective trial site or may require us
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to submit additional data, conduct additional studies or amend our investigational new drug application, or IND,
or comparable application prior to commencing a clinical trial;
● we may have delays in reaching or may fail to reach agreement on acceptable clinical trial contracts or clinical
trial protocols with prospective trial sites;
● we may have to suspend or terminate clinical trials of our potential product candidates for various reasons,
including a finding that the participants are being exposed to unacceptable health risks;
● regulators, institutional review boards or independent ethics committees may require that we or our investigators
suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements
or a finding that the participants are being exposed to unacceptable health risks;
● the cost of clinical trials may be greater than we anticipate;
● regulators may determine that our studies, study design, or data analyses do not meet their regulatory
requirements;
● the supply or quality of our potential product candidates, Twirla, or other materials necessary to conduct clinical
trials may be insufficient or inadequate; or
● Twirla or our potential product candidates may have undesirable side effects or other unexpected characteristics,
causing us or our investigators, regulators, institutional review boards or independent ethics committees to
suspend or terminate the trials.
Our costs will increase if we experience delays in testing, completion of post-marketing studies, or, for our potential
product candidate marketing authorizations. We do not know whether any clinical trials will begin as planned, will need to
be restructured or will be completed on schedule, or at all.
For Twirla, failure to complete post-marketing studies may also result in enforcement actions or removal of the product
from the market. Adverse post-marketing study results may also result in withdrawal or limitations on marketing
applications, label changes, or other restrictions or requirements, such as REMS or additional study requirements.
For our potential product candidates, we cannot commercialize any potential product candidates in the U.S. without
first obtaining FDA approval. Before obtaining regulatory approvals for commercial sale, however, we must demonstrate
in, or rely on data from preclinical studies and well controlled clinical trials that the potential product candidate is safe and
effective for use in the target indication and that the manufacturing processes, facilities, and controls are adequate.
Obtaining marketing approval in the U.S. is a lengthy, expensive and uncertain process, and approval may not be obtained
or may be subject to significant restrictions. Significant clinical trial delays also could shorten any periods during which we
may have the exclusive right to commercialize our potential product candidates, allow our competitors to bring products to
market before we do, or impair our ability to successfully commercialize our potential product candidates, and so may
harm our business, results of operations and financial condition. Delays in regulatory approvals or failure to obtain
regulatory approval for a potential product candidate may result from many factors, including:
● Regulatory requests for additional analyses, reports, data, nonclinical and preclinical studies, product design work
and testing, and manufacturing development work;
● Regulatory questions regarding interpretation of data or new information regarding the potential product candidate
or other products;
● Regulators may not agree with the design of our studies or our statistical analysis, may interpret our data
differently than we do, or may find that our study results are not supportive of approval;
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● Our studies may reveal unfavorable or inconclusive results, including unfavorable results regarding the potential
product candidate’s safety or efficacy;
● Regulators may determine that our potential product candidates present an unacceptable health risk or that the
product’s candidate’s risks outweigh any benefits;
● Regulators may not approve our manufacturing facilities or processes following a facility inspection;
● Regulators may determine that our studies were not properly conducted or did not comply with regulatory
requirements;
● We and regulators may not come to an agreement on product labeling;
● We may have insufficient funds to pay the FDA’s significant application user fees;
● We may not be able to use FDA’s 505(b)(2) NDA pathway due to changes in the FDA’s interpretation of the law;
and
● We may face patent challenges that may result in stays on the FDA’s ability to approve our potential product
candidates.
Delays or failure to receive regulatory approval for any additional potential product candidates may materially impact
our business.
Risks Related to Our Business Operations and Industry
The ongoing outbreak of the novel strain of coronavirus, or COVID-19, or other similar public health crises, could have
a material adverse impact on our business, financial condition and results of operations, including our ability to
successfully produce, market, and distribute Twirla®.
In December 2019, a novel strain of coronavirus (SARS-CoV-2), now referred to as COVID-19, surfaced in Wuhan,
China. Since then, the virus has spread globally to multiple countries, including the United States. The impact of this
pandemic has been and will likely continue to be extensive, affecting many aspects of society, and it has resulted in and
will likely continue to result in significant disruptions to global business activities and capital markets around the world,
including as emerging variants of the virus are detected and continue to spread.
As a result of the COVID-19 pandemic, or similar pandemics, we may experience disruptions that could severely
affect our business, including our plans to clinically develop and commercialize our products. We may not be able to meet
expectations with respect to our anticipated commercial launch of Twirla, our first approved product, which we plan to
begin manufacturing on a commercial scale in the second half of 2020.
Global business interruptions resulting from COVID-19 may adversely impact our third-party manufacturer, Corium,
whom we rely upon for the manufacture of Twirla, as well as its suppliers of raw materials. If Corium or any of its
suppliers of raw materials are adversely impacted by the COVID-19 pandemic or the restrictions resulting from the
pandemic, if they cannot obtain the necessary supplies, or if such third parties need to prioritize other products or customers
over us, including under the Defense Production Act, we may experience delays or disruptions in our supply chain, which
could have a material and adverse impact on our business. Third party manufacturers may also need to implement measures
and changes, or deviate from typical requirements because of the COVID-19 pandemic that may otherwise adversely
impact our supply chains or the quality of the resulting products or supplies. Depending on the change, we may need to
obtain FDA pre-approval or otherwise provide FDA with a notification of the change. As a result, we may not be able to
obtain sufficient quantities of Twirla, which could impair our ability to commercialize Twirla and conduct the post-
marketing studies requested by the U.S. Food and Drug Administration, or the FDA, in connection with the approval of
Twirla. In addition, if there are continued or future disruptions, our third-party
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manufacturers may not be able to supply our other potential product candidates, which would adversely affect our research
and development activities.
Further, many jurisdictions have implemented travel restrictions and expansive social distancing orders. These
measures may have a material adverse impact on the third-party consultants who assist us with our sales and marketing
functions, as well as on our ability to develop our own sales and marketing infrastructure. For example, such social
distancing orders could limit the ability of sales representatives to interact with healthcare providers and also restrict the
ability of patients to interact with their healthcare providers and obtain prescriptions for our products. Patients may also be
more reticent to visit their providers to obtain Twirla prescriptions during the COVID-19 pandemic. This could negatively
affect our ability to commercialize Twirla as well as market our other potential product candidates.
Delays in the ability to manufacture commercial supplies of Twirla and to implement a sales force for Twirla could also
adversely affect our financial position. Based on our current business plan and ability to get Twirla launched, we believe
that our cash, cash equivalents and marketable securities as of September 30, 2020 will be sufficient to meet our projected
operating requirements through the end of 2021. However, two vaccines for COVID-19 were granted Emergency Use
Authorization by the FDA in late 2020, and more are likely to be authorized in the coming months. While, to date, we have
not encountered any delays or interruptions to our supply due to the pandemic, the resultant demand for vaccines and
potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or
equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed
for our clinical trials and/or commercial product, which could lead to delays in these trials and/or issues with our
commercial supply. If the COVID-19 pandemic or other factors impact our current business plan or our ability to generate
revenue from the launch of Twirla, we believe we have the ability to revise our commercial plans, including curtailing sales
and marketing spending, to allow us to continue to fund our operations. However, significant delays in the timelines to
manufacture commercial supply of Twirla, and/or the ability of a salesforce to engage with healthcare providers could
delay, or even prevent, our ability to generate revenue, which in turn could require us to raise additional capital if the
revisions to our commercial plans are inadequate or management determines that it is necessary.
Additionally, certain of our clinical activities, including the post-marketing studies requested by the FDA in connection
with the approval of Twirla, as well as any product development activities that we have planned, may be delayed or
interrupted, compromising our ability to maintain regulatory approval for Twirla and our future ability to obtain marketing
approval for our other potential product candidates. By example, the pandemic may result in slower enrollment than we
anticipated, the need to suspend enrollment into studies, patient withdrawals, postponement of planned clinical or
preclinical studies, redirection of site resources from studies, study modification, suspension, or termination, the
introduction of remote study procedures and modified informed consent procedures, study site changes, direct delivery of
investigational products to patient homes requiring state licensing, study deviations or noncompliance, and changes or
delays in site monitoring. The foregoing may require that we consult with relevant review and ethics committees, IRBs,
and the FDA. The foregoing may also impact the integrity of our study data. The effects of the COVID-19 pandemic may
also increase the need for clinical trial patient monitoring and regulatory reporting of adverse effects. The pandemic could
further impact our ability to interact with the FDA or other regulatory authorities, and may result in delays in the conduct of
inspections or review of pending applications or submissions. Since March 2020, foreign and domestic inspections by the
FDA have largely been on hold with FDA announcing plans in July 2020 to resume prioritized domestic inspections.
Should FDA determine that an inspection is necessary for approval of a marketing application and an inspection cannot be
completed during the review cycle due to restrictions on travel, FDA has stated that it generally intends to issue a complete
response letter. Further, if there is inadequate information to make a determination on the acceptability of a facility, FDA
may defer action on the application until an inspection can be completed. In 2020, several companies announced receipt of
complete response letters due to the FDA's inability to complete required inspections for their applications. Regulatory
authorities outside the U.S. may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic
and may experience delays in their regulatory activities. In 2020, FDA noted it was continuing to ensure timely reviews of
applications for medical products during the COVID-19 pandemic in line with its user fee performance goals; however,
FDA may not be able to continue its current pace and approval timelines could be extended, including where a pre-
approval inspection or an inspection of clinical sites is required and due to the COVID-19 pandemic and travel restrictions
FDA is unable to complete such required inspections during the review period. Due to the potential impact of the COVID-
19 pandemic on clinical trials,
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drug development, and manufacturing, FDA issued a number of guidances concerning how sponsors and investigators may
address these challenges. FDA’s guidance is continually evolving. Any of these factors could significantly impair our
ability to generate revenue in the future and to attain and maintain profitability.
The COVID-19 pandemic may result in changes in laws and regulations. For example, in March 2020, the CARES
Act, includes various provisions regarding FDA drug shortage reporting requirements, as well as provisions regarding
supply chain security, such as risk management plan requirements, and the promotion of supply chain redundancy and
domestic manufacturing. This and any future changes in law may require that we change our internal processes and
procedures to ensure continued compliance.
In order to establish our sales and marketing infrastructure, we will need to grow the size of our organization, and we
may experience difficulties in managing this growth.
As of December 31, 2020, we had a total of 28 full-time employees reflecting a resumption of hiring to advance the
commercialization of Twirla. We use third-party consultants to assist with our sales and marketing functions. As our
commercialization of Twirla advances, we expect to need to expand the size of our employee base for managerial,
operational, commercial, sales, marketing, compliance, regulatory, finance and other resources. Future growth would
impose significant added responsibilities on members of management, including the need to identify, recruit, maintain,
motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of
its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth
activities. Our future financial performance and our ability to commercialize Twirla and any other future potential product
candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage any future
growth.
If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully
implement our business strategy.
Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to
attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our
management, scientific and medical personnel. In order to induce valuable employees to remain with us, we have provided
these employees with stock options that vest over time. The value to employees of stock options that vest over time is
significantly affected by movements in our stock price that we cannot control and may at any time be insufficient to
counteract more lucrative offers from other companies. Additionally, at times, we have also implemented programs that
included cash retention bonuses and/or restricted stock units as incentives to retain employees.
Our management team has expertise in many different aspects of drug development and commercialization.
Competition for skilled personnel in our market is intense and competition for experienced personnel may limit our ability
to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees,
members of our management, scientific and medical teams may terminate their employment with us on short notice. We
have employment agreements with our named executive officers which includes Alfred Altomari, our Chairman and Chief
Executive Officer. The employment agreements provide for at-will employment, which means that Mr. Altomari or any of
our other employees could leave our employment at any time, with or without notice. The loss of the services of any of our
executive officers or other key employees could potentially harm our business, operating results or financial condition. In
particular, we believe that the loss of the services of Mr. Altomari may have a material adverse effect on our business. We
do not currently carry “key person” insurance on the lives of members of executive management. Our success also depends
on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as
junior, mid-level and senior scientific and medical personnel.
Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other
resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse
opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-
quality candidates than those that we have to offer. If we are unable to continue to attract and retain high-quality personnel,
the rate of and success with which we can commercialize Twirla, as well as our potential product candidates, would be
limited.
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If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit
commercialization of Twirla, or our potential product candidates, if approved.
We face potential risks of product liability as a result of the clinical testing and commercial availability of Twirla and
the clinical testing of our other potential product candidates. For example, we may be sued if Twirla or any potential
product candidate we develop allegedly causes injury or is found to be otherwise unsuitable during product testing,
manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing,
defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties.
Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against
product liability claims, we may incur substantial liabilities or be required to limit commercialization or development of the
product or potential product candidate subject to such claims. Even a successful defense would require significant financial
and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
● Decreased demand for Twirla or any future potential product candidates that we may develop;
● Injury to our reputation;
● Withdrawal of clinical trial participants;
● Costs to defend any related litigation;
● A diversion of management’s time and our resources;
● Substantial monetary awards to trial participants or patients;
● Product recalls, withdrawals or labeling, marketing or promotional restrictions;
● Regulatory authority withdrawal of product approvals or refusal to approve pending applications;
● Loss of revenue;
● The inability to commercialize Twirla, or our potential product candidates, if approved;
● A decline in our stock price; and
● Exposure to adverse publicity.
We have obtained limited product liability insurance coverage for Twirla and our clinical trials with a $10.0 million
annual aggregate coverage limit. Our inability to obtain and retain sufficient product liability insurance at an acceptable
cost to protect against potential product liability claims could prevent or inhibit the commercialization Twirla or of
potential product candidates we develop. Although we maintain such insurance, any claim that may be brought against us
could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that
is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be
subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or
negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not
have, or be able to obtain, sufficient capital to pay such amounts.
Business interruptions could delay us in the process of developing our potential product candidates and could disrupt
our sales.
Our headquarters are located in Princeton, New Jersey, and Corium, our contract manufacturer, is located in Grand
Rapids, Michigan. We are vulnerable to natural disasters, such as severe storms and other events that could disrupt our or
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Corium’s operations. We do not carry insurance for natural disasters, and we may not carry sufficient business interruption
insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect
on our business operations.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems, and those of other third parties on
which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the internet, attachments to emails,
persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or
disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and
cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from
around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in
a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or
ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our
costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or
damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur
liability and the further commercialization of Twirla and/or development of our potential product candidates could be
delayed.
Our employees, independent contractors, principal investigators, CROs, manufacturers, consultants, commercial
partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements and insider trading, which could significantly harm our business.
We are exposed to the risk that employees, independent contractors, principal investigators, CROs, manufacturers,
consultants, commercial partners and vendors may engage in fraudulent or other illegal activity, fraud or other misconduct.
Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities
to us that violates: (i) the law and regulations of the FDA and non-U.S. regulators, including those laws that require the
reporting of true, complete and accurate information to the FDA and non-U.S. regulators, (ii) healthcare fraud and abuse
laws and regulations in the United States and abroad and (iii) laws that require the true, complete and accurate reporting of
financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are
subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive
practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other business arrangements. Misconduct in violation of
these laws may also involve the improper use of information obtained in the course of clinical trials, which could result in
regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to
identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent
this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from
governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those
actions could have a significant impact on our business, including regulatory enforcement actions, the imposition of
significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in
Medicare, Medicaid and other federal healthcare programs, corporate integrity agreements, contractual damages,
reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely
affect our ability to operate our business and our results of operations.
Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax
payments may be limited by provisions of the Internal Revenue Code of 1986, as amended, and may be subject to further
limitation as a result of our initial public offering.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, contain rules that limit the
ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50%
of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in
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losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes
involving stockholders owning, directly or indirectly, 5% or more of the stock of a company and any change in ownership
arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income
limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of
the applicable long-term tax-exempt rate and the value of the company’s stock immediately before the ownership change.
We may be unable to offset future taxable income, if any, with losses, or our tax liability with credits, before such losses
and credits expire and therefore would incur larger federal income tax liability. Our net operating loss carryforwards arising
in taxable years ending on or prior to December 31, 2017 will expire between 2019 and 2037 if we have not used them. Net
operating loss carryforwards arising in taxable years ending after December 31, 2017 are no longer subject to expiration
under the Code.
In addition, it is possible that the transactions relating to our initial public offering or subsequent public offerings,
either on a standalone basis or when combined with future transactions, have caused us to undergo one or more additional
ownership changes. In that event, we generally would not be able to use our pre-change loss or credit carryovers or certain
built-in losses prior to such ownership change to offset future taxable income in excess of the annual limitations imposed
by Sections 382 and 383 of the Code. We have not completed a study to assess whether an ownership change has occurred,
or whether there have been multiple ownership changes since our inception.
Risks Related to Ownership of Our Common Stock
We expect that our stock price may fluctuate significantly.
The trading price of our common stock is highly volatile and is subject to wide fluctuations in response to various
factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this
“Risk Factors” section and elsewhere in this annual report, these factors include:
● Our failure to commercialize Twirla or develop and commercialize additional potential product candidates;
● Unanticipated efficacy, safety or tolerability concerns related to the use of Twirla;
● Regulatory actions with respect to Twirla;
● Inability to obtain adequate product supply of Twirla or inability to do so at acceptable prices;
● Adverse results or delays in our clinical trials for our potential product candidates;
● Changes in laws or regulations applicable to Twirla or any future potential product candidates, including but not
limited to clinical trial requirements for approvals, post-approval requirements, and product marketing,
advertising, and promotional requirements and limitations;
● Actual or anticipated fluctuations in our financial condition and operating results;
● Actual or anticipated changes in our growth rate relative to our competitors;
● Competition from existing products or new products that may emerge;
● Announcements by us, our collaborators or our competitors of significant acquisitions, strategic partnerships, joint
ventures, collaborations or capital commitments;
● Failure to meet or exceed financial estimates and projections of the investment community or that we provide to
the public;
● Issuance of new or updated research or reports by securities analysts;
● Fluctuations in the valuation of companies perceived by investors to be comparable to us;
● Share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
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● Additions or departures of key personnel;
● Disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to
obtain patent protection for our technologies;
● Announcement or expectation of additional debt or equity financing efforts;
● Sales of our common stock by us, our insiders or our other stockholders; and
● General economic and market conditions.
These and other market and industry factors may cause the market price and demand for our common stock to
fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily
selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition,
the stock market in general, and the Nasdaq Capital Market and the stock prices of pharmaceutical companies in particular,
have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies.
Certain of our outstanding common stock purchase warrants contain price protection provisions (anti-dilution
protection) in the event that we sell our securities at prices lower than the current exercise price of such warrants, which
may have a negative impact on the trading price of our common stock or impair our ability to raise capital.
As of March 1, 2021, we had 1,850,000 common stock purchase warrants outstanding that were issued in connection
with the Perceptive Credit Agreement that contain price protection provisions in the event that we sell securities at a price
per share below their respective exercise prices on or before December 31, 2022 (collectively “Price Protection Warrants”).
The current exercise prices of the Price Protection Warrants are: 700,000 Price Protection Warrants - $3.74, 700,000 Price
Protection Warrants - $4.67 and 450,000 Price Protection Warrants - $2.87. In the event that we sell securities at a price per
share lower than the current exercise price of the Price Protection Warrants on or before December 31, 2022, their exercise
prices will be reduced pursuant to a weighted-average anti-dilution formula. Any future adjustments to the exercise prices
of the Price Protection Warrants may have a negative impact on the trading price of our common stock. Additionally,
raising additional capital with new investors may be difficult as a result of the adjustment feature.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our common stock may be volatile, and in the past companies that have experienced volatility in
the market price of their stock have been subject to securities class action litigation. We may be the target of this type of
litigation. Litigation of this type could result in substantial costs and diversion of management’s attention and resources,
which could adversely impact our business. Any adverse determination in litigation could also subject us to significant
liabilities.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to
accurately report our financial condition, results of operations or cash flows, which may adversely affect investor
confidence in us and, as a result, the value of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and,
together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement
required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our
reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act,
or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive
changes to our financial statements or require us to identify other areas for further attention or improvement. If we are
unable to conclude that our internal control over financial reporting is effective, or if our independent registered public
accounting firm determines we have a material weakness or significant deficiency in our internal control over financial
reporting once that firm conducts its Section 404 reviews, we could lose investor confidence in the accuracy
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and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to
sanctions or investigations by the Nasdaq Capital Market, the SEC or other regulatory authorities. Failure to remedy any
material weakness in our internal control over financial reporting, or to implement or maintain other effective control
systems required of public companies, could also restrict our future access to the capital markets.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be
disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management,
recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We
believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the
inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not
be detected.
We have never paid dividends on our common stock and we do not anticipate paying any dividends in the foreseeable
future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our
common stock increases.
We have not paid dividends on our common stock to date and we currently intend to retain our future earnings, if any,
to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be
your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience
a gain from your investment in our common stock if the price of our common stock increases.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable
commentary or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock relies in part on the research and reports that equity research analysts
publish about us and our business. We do not control these analysts. The price of our common stock could decline if one or
more equity analysts downgrade our common stock or if analysts issue other unfavorable commentary or cease publishing
reports about us or our business.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of
control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and
prevent attempts by our stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could
delay or prevent a change of control of our company or changes in our board of directors that our stockholders might
consider favorable. Some of these provisions:
● Authorize the issuance of preferred stock which can be created and issued by the board of directors without prior
stockholder approval, with rights senior to those of our common stock;
● Provide for a classified board of directors, with each director serving a staggered three-year term;
● Prohibit our stockholders from filling board vacancies, calling special stockholder meetings or taking action by
written consent;
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● Provide for the removal of a director only with cause and by the affirmative vote of the holders of 75% or more of
the shares then entitled to vote at an election of our directors;
● Require advance written notice of stockholder proposals and director nominations; and
● Require any action instituted against our officers or directors in connection with their service to the Company to
be brought in the state of Delaware.
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may
prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and
other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law
could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate
actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving
our company. This provision could have the effect of delaying or preventing a change of control, whether or not it is
desired by or beneficial to our stockholders. Any delay or prevention of a change of control transaction or changes in our
board of directors could cause the market price of our common stock to decline.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal offices occupy approximately 5,750 square feet of leased office space in Princeton, New Jersey pursuant
to a lease agreement that expires in December 2021. We believe that our current facilities are suitable and adequate to meet
our current needs. We are currently seeking new facilities as we add employees, and we believe that suitable additional or
substitute space will be available as needed to accommodate any such expansion of our operations.
Item 3. Legal Proceedings
None.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information and Holders of Record
Our common stock was listed on the Nasdaq Global Market under the symbol “AGRX” from May 23, 2014 through
January 2, 2019. Beginning on January 3, 2019, our common stock has been listed on the Nasdaq Capital Market under the
symbol “AGRX”.
Year Ended December 31, 2020
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year Ended December 31, 2019
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
$
$
$
$
$
$
$
$
3.30
3.89
3.35
4.77
2.97
1.64
1.56
1.70
$
$
$
$
$
$
$
$
2.68
2.32
1.75
1.35
0.35
0.95
1.02
0.66
As of February 24, 2021, we had 23 holders of record of our common stock. The actual number of shareholders is
greater than this number of record holders and includes shareholders who are beneficial owners but whose shares are held
in street name by brokers and other nominees. The number of holders of record also does not include shareholders whose
shares may be held in trust by other entities. The closing price of our common stock on February 24, 2021 was $3.13.
Dividends
We have never declared or paid a cash dividend on our capital stock. We currently intend to retain any future earnings
and do not expect to pay any dividends in the foreseeable future. In addition, our Credit Agreement and Guaranty among
us, the gurantors from time to time party thereto, the lenders from time to time party thereto and Perceptive Credit Holdings
III, LP, as a lender and as Administrative Agent for the lenders, contains, and any other loan facilities that we may enter
into may contain, restrictions on our ability to pay dividends. Subject to such restrictions, any future determinations to pay
cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a
number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions,
general business conditions, and any other factors that our board may deem relevant.
Stock Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities
under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Exchange Act
or the Securities Act of 1933, as amended.
The following graph shows a comparison from December 31, 2015 through December 31, 2020 of the cumulative total
return for our common stock, and the Nasdaq Composite Index and The Nasdaq Biotechnology Index. The graph assumes
that $100 was invested at the market close on December 31, 2015 in the common stock of Agile Therapeutics, Inc., the
Nasdaq Composite Index and The Nasdaq Biotechnology Index and assumes reinvestments of
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dividends. The stock price performance of the following graph is not necessarily indicative of future stock price
performance.
Comparison of Cumulative Total Return
December 31, 2020
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations is provided to enhance the
understanding of, and should be read in conjunction with, Part I, Item 1, “Business” and Item 8, “Financial Statements
and Supplementary Data.” For information on risks and uncertainties related to our business that may make past
performance not indicative of future results or cause actual results to differ materially from any forward-looking
statements, see “Special Note Regarding Forward-Looking Statements,” and Part I, Item 1A, “Risk Factors.” Dollars in
tabular format are presented in thousands, except per share data, or as otherwise indicated.
Overview
We are a women’s healthcare company dedicated to fulfilling the unmet health needs of today’s women. We have
remained steadfast in our commitment to innovate in women’s healthcare where there continues to be unmet needs – not
only in contraception – but also in other meaningful women’s health therapeutic areas.
Our first product, Twirla, which was approved in February 2020 and launched in early December 2020, is a once-
weekly prescription combination hormonal contraceptive patch. It delivers a dose of estrogen consistent with commonly
prescribed combined hormonal contraceptives, or CHCs, and lower than the estrogen dose found in other marketed
contraceptive patches. We believe there is a market need for a contraceptive patch that is designed to deliver approximately
30 mcg of estrogen and 120 mcg of progestin in a convenient dosage form that may support compliance in a noninvasive
fashion. Twirla leverages our proprietary transdermal patch technology called Skinfusion®. Skinfusion
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is designed to allow drug delivery through the skin while optimizing patch adhesion and patient comfort and wearability,
which may help support compliance.
With the approval of Twirla we are now focused on our advancement as a commercial company. During 2021, we plan
to continue implementing our commercialization plan for Twirla, with the goal of becoming a contraceptive market leader,
and ultimately, pursuing opportunities to broaden our portfolio to address areas of unmet medical need in women’s health.
It should be noted that current public health threats could adversely affect our ongoing or planned business operations.
In particular, the ongoing COVID-19 pandemic has resulted in federal, state and local governments and private entities
mandating various restrictions, including travel restrictions, access restrictions, restrictions on public gatherings, and stay at
home orders. The effect of these orders, government imposed quarantines and measures we have taken, such as
implementing work-at-home policies, may negatively impact productivity, disrupt our business and/or could adversely
affect our commercialization plans and results. We cannot presently predict the scope and severity of any potential
business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including personnel at third-
party manufacturing facilities and other third parties with whom we conduct business, were to experience shutdowns or
other business disruptions, our ability to conduct our business in the manner and on the timeline presently planned could be
materially and adversely impacted. It is unknown how long these conditions will last and what the complete effect will be
on us. While to date we have been able to continue to execute our overall business plan, some of our business activities
have been slowed and taken longer to complete and we continue to adjust to the challenges of operating in a largely remote
setting with our employees. We have only recently launched our commercial activities for Twirla and begun engaging with
healthcare providers to promote Twirla. We expect that as we broaden our sales detailing activities in some instances our
sales force may encounter challenges engaging with healthcare providers during this on-going pandemic. Overall, we
recognize the challenges of launching in a pandemic, will continue to closely monitor events as they develop and plan for
alternative and mitigating measures that we can implement if needed.
For more information about Twirla, please see Part 1, Item 1, “Business”
Financial Overview
Since our inception in 1997, we have devoted substantial resources to developing and seeking regulatory approval for
Twirla, building our intellectual property portfolio, business planning, raising capital and providing general and
administrative support for these operations. We incurred research and development expenses of $13.5 million, $9.9 million
and $9.8 million during the years ended December 31, 2020, 2019 and 2018, respectively. While we anticipate that a
portion of our operating expenses will continue to be related to research and development as we plan our post marketing
studies, which include both our post marketing requirement and post marketing commitment to the FDA, and evaluate the
development of our pipeline, we expect our operating expenses to substantially shift towards commercialization. A
substantial amount of our current resources have been dedicated to completing manufacturing validation and
commercializing Twirla.
We have funded our operations primarily through sales of common stock, convertible preferred stock, convertible
promissory notes and term loans. As of December 31, 2020, and 2019, respectively, we had $54.5 million and
$34.5 million in cash and cash equivalents.
In January 2019, we entered into a common stock sales agreement or the “2019 ATM Agreement,” under which we
were authorized to sell up to an aggregate of $10.0 million in gross proceeds through the sale of shares of common stock
from time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933,
as amended). We agreed to pay a commission of 3% of the gross proceeds of any common stock sold under this agreement.
During the year ended December 31, 2019, we issued and sold a total of 1,801,528 shares of common stock under the 2019
ATM Agreement resulting in net proceeds of approximately $2.5 million. We terminated the 2019 ATM Agreement on
July 31, 2019.
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In March 2019, we completed a private placement of 8,426,750 shares of common stock at $0.93 per share. Proceeds
from the private placement, net of offering costs, were approximately $7.8 million.
In August 2019, we completed a public offering of 14,526,315 shares of common stock at a price of $0.95 per share.
Proceeds from the public offering, net of underwriting discounts, commissions and offering expenses, were approximately
$12.7 million.
In November 2019, we entered into a second ATM Agreement, or the “Second 2019 ATM Agreement,” under which
we were authorized to issue and sell shares of our common stock having aggregate sales proceeds of up to $20.0 million
from time to time. We paid a commission of 3% of the gross proceeds from the sales of our common stock under the
Second 2019 ATM Agreement. In the year ended December 31, 2019, we issued and sold 10,440,908 shares of common
stock under the Second 2019 ATM Agreement, representing all of the capacity of the Second ATM Agreement, resulting in
net proceeds of approximately $19.3 million.
In February 2020, we entered into the Perceptive Credit Agreement for a senior secured term loan facility of up to
$35.0 million, which was amended in February 2021 (“Amended Perceptive Credit Agreement”) to add a fourth tranche of
$10.0 million, which is subject to the same interest rate and 1% fee payable upon the drawing of a tranche as set forth in the
credit agreement. A first tranche of $5.0 million was funded on execution of the Perceptive Credit Agreement. A second
tranche of $15.0 million was funded as a result of the approval of Twirla by the FDA. Another $25.0 million will be
available in two separate tranches upon the achievement of certain revenue milestones. The facility will be interest only
until the third anniversary of the closing date.
In February 2020, we completed a public offering of 17,250,000 shares of our common stock at a price of $3.00 per
share. Proceeds from the public offering, net of underwriting discounts, commissions and offering expenses, were
approximately $48.4 million.
We have generated minimal revenue and have never been profitable for any year. Our net loss was $51.9 million,
$18.6 million and $19.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. We expect to incur
increased expenses and increasing operating losses for the foreseeable future as we commercialize Twirla. This includes
commercially launching Twirla, advancing our other potential product candidates and expanding our research and
development programs.
Going Concern
As of December 31, 2020, we had cash, cash equivalents and marketable securities of $54.5 million. We believe that
our cash, cash equivalents and marketable securities as of December 31, 2020 will be sufficient to meet our projected
operating requirements through the end of 2021. We will require additional capital to fund our operating needs beyond
2021, which primarily will include commercializing Twirla, and exploring the advancement of our existing pipeline and its
possible expansion through business development activities.
Our future success depends on our ability to raise additional capital and/or implement various strategic alternatives.
Our ability to continue operations beyond 2021 will depend on our ability to obtain additional capital, and there can be no
assurance that any financing can be realized by the Company, or if realized, what the terms of any such financing may be,
or that any amount that the Company is able to raise will be adequate. Based upon the foregoing, management has
concluded that there is substantial doubt about the Company’s ability to continue as a going concern through the 12 months
following the date on which this Annual Report on Form 10-K is filed.
We continue to analyze various alternatives, including refinancing alternatives, potential asset sales and mergers and
acquisitions. We cannot be certain that these initiatives or raising additional capital, whether through selling additional debt
or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms
acceptable to us. If we issue additional securities to raise funds, whether through the issuance of equity or convertible debt
securities, or any combination thereof, these securities may have rights, preferences, or privileges senior to those of our
common stock, and our current stockholders will experience dilution. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
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debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic
alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our
technologies, future revenue streams, research programs or product candidates, including Twirla, or grant licenses on terms
that may not be favorable to us. If we are unable to obtain funds when needed or on acceptable terms, we then may be
unable to complete the commercialization of Twirla and may also be required to further cut operating costs, forego future
development and other opportunities and may need to seek bankruptcy protection.
The financial statements as of December 31, 2020 have been prepared under the assumption that we will continue as a
going concern for the next 12 months. Our ability to continue as a going concern is dependent upon our uncertain ability to
obtain additional capital, reduce expenditures and/or execute on our business plan and successfully launch Twirla. These
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We do not own any manufacturing facilities and rely on our contract manufacturer, Corium, for all aspects of the
manufacturing of Twirla. We will need to continue to invest in the manufacturing process for Twirla, and incur significant
expenses, in order to be capable of supplying projected commercial quantities of Twirla. We expect to incur significant
expenses in order to create an infrastructure to support the commercialization of Twirla, including sales, marketing,
distribution, medical affairs and compliance functions. We will need to generate significant revenue to achieve
profitability, and we may never do so.
Financial Operations Overview
Revenue
To date, we have generated minimal revenue from product sales. In the future, in addition to revenue from product
sales, we may generate revenue from license fees, milestone payments or royalties from the sale of products developed
using our intellectual property. Our ability to generate revenue and become profitable depends on our ability to successfully
commercialize Twirla and any product candidates that we may advance in the future. If we fail to successfully
commercialize Twirla, or any other product candidates we advance in a timely manner or obtain regulatory approval for
them, our ability to generate future revenue, and our results of operations and financial position, could be adversely
affected.
Research and Development Expenses
Since our inception, we have focused our resources on our research and development activities. Research and
development expenses consist primarily of costs incurred for the development of Twirla and other current and future
potential product candidates, and include:
● expenses incurred under agreements with contract research organizations, or CROs, and investigative sites that
conduct our clinical trials and preclinical studies;
● employee-related expenses, including salaries, benefits, travel and stock-based compensation expenses;
● the cost of acquiring, developing and manufacturing clinical trial materials, including the supply of our potential
product candidates; and
● costs associated with research, development and regulatory activities.
Research and development costs are expensed as incurred. Costs for certain development activities, such as clinical
trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as subject
enrollment, clinical site activations or information provided to us by our third-party vendors.
Research and development activities are central to our business model and to date, our research and development
expenses have been related primarily to the development of Twirla. Product candidates in later stages of clinical
development generally have higher development costs than those in earlier stages of clinical development, primarily due
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to the increased size and duration of later-stage clinical trials. We do not currently utilize a formal time allocation system to
capture expenses on a project-by-project basis, as the majority of our past and planned expenses have been and will be in
support of Twirla.
For the years ended December 31, 2020, 2019 and 2018, our research and development expenses were approximately
$13.5 million, $9.9 million and $9.8 million, respectively. The following table summarizes our research and development
expenses by functional area.
Clinical development
Regulatory
Personnel related
Manufacturing—commercialization
Stock-based compensation
Total research and development expenses
2020
Year ended December 31,
2019
(In thousands)
2018
$
$
2,022
951
2,086
7,790
651
13,500
$
$
1,781
2,990
1,669
2,896
522
9,858
$
$
1,318
562
2,162
4,461
1,274
9,777
It is difficult to determine with any certainty the exact duration and completion costs of any of our future clinical trials
of Twirla or our current and future potential product candidates we may advance. It is also difficult to determine if, when or
to what extent we will generate revenue from the commercialization and sale of Twirla or our potential product candidates
that obtain regulatory approval.
Future research and development costs incurred for our potential product candidates and required post-marketing
studies will depend on a variety of factors, including the uncertainties of future clinical trials and preclinical studies, the
rate of subject enrollment, access to additional capital, and significant and changing government regulation. For the
foreseeable future, we expect the current public health crisis to have a negative effect on the conduct of clinical trials. In
addition, the probability of success for each product candidate will depend on numerous factors, including competition,
manufacturing capability and commercial viability. A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs and timing associated with the
development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to
conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development
of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, or experience issues
with our manufacturing capabilities we could be required to expend significant additional financial resources and time with
respect to the development of that product candidate. We will determine which programs to pursue and how much to fund
each program in response to the scientific and clinical success of each product candidate, coupled with an assessment of
each product candidate’s commercial potential. Substantially all of our resources are currently dedicated to
commercializing Twirla.
Selling and Marketing Expenses
Selling and marketing expenses consist principally of the cost of salaries and related costs for personnel in sales and
marketing, our contract sales force, brand building, advocacy, market research and consulting. Selling and marketing
expenses are expensed as incurred.
For the years ended December 31, 2020, 2019 and 2018, our selling and marketing expenses totaled approximately
$23.3 million, $1.1 million and $0.9 million, respectively. Our commercial launch of Twirla in the United States utilized a
contract sales force. We anticipate that our selling and marketing expenses will increase in the future as our
commercialization efforts continue. These increases will likely include increased payroll and operating costs, including
brand building, advocacy, market research and consulting, and the costs of maintaining our contract sales force.
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General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance
and administrative functions including payroll taxes and health insurance, stock-based compensation and travel expenses.
Other general and administrative expenses include facility-related costs, insurance and professional fees for legal, patent
review, consulting and accounting services. General and administrative expenses are expensed as incurred.
For the years ended December 31, 2020, 2019 and 2018, our general and administrative expenses totaled
approximately $12.7 million, $7.9 million and $7.8 million, respectively. We anticipate that our general and administrative
expenses will increase in the future as our recently added administrative positions are maintained on a full-year basis.
These increases will likely include legal and accounting services, stock registration and printing fees, addition of new
personnel to support compliance and communication needs, increased insurance premiums, outside consultants and
investor relations.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The
preparation of these financial statements requires us to make significant estimates and judgments that affect the reported
amounts of assets, liabilities and expenses and related disclosures. On an ongoing basis, our actual results may differ
significantly from our estimates.
Our significant accounting policies are described in more detail in the notes to our financial statements appearing
elsewhere in this Annual Report on Form 10-K. We believe the following accounting policies to be most critical to the
judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Product revenues consist of sales of Twirla in the United States. In December 2020, we began shipping Twirla to our
customers in the U.S., which consist primarily of specialty distributors. We recognize product revenues in accordance with
ASC 606, Revenue from Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to
determine revenue recognition: (1) Identify the contract(s) with a customer; (2) Identify the performance obligations in the
contract; (3) Determine the transaction price; (4) Allocate the transaction price to the performance obligations in the
contract; and (5) Recognize revenue when (or as) the entity satisfies a performance obligation.
In accordance with ASC 606, we recognize revenue when our performance obligation is satisfied by transferring
control of the product to a customer. Per our contracts with customers, control of the product is transferred upon the
conveyance of title, which occurs when the product is sold to and received by a customer. Trade accounts receivable due to
us from contracts with our customers are stated separately in the balance sheet, net of various allowances as described in
the Trade Accounts Receivable policy in Note 2- Summary of Significant Accounting Polieies.
The amount of revenue we recognize is equal to the amount of consideration which is expected to be received from
the sale of product to our customers. Revenue is only recognized when it is probable that a significant reversal will not
occur in future periods. To determine this, we assess both the likelihood and magnitude of any such potential reversal of
revenue.
The product is sold to customers at the wholesale acquisition cost. However, we record product revenue, net of
estimates for applicable variable consideration which consist primarily of wholesaler distribution fees, prompt pay and
other discounts, rebates, chargebacks, product returns and co-pay assistance programs.
If any, or all, of our actual experiences vary from the estimates above, we may need to adjust prior period accruals,
affecting revenue in the period of adjustment.
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Cost of Product Revenues
We began to capitalize inventory costs associated with Twirla in December 2020 with the commercial launch of
Twirla. Inventory costs consist of direct and indirect costs related to the manufacturing of Twirla sold, including third-party
manufacturing costs, packaging services, freight, and allocation of overhead costs. There was no cost associated with the
validation batches from Corium, our third party manufacturer, since the cost of validation was previously expensed as
research and development. Once the supply of validation batches is exhausted, we will capitalize product cost using a
weighted average costing method, which approximates actual cost.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses,
particularly for product development costs. This process involves reviewing open contracts and purchase orders,
communicating with our personnel to identify services that have been performed on our behalf and estimating the level of
services performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise
notified of the actual costs. The majority of our service providers invoice us monthly in arrears for services performed or
when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our
financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our
estimates with service providers and make adjustments as necessary. Examples of estimated accrued research and
development expenses include:
● fees paid to CROs in connection with clinical studies;
● fees paid to investigative sites in connection with clinical studies;
● fees paid to vendors in connection with preclinical development activities;
● fees paid to vendors related to product manufacturing, development and distribution of clinical supplies; and
● fees paid to a third-party manufacturer in connection with the development of our commercial manufacturing
process.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant
to contracts with multiple CROs that conduct and manage clinical studies on our behalf. The financial terms of these
agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may
be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment
of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of
subjects and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which
services will be performed, enrollment of subjects, number of sites activated and the level of effort to be expended in each
period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the
accrued liability or prepaid expense accordingly. Although we do not expect our estimates to be materially different from
amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and
timing of services performed may vary and may result in our reporting amounts that are too high or too low in any
particular period. Based on historical experience, actual results have not been materially different from our estimates. As of
December 31, 2020, we did not have any ongoing clinical trials.
Warrant Liability
We account for warrants to purchase common stock in accordance with Accounting Standards Codification, or ASC,
480, Distinguishing Liabilities from Equity. ASC 480 requires that a financial instrument, other than an outstanding share,
that, at inception, is indexed to an obligation to repurchase the issuer’s equity shares, regardless of the timing or the
probability of the redemption feature and may require the issuer to settle the obligation by transferring assets classified as a
liability. We measure the fair value of our warrant liability using the Black-Scholes option-pricing model with changes in
fair value recognized as increases or reductions to other income (expense) in the statement of operations.
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In connection with the completion of our initial public offering in May 2014, the warrants to purchase shares of
Series A-1 and Series A-2 preferred stock expired unexercised and the warrants to purchase shares of Series C preferred
stock automatically converted into warrants to purchase shares of common stock. Prior to January 1, 2019, warrants with
non-standard anti-dilution provisions (referred to as down round protection) were classified as liabilities and re-measured
each reporting period. On January 1, 2019, we adopted the provisions of Accounting Standards Update (“ASU”) 2017-11
Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815):
(Part 1) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite
Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Non-controlling Interests with a Scope Exception, which indicates that a down round feature no longer
precludes equity classification when assessing whether an investment is indexed to an entity’s own stock. We used a
modified retrospective approach for adoption, which did not restate our financial statements as of the prior year end
(December 31, 2018). The cumulative effect of adoption of ASU 2017-11 resulted in an adjustment to accumulated deficit
as of January 1, 2019 of $0.2 million with a corresponding adjustment to additional paid-in capital. Warrants to purchase
62,505 shares of common stock at $6.00 per share expired on December 14, 2019, and none of these warrants were
outstanding as of December 31, 2020.
The warrants issued in connection with our debt financing completed in February 2015 are classified as a component
of stockholders’ equity. The value of such warrants was determined using the Black-Scholes option-pricing model. These
warrants expired without being exercised on February 24, 2020.
As part of the February 2020 Perceptive Credit Agreement, we issued Perceptive warrants to purchase 1,400,000
shares of Agile common stock, all of which expire on February 27, 2027. The per share exercise price for 700,000 shares is
$3.74, which is equal to the 5-day volume weighted average exercise price (“5 Day VWAP”) as of the trading day
immediately prior to closing. The per share exercise price for the remaining 700,000 shares of our common stock is $4.67,
which is 1.25 times the 5 Day VWAP. In connection with entering into the Amended Perceptive Credit Agreement, we
issued Perceptive a warrant to purchase 450,000 shares of Agile common stock.
Stock-Based Compensation
We account for stock-based compensation under ASC 718, Accounting for Stock Based Compensation, under which
compensation expense is generally recognized over the vesting period of the award. Determining the amount of stock-based
compensation to be required requires us to develop estimates of fair values of stock options as of the grant date.
We account for stock-based compensation by measuring and recognizing expense for all stock-based payments made
to employees and directors based on estimated grant date fair values. We use the straight-line method to allocate
compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period.
We estimate the fair value of our stock-based awards to employees and directors using the Black-Scholes option valuation
model, or Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including the
expected stock price volatility, the calculation of expected term and the fair value of the underlying common stock on the
date of grant, among other inputs. The risk-free interest rate was determined with the implied yield currently available for
zero-coupon U.S. government issues with a remaining term approximating the expected life of the options.
We also award restricted stock units (“RSUs”) to employees and our board of directors (the “Board”). RSUs are
generally subject to forfeiture if employment terminates prior to the completion of the vesting restrictions. We expense the
cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at
the date of grant, ratably over the period during which the vesting restrictions lapse. Cost associated with performance-
based restricted stock units with a performance condition which affects the vesting is recognized only if the performance
condition is probable of being satisfied.
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Comparison of Years Ended December 31, 2020 and 2019
Revenues, net
Cost of product revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Total operating expenses
Loss from operations
Other income (expense)
Interest income
Interest expense
Total other income (expense), net
Loss before benefit from income taxes
Net loss
Year Ended
December 31,
2020
2019
Change
$
$
$
$
749
282
467
13,500
23,285
12,735
49,520
(49,053)
309
(3,109)
(2,800)
(51,853)
(51,853)
$
$
$
$
— $
—
—
749
282
467
9,858
1,085
7,915
18,858
(18,858)
$
3,642
22,200
4,820
30,662
(30,195)
252
—
252
(18,606)
(18,606)
$
57
(3,109)
(3,052)
(33,247)
(33,247)
Revenues. Revenue, net consists of sales of Twirla, which was approved by the FDA in February 2020 and launched
in the US in December 2020, and reflects the initial shipment of Twirla to specialty distributors, net of estimates for
applicable variable consideration, which consist primarily of wholesale distribution fees, prompt pay and other discounts,
rebates, chargebacks, product returns and co-pay assistance programs.
Cost of product revenues. Costs of product revenues totaled $0.3 million and consist of direct and indirect costs
related to the manufacturing of Twirla sold, including third-party manufacturing costs, packaging services, freight, and
allocation of overhead costs. For the year ended December 31, 2020, there was no third-party manufacturing cost related to
Twirla sold since the units sold were validation product and the costs associated with validation had previously been
expensed as research and development. Once the supply of validation batches is exhausted, the cost of product from our
third-party manufacturer will be determined using the weighted average costing method, which approximates actual cost.
Research and development expenses. Research and development expenses increased by $3.6 million, or 37%, from
$9.9 million for the year ended December 31, 2019 to $13.5 million for the year ended December 31, 2020. This overall
increase in research and development expenses was primarily due to the following:
● an increase in manufacturing commercialization expenses of $4.9 million for the year ended December 31, 2020
as compared to the year ended December 31, 2019. This increase reflects costs to complete manufacturing
development, process improvements, and pre-validation and validation work for the commercial manufacturing of
Twirla by Corium, our contract manufacturer;
● an increase in clinical development expenses of $0.2 million for the year ended December 31, 2020 as compared
to the year ended December 31, 2019. This increase primarily relates to costs for medical education and
consulting partially offset by costs associated with the comparative wear study of Twirla and Xulane which was
initiated and completed during 2019;
● an increase in personnel-related expenses of $0.5 million for the year ended December 31, 2020 as compared to
the year ended December 31, 2019. This increase reflects higher headcount for the year ended December 31,
2020; and
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● a decrease in regulatory expenses of $2.0 million for the year ended December 31, 2020 as compared to the year
ended December 31, 2019. This decrease is primarily related to decreased costs associated with preparation for
the FDA advisory committee meeting in the fourth quarter of 2019;
Selling and marketing expenses. Selling and marketing expenses increased by $22.2 million, from $1.1 million for
the year ended December 31, 2019 to $23.3 million for the year ended December 31, 2020. This overall increase in selling
and marketing expenses was primarily due to an increase related to the resumption of our pre-commercialization activities
such as brand building, advocacy, market research and consulting, and the costs of establishing and maintaining our
contract sales force.
General and administrative expenses. General and administrative expenses increased by $4.8 million, or 61%, from
$7.9 million for the year ended December 31, 2019 to $12.7 million for the year ended December 31, 2020. This overall
increase in general and administrative expenses was primarily due to the following:
● an increase in salaries and wages of $1.5 million, due to increased headcount and retention bonuses expensed and
paid during the year ended December 31, 2020;
● an increase in professional fee expense of $1.9 million primarily related to legal fees, accounting fees, recruiting
fees and increased use of financial consultants;
● an increase in stock compensation expense of $0.9 million for the year ended December 31, 2020 compared to the
year ended December 31, 2019. This increase is primarily the result of new hires and higher stock prices
associated with 2020 stock option grants as compared to 2019 stock option grants; and
● an increase in D&O insurance of $0.3 million for the year ended December 31, 2020 as compared to the year
ended December 31, 2019.
Interest income. Interest income comprises interest income earned on cash, cash equivalents and marketable
securities.
Interest expense. Interest expense is attributable to our term loan with Perceptive for the year ended December 31,
2020. Interest expense also includes the amortization of the discount associated with allocating value to the common stock
warrants issued to Perceptive and the amortization of the deferred financing costs associated with the term loan. Interest
expense increased by $3.1 million, from $0 for the year ended December 31, 2019 to $3.1 million for the year ended
December 31, 2020.
Net Operating Losses and Tax Carryforwards
As of December 31, 2020, we had approximately $ 281.7 million of federal and $107.2 million of state net operating
loss carryforwards. We also potentially have federal and state research and development tax credits which would offset
future taxable income. We have not completed a study to assess whether an ownership change has occurred, or whether
there have been multiple ownership changes since our inception, due to the significant costs and complexities associated
with such studies. Accordingly, our ability to utilize the aforementioned carryforwards may be limited. Additionally, for
federal net operating losses generated prior to 2018, U.S. tax laws limit the time during which these carryforwards may be
utilized against future taxes. As a result, we may not be able to take full advantage of these carryforwards for federal and
state tax purposes. As of December 31, 2020, all of our net operating losses were fully offset by a valuation allowance.
Liquidity and Capital Resources
At December 31, 2020, we had cash, cash equivalents and marketable securities totaling $54.5 million. We invest our
cash equivalents and marketable securities in short-term highly liquid, interest-bearing investment-grade and government
securities in order to preserve principal.
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The following table sets forth the primary sources and uses of cash for the periods indicated:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Operating Activities
$
$
2020
(47,311)
(40,690)
67,985
(20,016)
Year Ended December 31,
2019
(In thousands)
(15,689)
$
(98)
42,415
26,628
$
$
$
2018
(16,895)
(318)
(10,888)
(28,101)
We incurred significant costs in the area of research and development, including CRO fees, manufacturing, regulatory
and other clinical trial costs, as Twirla was being developed. With the approval of Twirla early in 2020, our operating
expenses shifted substantially to selling and marketing as we built out our commercial infrastructure. Net cash used in
operating activities was $47.3 million for the year ended December 31, 2020 and consisted primarily of a net loss of $51.9
million, offset by non-cash stock-based compensation expense of $2.8 million, and $1.6 million of other non-cash charges,
primarily interest expense. Our net change in operating assets and liabilities was negligible. Net cash used in operating
activities was $15.7 million for the year ended December 31, 2019 and consisted of a net loss of $18.6 million and an
increase in prepaid expenses of $0.2 million, which was offset by non-cash stock-based compensation expense of
$1.8 million and depreciation and amortization of $0.2 million as well as an increase in accounts payable, accrued expenses
and other liabilities of $1.1 million which reflects increased commercial development and commercial manufacturing
expenses related to the initialization of pre-commercialization activities for Twirla. Net cash used in operating activities
was $16.9 million for the year ended December 31, 2018 and consisted of a net loss of $19.8 million which was offset, in
part, by non-cash stock-based compensation expense of $3.6 million and non-cash interest expense of $0.3 million as well
as a decrease in accounts payable and accrued liabilities of $1.2 million which reflects higher manufacturing
commercialization expenses and the accrued loan fee which were both paid in 2018.
Investing Activities
Net cash used in investing activities for the years ended December 31, 2020, 2019 and 2018 was $40.7 million,
$0.1 million and $0.3 million, respectively. Cash used in investing activities for the year ended December 31, 2020
primarily represents net purchases of marketable securities of $40.3 million with the balance being the acquisition of
equipment to be used in the commercialization of Twirla.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2020 was $68.0 million, which primarily
represents net proceeds of $48.4 million received from the issuance of 17,250,000 shares of our common stock through a
public offering, proceeds of $20.0 million from the Perceptive term loan, and stock option exercise proceeds of $0.6
million. These proceeds were partially offset by debt financing costs of $1.0 million. Net cash provided by financing
activities for the year ended December 31, 2019 was $42.4 million which primarily represented net proceeds of
$7.8 million received from the issuance of 8,426,750 shares of our common stock in a private placement, net proceeds of
$12.7 million from the sale of 14,526,315 shares of common stock through a public offering, and net proceeds of
approximately $21.8 million from the sale of a total of 12,242,436 shares of our common stock through two at-the-market,
or ATM, sales programs. Net cash used in financing activities for the year ended December 31, 2018 was $10.9 million
which represented principal payments under the Hercules Loan Agreement which began on February 1, 2017 and were
completed on December 1, 2018.
Funding Requirements and Other Liquidity Matters
Based on our current business plan and ability to get Twirla launched, we believe that our cash, cash equivalents and
marketable securities as of December 31, 2020 will be sufficient to meet our projected operating requirements through the
end of 2021. We will require additional capital to fund our operating needs beyond 2021, including, among other
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items, the commercialization of Twirla, and advancing the development of our other potential product candidates. On
October 2, 2020 we filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred
stock, warrants, rights, debt securities and units up to an aggregate amount of $200.0 million (the “2020 Shelf Registration
Statement”). On October 14, 2020, the 2020 Shelf Registration Statement was declared effective by the SEC. If the
COVID-19 pandemic or other factors impact our current business plan or our ability to generate revenue from the launch of
Twirla, we believe we have the ability to revise our commercial plans, including curtailing sales and marketing spending, to
allow us to continue to fund our operations.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We
anticipate that our expenses will increase substantially as we:
● maintain a sales and marketing infrastructure to commercialize Twirla in the United States;
● continue to evaluate additional line extensions for Twirla and initiate development of potential product candidates
in addition to Twirla;
● maintain, leverage and expand our intellectual property portfolio; and
● add operational, financial and management information systems and personnel, including personnel to support our
product development and future commercialization efforts.
We may also need to raise additional funds sooner if we choose to accelerate components of our commercial plan or
we encounter any unforeseen events that affect our current business plan, or we may choose to raise additional funds to
provide us with additional working capital. Adequate additional funding may not be available to us on acceptable terms, or
at all. If we are unable to raise additional capital when needed or on attractive terms or are unable to enter into strategic
collaborations, we then may be unable to successfully commercialize Twirla and may also be required to further cut
operating costs, forgo future development and other opportunities or even terminate our operations, which may involve
seeking bankruptcy protection. Because of the numerous risks and uncertainties associated with such developments, we are
unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the
commercialization of Twirla. Our future capital requirements will depend on many factors, including:
•
•
•
•
the costs of future commercialization activities, including product sales, marketing, manufacturing and
distribution, for Twirla;
the revenue received from commercial sales of Twirla;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual
property rights and defending intellectual property-related claims; and
the costs associated with any potential business or product acquisitions, strategic collaborations, licensing
agreements or other arrangements that we may establish.
Except for the remaining two tranches under the Amended Perceptive Credit Agreement, which are contingent upon
achieving certain revenue milestones, we do not have any committed external source of funds. Until such time, if ever, as
we can generate substantial cash flows from product revenues, we expect to finance our cash needs through a combination
of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.
Going Concern
As of December 31, 2020, we had cash, cash equivalents and marketable securities of $54.5 million. We believe that
our cash and cash equivalents as of December 31, 2020 will be sufficient to meet our projected operating requirements
through the end of 2021. We will require additional capital to fund our operating needs beyond 2021,
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which we expect primarily will consist of commercializing Twirla, and exploring the advancement of our existing pipeline
and its possible expansion through business development activities.
Our future success depends on our ability to raise additional capital and/or implement various strategic alternatives.
We continue to analyze strategic and financing alternatives, potential asset sales as well as mergers and acquisitions. We
cannot be certain that these initiatives or raising additional capital, whether through selling additional debt or equity
securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us.
If we issue additional securities to raise funds, whether through the issuance of equity or convertible debt securities, or any
combination thereof, these securities may have rights, preferences, or privileges senior to those of our common stock, and
our current shareholders may experience dilution. Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital
expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing
arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue
streams, research programs or product candidates, including Twirla, or grant licenses on terms that may not be favorable to
us. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current
development programs, cut operating costs, forego future development and other opportunities and may need to seek
bankruptcy protection.
The financial statements as of December 31, 2020 have been prepared under the assumption that we will continue as a
going concern for the next 12 months following the date this Annual Report on Form 10-K is filed. Our ability to continue
as a going concern is dependent upon our uncertain ability to obtain additional capital, reduce expenditures and/or execute
on our business plan and successfully launch Twirla. The audited financial statements as of December 31, 2020 do not
include any adjustments that might result from the outcome of this uncertainty.
Contractual Obligations and Commitments
In April 2020, we entered into a manufacturing and commercialization agreement with Corium, Inc. (“the Corium
Agreement”) for the manufacture and supply of Twirla. Under the terms of the Coriumn Agreement, Corium is to be the
exclusive supplier of Twirla for ten years. The Corium Agreement includes a fixed price per unit for two years depending
on annual purchase volume and quarterly minimum purchase amounts. As of December 31, 2020, the amount committed
for purchases into the first quarter of 2021 is $7.0 million.
In April 2020, we entered into a project agreement (the “Project Agreement”) with inVentiv Commercial Services,
LLC (“inVentiv”) under which inVentiv will provide a field force of sales representatives to provide certain detailing
services, sales operation services, compliance services and training services with respect to Twirla to the Company in
exchange for an up-front implementation fee and a fixed annual fee. The Project Agreement has an initial term of two
years from August 24, 2020, the date of the first activity undertaken by inVentiv to detail Twirla (the “Deployment Date”),
unless earlier extended upon the mutual written agreement of the Parties. We may terminate the Project Agreement for any
reason upon timely notice after the first anniversary of the Deployment Date; provided, however, that if we terminate the
Project Agreement prior to the eighteen month anniversary of the Deployment Date, we will be obligated to pay inVentiv a
termination fee, the amount of which varies depending on the date of termination. As of December 31, 2020, the minimum
amount committed totals $9.3 million.
The following table summarizes our contractual obligations and commitments as of December 31, 2020 that will affect
our future liquidity:
Long-term Debt Obligations
Operating Lease Obligations
Purchase Obligations
$ 20,000
150
16,257
$
— $ 3,300
—
150
—
16,257
$ 16,700
—
—
$
Total
$ 36,407
$ 16,407
$ 3,300
$ 16,700
$
—
—
—
—
Total
Less than 1
year
1 - 3 years
(In thousands)
More than 5
3 - 5 years
years
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Our operating lease commitment relates to our lease of office space in Princeton, New Jersey. In November 2020, we
entered into an extension for this location through December 31, 2021, and simultaneously reduced the amount of space we
are leasing. We are currently seeking new facilities as we add employees, and we believe that suitable additional or
substitute space will be available as needed to accommodate any such expansion of our operations.
Shelf Registration Statements
On October 2, 2020, we filed the 2020 Shelf Registration Statement. On October 14, 2020, the 2020 Shelf Registration
Statement was declared effective by the SEC. Prior to the 2020 Shelf Registration Statement, we had filed a universal shelf
registration statement in November 2018 for the issuance of up to $100.0 million of securities, which we refer to as the
2018 Shelf Registration Statement, which was declared effective by the SEC on November 14, 2018.
Recent Accounting Pronouncements
See Note 2 to our financial statements that discusses new accounting pronouncements.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as
defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often
referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions
that are not required to be reflected on our balance sheets.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. Market risk is the risk of change in fair value of
a financial instrument due to changes in interest rates, equity prices, financing, exchange rates or other factors. These
market risks are principally limited to interest rate fluctuations.
We had cash, cash equivalents and marketable securities of $54.5 million and $34.5 million at December 31, 2020 and
December 31, 2019, respectively, consisting primarily of funds in cash, money market accounts and corporate and
government debt securities. The primary objective of our investment activities is to preserve principal and liquidity while
maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative
purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase in
interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our
operating results or cash flows to be materially affected by a sudden change in market interest rates.
Our results of operations and cash flows are subject to fluctuations due to changes in interest rates. We do not believe
that we are materially exposed to changes in interest rates. We do not currently use interest rate derivative instruments to
manage exposure to interest rate changes. Based on average invested cash of $75.1 million for the year ended
December 31, 2020, a 1% increase or decrease in interest rates would have increased or decreased interest income by $0.8
million for the year ended December 31, 2020. Based on average debt outstanding of $16.7 million for the year ended
December 31, 2020, a 1% increase or decrease in interest rates would have increased or decreased interest expense by $0.2
million for the year ended December 31, 2020.
Inflation Risk
Inflation generally affects us by increasing our cost of labor and pricing of contracts and agreements. We do not
believe that inflation had a material effect on our business, financial condition, or results of operations during the year
ended December 31, 2020.
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Item 8. Financial Statements and Supplementary Data
Agile Therapeutics, Inc.
Index to Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Operations and Comprehensive Loss
Statements of Changes in Stockholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
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91
92
93
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Report of Independent Registered Public Accounting Firm
To the stockholders and the board of directors of Agile Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Agile Therapeutics, Inc. (the “Company”) as of December 31,
2020 and 2019, the related statements of operations and comprehensive loss, statements of changes in stockholders’ equity,
and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1 to the financial statements, the Company has generated losses since inception, used
substantial cash in operations, anticipates it will continue to incur net losses for the foreseeable future and requires
additional capital to fund its operating needs beyond 2021. Management's evaluation of the events and conditions and
management’s plans regarding these matters are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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Product Revenue -Net
Description of the
Matter
The Company sells approved product to a limited number of distributors. As discussed in Note 2,
product sales are recorded net of estimated rebates and chargebacks, estimated product returns and
other deductions at the time revenue is recorded. When recognizing revenue, the Company estimates
the transaction price and assesses whether to constrain variable consideration. Limited historical data
is available for use in developing such estimates.
How We
Addressed the
Matter in Our
Audit
The Company’s estimates of rebates, chargebacks, product returns and other deductions depend on
the identification of key customer contract terms and conditions, as well as estimates of sales
volumes to different classes of payers. Auditing the Company’s net product sales was complex due
to the Company’s limited history of product sales, and the revenue recognition process involves
significant judgment to identify and assess the terms and conditions of customer agreements and
related government regulations.
Among other procedures performed to test management’s estimates of rebates, chargebacks, product
returns and other deductions we developed an independent expectation of the reserve based on the
relevant terms of the customer contracts and/or obtained management’s calculations of the respective
reserve and tested management’s estimate by tracing relevant inputs to the customer contracts and
underlying sales data. We obtained and reviewed the Company’s estimated channel and payer mix,
compared relevant inputs to underlying sales data and analyzed the impact of changes to the inputs
on the estimate. We also evaluated credits and adjustments subsequent to the balance sheet date and
tested the underlying sales data by confirming a sample of receivable balances directly with the
Company’s customers.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Iselin, New Jersey
March 1, 2021
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Agile Therapeutics, Inc.
Balance Sheets
(in thousands, except par value and share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Prepaid expenses
Total current assets
Property and equipment, net
Right of use asset
Other non-current assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Lease liability, current portion
Total current liabilities
Long-term debt
Total liabilities
Commitments and contingencies (Note 15)
Stockholders’ equity
December 31,
2020
2019
$
$
$
$
$
$
14,463
40,008
865
1,449
56,785
14,243
138
1,896
73,062
3,867
3,348
138
7,353
16,381
23,734
34,479
—
—
840
35,319
14,044
158
19
49,540
1,819
1,804
172
3,795
—
3,795
Common stock, $.0001 par value, 150,000,000 shares authorized, 87,563,753 and
69,810,305 issued and outstanding at December 31, 2020 and December 31, 2019,
respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
9
361,539
3
(312,223)
49,328
73,062
$
7
306,108
—
(260,370)
45,745
49,540
$
See accompanying notes.
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Table of Contents
Agile Therapeutics, Inc.
Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
2020
Year ended December 31,
2019
2018
Revenues, net
Cost of product revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Restructuring costs
Total operating expenses
Loss from operations
Other income (expense)
Interest income
Interest expense
Change in fair value of warrants
Total other income (expense), net
Loss before benefit from income taxes
Benefit from income taxes
Net loss
Net loss per share (basic and diluted)
Weighted-average common shares (basic and diluted)
Comprehensive loss:
Net loss
Other comprehensive income:
Unrealized gain on marketable securities
Comprehensive loss
$
$
$
$
$
$
See accompanying notes.
92
— $
—
—
—
—
—
$
$
749
282
467
13,500
23,285
12,735
—
49,520
(49,053)
$
9,858
1,085
7,915
—
18,858
(18,858)
309
(3,109)
—
(2,800)
(51,853)
—
(51,853) $
252
—
—
252
(18,606)
—
(18,606) $
9,777
942
7,797
1,019
19,535
(19,535)
366
(1,116)
29
(721)
(20,256)
477
(19,779)
(0.61) $
(0.38) $
(0.58)
84,683,084
49,432,487
34,315,931
(51,853) $
(18,606) $
(19,779)
3
(51,850) $
—
(18,606) $
—
(19,779)
Table of Contents
Agile Therapeutics, Inc.
Statements of Changes in Stockholders' Equity
(in thousands, except share data)
Balance December 31, 2017
Share‑based compensation—stock options and RSUs
Vesting of RSUs
Net loss
Balance December 31, 2018
Adjustment to derivitive liabilities upon adoption of ASU 2017‑11
Share‑based compensation— stock options and RSUs
Issuance of common stock in private placement, net of expenses
Issuance of common stock pursuant to at‑the‑market stock sales, net of expenses
Issuance of common stock upon exercise of stock options
Proceeds from issuance of common stock in public offering, net of expenses
Vesting of RSUs
Net loss
Balance December 31, 2019
Share-based compensation - stock options and RSUs
Issuance of common stock in public offering, net of expenses
Issuance of common stock upon exercise of stock options
Warrants issued in connection with long-term debt
Unrealized net gain on marketable securities
Net loss
Balance December 31, 2020
Number of
Shares
34,186,342
—
190,987
—
34,377,329
—
—
8,426,750
12,242,436
92,271
14,526,315
145,204
—
69,810,305
—
17,250,000
503,448
—
—
—
87,563,753
Common Stock
Additional
Paid-in
Amount Capital
Accumulated
Net
Other ComprehensiveAccumulated Stockholders'
Income
Deficit
Equity
$
$
$
$
3
—
—
—
3
—
—
1
1
—
2
—
—
7
—
2
—
—
—
—
9
$ 258,092
3,630
—
—
$ 261,722
213
1,762
7,809
21,753
164
12,685
—
—
$ 306,108
2,818
48,433
610
3,570
—
—
$ 361,539
$
$
$
$
— $
—
—
—
— $
—
—
—
—
—
—
—
—
— $
—
—
—
—
3
—
3 $
(221,772)
—
—
(19,779)
(241,551)
(213)
—
—
—
—
—
—
(18,606)
(260,370)
—
—
—
—
—
(51,853)
(312,223)
$
$
$
$
36,323
3,630
—
(19,779)
20,174
—
1,762
7,810
21,754
164
12,687
—
(18,606)
45,745
2,818
48,435
610
3,570
3
(51,853)
49,328
See accompanying notes.
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Table of Contents
Agile Therapeutics, Inc.
Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Amortization
Noncash stock-based compensation
Noncash interest
Change in fair value of warrants
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other assets
Accounts payable and accrued expenses
Lease liability
Net cash used in operating activities
Cash flows from investing activities:
Purchases of marketable securities
Sales and maturities of marketable securities
Acquisition of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock in public offering, net of offering costs
Proceeds from issuance of long-term debt
Principal payments of long-term debt
Debt financing costs paid
Proceeds from issuance of common stock in private placement, net of offering
costs
Proceeds from At-the-Market sales of common stock, net of offering costs
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of noncash financing activities
Warrants issued in connection with long-term debt
Supplemental cash flow information
Interest paid
Cash paid for income taxes
Non‑cash transactions
Property and equipment purchases included in accounts payable
See accompanying notes.
94
Year Ended
December 31,
2019
2018
2020
$ (51,853) $ (18,606) $ (19,779)
105
171
2,818
1,341
—
(865)
(2,485)
3,641
(184)
(47,311)
(54,837)
14,500
(353)
(40,690)
48,434
20,000
—
(1,059)
—
—
610
67,985
18
145
1,762
—
—
—
(233)
1,377
(152)
(15,689)
23
—
3,630
282
(29)
—
155
(1,177)
—
(16,895)
—
—
(98)
(98)
—
—
(318)
(318)
12,687
—
—
—
7,810
21,754
164
42,415
—
—
(10,888)
—
—
—
—
(10,888)
(20,016)
34,479
$ 14,463
26,628
7,851
$ 34,479
(28,101)
35,952
7,851
$
$
$
$
$
3,570
$
— $
—
2,099
$
— $
— $
— $
1,370
—
— $
49
$
—
Table of Contents
Agile Therapeutics, Inc.
Notes to Financial Statements
December 31, 2020
(in thousands, except share and per share data)
1. Organization and Description of Business
Nature of Operations
Agile Therapeutics, Inc. (“Agile” or the “Company”) was incorporated in Delaware on December 22, 1997. Agile is a
women's healthcare company dedicated to fulfilling the unmet health needs of today's women. The Company's activities
since inception have consisted principally of raising capital and performing research and development, including
development of the Company’s lead product, Twirla. The Company is headquartered in Princeton, New Jersey.
The Company’s sole approved product, Twirla®, also known as AG200-15, is a once-weekly prescription
contraceptive patch that received approval from the U.S. Food and Drug Administration, or FDA in February 2020.
Substantially all of the Company’s resources are currently dedicated to commercializing Twirla in the United States. The
Company has generated minimal product revenue to date and is subject to a number of risks similar to those of other early
stage companies, including, but not limited to, dependence on key individuals, the difficulties and uncertainties inherent in
the development of commercially usable products, market acceptance of products, protection of proprietary technology, the
potential need to obtain additional capital necessary to fund the development of its products, competition from larger
companies and compliance with FDA and other government regulations. If the Company does not successfully
commercialize any product candidates, it will be unable to generate recurring product revenue or achieve profitability. The
Company has incurred operating losses and negative cash flows from operating activities each year since inception. As of
December 31, 2020, the Company had an accumulated deficit of approximately $312 million.
The Company expects to continue to incur significant expenses and increased operating losses for the foreseeable
future and that its operating expenses will increase substantially in connection with its ongoing activities, as the Company:
● maintains a sales and marketing infrastructure to commercialize Twirla in the United States;
● continues to evaluate additional line extensions for Twirla and initiates development of potential product
candidates in addition to Twirla;
● maintains, leverages and expands the Company’s intellectual property portfolio; and
● adds operational, financial and management information systems and personnel, including personnel to support
the Company’s product development and future commercialization efforts.
The Company has financed its operations to date primarily through the issuance and sale of its common stock in both
public and private offerings (see Note 10), private placements of its convertible preferred stock, venture loans, and non-
dilutive grant funding.
Going Concern
As of December 31, 2020, the Company had cash, cash equivalents and marketable securities of $54.5 million. The
Company believes that its cash, cash equivalents and marketable securities as of December 31, 2020 will be sufficient to
meet its projected operating requirements through the end of 2021. The Company will require additional capital to fund its
operating needs beyond 2021, which primarily will include commercializing Twirla, and exploring the advancement of its
existing pipeline and its possible expansion through business development activities.
The Company has generated losses since inception, used substantial cash in operations and anticipates it will continue
to incur net losses for the foreseeable future. The Company’s ability to continue operations beyond 2021 will
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
depend on its ability to obtain additional capital, and there can be no assurance that any financing can be realized by the
Company, or if realized, what the terms of any such financing may be, or that any amount that the Company is able to raise
will be adequate. Based upon the foregoing, management has concluded that there is substantial doubt about the
Company’s ability to continue as a going concern through the 12 months following the date on which this Annual Report
on Form 10-K is filed.
The Company continues to analyze various alternatives, including refinancing alternatives, asset sales and mergers and
acquisitions. The Company’s future success depends on its ability to raise additional capital as discussed above. The
Company cannot be certain that these initiatives or raising additional capital, whether through selling additional debt or
equity securities or obtaining a line of credit or other loan, will be available to it or, if available, will be on terms acceptable
to the Company. If the Company issues additional securities to raise funds, these securities may have rights, preferences, or
privileges senior to those of its common stock, and the Company’s current stockholders will experience dilution. If the
Company is unable to obtain funds when needed or on acceptable terms, the Company then may be unable to complete the
commercialization of Twirla, and may also be required to cut operating costs, and forego future development and other
opportunities.
The audited financial statements as of December 31, 2020 have been prepared under the assumption that the Company
will continue as a going concern for the next 12 months. The Company’s ability to continue as a going concern is
dependent upon its uncertain ability to obtain additional capital, reduce expenditures and/or execute on its business plan
and successfully launch Twirla. The audited financial statements as of December 31, 2020 do not include any adjustments
that might result from the outcome of this uncertainty. If the Company is unable to continue as a going concern, it may
have to liquidate its assets and may receive less than the value at which those assets are carried on the financial statements.
2. Summary of Significant Accounting Polices
Basis of Presentation
The accompanying financial statements have been prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP") and include all adjustments necessary for the fair presentation of the Company's
financial position for the periods presented. Certain reclassifications have been made to prior periods to conform with
current reporting. On the balance sheet, our right of use asset has been stated separately from other non-current assets. On
the statement of operations, the Company has separated the presentation of selling and marketing expenses from the total
general and administrative expenses in the current period. To conform prior year amounts to the current period
presentation, totals of $1.1 million and $0.9 million were reclassified from general and administrative expenses to selling
and marketing expenses for the years ended December 31, 2019 and 2018, respectively.
Use of Estimates
The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The
Company bases its estimates and judgments on historical experience and various other assumptions that it believes are
reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the
amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions,
which are used for, but not limited to, revenue recognition, the accounting for common stock warrants, stock-based
compensation, income taxes, and accounting for research and development costs. As future events and their effects cannot
be determined with precision, actual results could differ significantly from these estimates.
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Risks and Uncertainties
Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
While Twirla has been approved by the FDA, other potential product candidates developed by the Company will
require approval from the FDA prior to commercial sales. There can be no assurance that the Company’s other product
candidates will receive the required approval. If the Company is denied approval or such approval is delayed, or is unable
to obtain the necessary financing to complete development and approval, there could be a material adverse impact on the
Company’s financial condition and results of operations.
It should be noted that current public health threats could adversely affect the Company’s ongoing or planned business
operations. In particular, the ongoing COVID-19 pandemic has resulted in federal, state and local governments and private
entities mandating various restrictions, including travel restrictions, access restrictions, restrictions on public gatherings,
and stay at home orders. The effect of these orders, government imposed quarantines and measures the Company has taken,
such as implementing work-at-home policies, may negatively impact productivity, disrupt the Company’s business and
could delay the Company’s commercialization timeline. The Company cannot presently predict the scope and severity of
any potential business shutdowns or disruptions, but if the Company or any of the third parties with whom it engages,
including personnel at third-party manufacturing facilities and other third parties with whom the Company conducts
business, were to experience shutdowns or other business disruptions, the Company’s ability to conduct its business in the
manner and on the timeline presently planned could be materially and adversely impacted. While it is unknown how long
these conditions will last and what the complete effect will be on the Company, to date, the Company has been able to
continue to execute on its plans according to the related timelines. The Company will continue to closely monitor events
as they develop and evaluate alternative, mitigating measures it can implement if needed.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with an original maturity of three months or less when
purchased to be cash equivalents. All cash and cash equivalents are held in United States financial institutions. Cash and
cash equivalents include money market funds that invest primarily in commercial paper and U.S. government and U.S.
government agency obligations.
The Company maintains balances with financial institutions in excess of the Federal Deposit Insurance Corporation
limit.
Marketable Securities
The Company invests a portion of its excess cash balances in marketable securities, including U.S. government agency
securities, and highly rated corporate bonds. The Company classifies all of its marketable securities as current assets on the
balance sheet because they are available-for-sale and available to fund current operations. Marketable securities are stated
at fair value with unrealized gains and losses included as a component of accumulated other comprehensive income (loss),
which is a separate component of stockholders' equity, until such gains and losses are realized. If a decline in the fair value
is considered other-than-temporary, based on available evidence, the unrealized loss is reclassified from accumulated other
comprehensive income (loss) to the statements of operations. Realized gains and losses are determined on the specific
identification method and are included in other income.
Trade Accounts Receivable and Allowances
Trade accounts receivable are amounts owed to the Company by its customers for product that has been delivered.
The trade accounts receivable are recorded at the invoice amount, less prompt pay and other discounts, chargebacks, and an
allowance for credit losses, if any. The allowance for credit losses is the Company’s estimate of losses over the life of the
receivables. The Company evaluates forward looking economic factors and uses professional judgment to
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
determine the allowance for credit losses, as Twirla was commercially launched in December 2020 and historical data is
not yet available. The credit loss reserves are reviewed and adjusted periodically.
Trade accounts receivable are aged based on the contractual payment terms. When the collectability of an invoice is
no longer probable, the Company will create a reserve for that specific receivable. If a receivable is determined to be
uncollectible, it is charged against the general credit loss reserve or the reserve for the specific receivable, if one exists.
Fair Value of Financial Instruments
In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, disclosures of fair value
information about financial instruments are required, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. Cash, cash equivalents, and marketable securities are carried at fair value (see Note 3).
Other financial instruments, including accounts receivable, accounts payable and accrued liabilities, are carried at cost,
which approximates fair value given their short-term nature.
Inventory
Inventory is valued utilizing the weighted average costing method. The Company records an inventory reserve for
losses associated with dated, expired, excess or obsolete items. This reserve is based on management’s current knowledge
with respect to inventory levels and planned production. Management does not believe the Company’s inventory is subject
to significant risk of obsolescence in the near term.
The Company’s third-party manufacturer, Corium, has completed the validation of the commercial manufacturing
process for Twirla. The costs associated with validation batches were expensed as research and development expenses
during the period the costs were incurred. The Company is using this validation product for commercial supplies and
samples of Twirla. Since the Company did not capitalize any validation product, all sales of this validation product will
have no product cost associated with it. During the year ended December 31, 2020, the cost basis of product sold that had
a carrying value of zero was approximately $0.1 million. Had such inventory been valued at acquisition cost, it would
have resulted in an increase in cost of goods sold and a decrease in gross profit. The Company expects inventories with a
carrying value of zero to be utilized in 2021. All future production of commercial supplies will be capitalized as inventory.
Property and Equipment
Property and equipment, consisting of manufacturing equipment, is stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line, method over the estimated useful lives of the assets. Currently, all fixed
assets pertain to production equipment at the Company’s third party manufacturing partner and have an estimated useful
life of 7 years.
Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance, are charged
to earnings in the period in which costs are incurred. Improvements and additions are capitalized in accordance with
Company policy.
Long-Lived Assets
In accordance with ASC 360, Property, Plant and Equipment, the Company’s policy is to review long-lived assets for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Management does not believe that there has been any impairment of the carrying value of any long-lived
assets as of December 31, 2020.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
Research and Development Expense
Research and development costs are expensed as incurred. Research and development expense consists primarily of
costs related to personnel, including salaries and other personnel-related expenses, expenses related to manufacturing,
clinical trial expenses, consulting fees and support services used in drug development. All research and development costs
are charged to operations as incurred in accordance with ASC 730, Research and Development.
In certain circumstances, the Company is required to make advance payments to vendors for goods or services that
will be received in the future for use in research and development activities. In such circumstances, the advance payments
are deferred and are expensed when the activity has been performed or when the goods have been received.
Advertising Costs
The Company has elected to expense advertising costs when incurred. Advertising costs totaled $5.5 million and $0 for
the years ended December 31, 2020 and 2019, respectively.
Deferred Financing Costs
Costs directly attributable to the Company’s term loan (see Note 9) are deferred and reported as a reduction of the
related term loan. These costs represent legal fees and other costs related to the term loan and are being amortized utilizing
the straight-line method over the term of the loan. Amortization of deferred financing costs charged to interest expense was
approximately $231, $0 and $133 for the years ended December 31, 2020, 2019 and 2018, respectively.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to credit risk consist principally of cash, cash equivalents
and marketable securities. The Company invests its cash, cash equivalents and marketable securities in debt instruments
and interest-bearing accounts in United States financial institutions, the balances of which exceed federally insured limits.
The Company has not recognized any losses from credit risks on such accounts. The Company mitigates credit risk by
limiting the investment type and maturity to securities that preserve capital, maintain liquidity and have a high credit
quality. The Company has no financial instruments with off balance sheet risk of accounting loss.
Major customers of the Company are defined as those constituting greater than 10% of its total revenue. In 2020, the
Company had sales to three customers that individually accounted for more than 10% of our total revenue. These
customers had sales of $0.3 million, $0.2 million, and $0.2 million, respectively, which represented 97% of total revenues
in the aggregate. Accounts receivable related to these major customers comprised 35%, 32%, and 30%, respectively.
Revenue Recognition
The Company recognizes revenue from the sale of its product, Twirla, in accordance with ASC 606, Revenue from
Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to determine revenue
recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3)
determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5)
recognize revenue when (or as) the entity satisfies a performance obligation.
In accordance with ASC 606, the Company recognizes revenue at the point in time when its performance obligation is
satisfied by transferring control of the promised goods or services to a customer. In accordance with the Company’s
contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
product is sold to and received by a customer. The Company’s customers are located in the United States and consist
primarily of wholesale distributors. Trade accounts receivable due to the Company from contracts with its customers are
stated separately in the balance sheet, net of various allowances as described in the Trade Accounts Receivable and
Allowance policy.
The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be
received from the sale of product to its customers. Revenue is only recognized when it is probable that a significant
reversal will not occur in future periods. To determine whether a significant reversal will occur in future periods, the
Company assesses both the likelihood and magnitude of any such potential reversal of revenue.
Twirla is sold to customers at the wholesale acquisition cost (WAC). However, the Company records product revenue,
net of reserves for applicable variable consideration. These types of variable consideration items reduce revenue and
include the following:
•Distribution services fees
•Prompt pay and other discounts
•Product returns
•Chargebacks
•Rebates
•Co-payment assistance
An estimate for each variable consideration item is made and is recorded in conjunction with the revenue being
recognized. Generally, if the estimated amount is payable to a customer, it is recorded as a reduction to accounts receivable.
If the estimated amount is payable to an entity other than a customer, it is recorded as a current liability. An estimated
amount of variable consideration may differ from the actual amount. At each balance sheet date, these provisions are
analyzed, and adjustments are made if necessary. Any adjustments made to these provisions would affect net product
revenue and earnings in the current period.
In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain
variable consideration. For example, the Company must estimate the percentage of end-users that will obtain the product
through public insurance such as Medicaid or through private commercial insurance. To determine these estimates, the
Company relied on industry standard data and trend analysis since historical sales data was not available as Twirla was
launched in December 2020. As historical data becomes available, the Company will incorporate that data into its estimates
of variable consideration.
The specific considerations that the Company uses in estimating these amounts related to variable considerations are
as follows.
Distribution services fees – The Company pays distribution service fees to its wholesale distributors. These fees
are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchase amount. The
Company records these fees as contra trade accounts receivable on the balance sheet.
Prompt pay and other discounts – The Company incentivizes its customers to pay their invoices on time through
prompt pay discounts. These discounts are an industry standard practice and the Company offers a prompt pay discount to
each wholesale distributor customer. The specific prompt pay terms vary by customer and are contractually fixed. Prompt
pay discounts are typically taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale
based on the WAC. Prompt pay discount estimates are recorded as contra trade accounts receivable on the balance sheet.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
The Company may also give other discounts to its customers to incentivize purchases and promote customer loyalty.
The terms of such discounts may vary by customer. These discounts reduce gross product revenue at the time the revenue
is recorded.
Product returns – Customers have the right to return product that is within six months or less of the labeled
expiration date or that is past the expiration date by no more than twelve months. Twirla was commercially launched in
December 2020 and there were no returns as of December 31, 2020. As time passes and historical data becomes available,
the Company will begin to use historical sales and return data to estimate future product returns.
Chargebacks – Certain government entities and covered entities will be able to purchase the product at a price
discounted below WAC. The Company is currently in the process of finalizing agreements with these types of entities. The
difference between the government or covered entity purchase price and the wholesale distributor purchase price of WAC
will be charged back to the Company. The Company estimates the amount in chargebacks based on the expected number of
claims and related cost that is associated with the revenue being recognized for product that remains in the distribution
channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the
balance sheet.
Rebates – The Company will be subject to mandatory discount obligations under the Medicaid and Tricare
programs. The Company is currently in the process of finalizing these agreements with Medicaid and Tricare. The rebate
amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after
the product has been dispensed to an end user and the Company has been invoiced. Rebates for Medicaid and Tricare are
typically invoiced in arrears. The Company estimates the amount in rebates based on the expected number of claims and
related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the
end of each reporting period. Rebate estimates are recorded as other current liabilities on the balance sheet.
Co-payment assistance - The Company offers a co-payment assistance program to commercially insured patients
whose insurance requires a co-payment to be made when filling their prescription. This is a voluntary program that is
intended to provide financial assistance to patients meeting certain eligibility requirements. The Company estimates the
amount of co-payment assistance based on the expected number of claims and related cost that is associated with the
revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Co-
payment assistance estimates are recorded as other current liabilities on the balance sheet.
The following table provides a summary of the Company’s sales allowances and related accruals for the year ended
December 31, 2020 which have been deducted in arriving at revenues, net.
Customer credits, discounts and allowances
Rebates and co-pay assistance
Total
Warrants
December 31,
2019
Allowances for
current period sales
Payments & December 31,
credits
2020
$
$
— $
—
— $
187
116
303
$
$
— $
—
— $
187
116
303
The Company accounts for its warrants to purchase common stock in accordance with ASC 480, Distinguishing
Liabilities from Equity. On January 1, 2019, the Company adopted the provisions of Accounting Standards Update
(“ASU”) 2017-11 Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and
Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II)
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities
and Certain Mandatorily Redeemable Non-controlling Interests with a Scope Exception, which indicate that a down round
feature no longer precludes equity classification when assessing whether an investment is indexed to an entity’s own stock.
The Company used a modified retrospective approach to adoption, which does not restate its financial statements as of the
prior year end (December 31, 2018). The cumulative effect of adoption of ASU 2017-11 resulted in an adjustment to
accumulated deficit as of January 1, 2019 of $213 with a corresponding adjustment to additional paid-in capital.
Warrants to purchase 62,505 shares of common stock at $6.00 per share expired on December 14, 2019, and none of
these warrants are outstanding as of December 31, 2020.
The warrants issued in connection with the Company’s debt financing completed in February 2015 are classified as a
component of stockholders’ equity. The value of such warrants was determined using the Black-Scholes option-pricing
model. These warrants expired without being exercised on February 24, 2020.
In connection with entering into a senior secured term loan facility in February 2020, the Company issued warrants to
purchase 1,400,000 shares of its common stock. These warrant instruments qualify for equity classification and have been
allocated based upon the relative fair value of the base instrument and the warrant. See Note 9 for additional information.
Income Taxes
The Company accounts for deferred taxes using the asset and liability method as specified by ASC 740, Income Taxes.
Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting
and the tax basis of assets and liabilities, operating losses and tax credit carryforwards. Deferred income taxes are
measured using the enacted tax rates and laws that are anticipated to be in effect when the differences are expected to
reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax
benefits which are not expected to be realized. The effect on deferred income tax assets and liabilities of a change in tax
rates is recognized in the period that such tax rate changes are enacted.
The Company has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions
which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure
of uncertain tax positions taken or expected to be taken in income tax returns. The Company has no uncertain tax positions
as of December 31, 2020 that qualify for either recognition or disclosure in the financial statements under this guidance.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock
Compensation. The Company grants stock options for a fixed number of shares to employees and non-employees with an
exercise price equal to the fair value of the shares at grant date. Compensation cost is recognized for all share-based
payments granted and is based on the grant-date fair value estimated using the weighted-average assumption of the Black-
Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The
Company elects to account for forfeitures when they occur. The equity instrument is not considered to be issued until the
instrument vests. As a result, compensation cost is recognized over the requisite service period with an offsetting credit to
additional paid-in capital.
The Company also awards restricted stock units (“RSUs”) to employees and its board of directors. RSUs are generally
subject to forfeiture if employment terminates prior to the completion of the vesting restrictions. The Company expenses
the cost of the RSUs, which is determined to be the fair market value of the shares of common stock
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse. Cost
associated with performance-based restricted stock units with a performance condition which affects the vesting is
recognized only if the performance condition is probable of being satisfied.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available
for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and
in assessing performance. The Company views its operations and manages its business in one operating and reporting
segment, which is the business of commercializing its transdermal patch for use in contraception.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted
average number of common shares outstanding for the period, without consideration for common stock equivalents.
Diluted net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-
average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the
period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share
calculation, common stock warrants, unvested RSUs and stock options are considered to be potentially dilutive securities
but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore,
basic and diluted net loss per share were the same for all periods presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded from the
calculation of diluted net loss per share for the years ended December 31, 2020, 2019 and 2018, respectively, because to do
so would be anti-dilutive (in common equivalent shares):
Common stock warrants
Unvested restricted stock units
Common stock options
Total
Recent Accounting Pronouncements
Year Ended December 31,
2019
2020
1,400,000
159,795
8,519,086
10,078,881
180,274
—
7,192,357
7,372,631
2018
242,779
147,554
5,687,901
6,078,234
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board
(“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise
discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material
impact on our consolidated financial statements or disclosures.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from
Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain Financial Instruments with
Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. This
ASU eliminates the requirement to consider “down round” features when determining whether certain equity-linked
financial instruments or embedded features are indexed to an entity’s own stock. On January 1, 2019, the Company
adopted the provisions of ASU No. 2017-11 using a modified retrospective approach, which does not restate its financial
statements as of the prior year end (December 31, 2018). The cumulative effect of adoption of ASU 2017-11 resulted in an
adjustment to accumulated deficit as of January 1, 2019 of $213 with a corresponding adjustment to
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
additional paid-in capital. As a result of the adoption of ASU 2017-11, effective January 1, 2019, the Company no longer
measures these warrants at fair value.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the impairment model by requiring entities to use
a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types
of financial instruments, including trade receivables. ASU 2016 13 was adopted by the Company on January 1, 2020 and
had no current impact on the Company as the Company did not have any financial instruments covered by the topic on the
date of adoption. In December 2020, the Company recognized its first sales of Twirla resulting in a receivable of $0.9
million at December 31, 2020. The Company applied the new credit standard to these transactions resulting in an
immaterial allowance for credit losses at December 31, 2020.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for
Income Taxes (“ASU 2019-12”). This guidance simplifies the accounting for income taxes by, among other things,
reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws. The
guidance is effective for the Company on January 1, 2021. The Company is currently evaluating the impact of adopting this
standard and does not expect the guidance to have a material impact on its consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if
adopted, would have a material impact on the accompanying financial statements.
3. Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, describes the fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level
fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable
inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
● Level 1—Quoted prices in active markets for identical assets and liabilities. The Company’s Level 1 assets consist
of cash and cash equivalents. The Company has no Level 1 liabilities.
● Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices
for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets and liabilities. The Company has no Level 2
assets or liabilities.
● Level 3—Unobservable inputs that are supported by little or no market data and which require internal
development of assumptions about how market participant price the fair value of the assets or liabilities. The
Company has no Level 3 assets or liabilities.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
The following tables set forth the Company’s financial instruments measured at fair value by level within the fair value
hierarchy as of December 31, 2020 and 2019:
December 31, 2020
Assets:
Cash and cash equivalents
Marketable securities
Total assets at fair value
December 31, 2019
Assets:
Cash and cash equivalents
Total assets at fair value
Level 1
Level 2
Level 3
$ 14,463
—
$ 14,463
$
— $
40,008
$ 40,008
$
—
—
—
Level 1
Level 2
Level 3
$ 34,479
$ 34,479
$
$
— $
— $
—
—
There were no transfers between Level 1, 2 or 3 during 2020 or 2019.
4. Marketable Securities
The following is a summary of marketable securities, classified as available-for-sale:
Amortized
Cost
Gross Unrealized
Gains
Losses
Fair
Value
December 31, 2020
U.S. government obligations (maturing in one year or less) $
Corporate debt securities (maturing in one year or less)
Total marketable securities
$
7,035
32,970
40,005
$
$
2
1
3
$
$
— $
— $
7,037
32,971
40,008
The Company holds investment-grade marketable securities. There were no continuous unrealized loss positions in
excess of twelve months as of December 31, 2020. Marketable securities include $0.1 million of accrued interest income
at December 31, 2020.
5. Prepaid Expenses
Prepaid expenses consist of the following:
Prepaid insurance
Other
Total prepaid expenses
December 31, December 31,
2020
680
769
1,449
2019
656
184
840
$
$
$
$
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6. Property and Equipment
Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
Property and equipment, consisting of manufacturing, office and computer equipment, is stated at cost, less
accumulated depreciation. Depreciation is computed using the straight-line, method over the estimated useful lives of the
assets. Property and equipment consist of the following:
Office equipment
Computer equipment
Manufacturing equipment
Less: accumulated depreciation
Property and equipment
December 31,
2020
2019
Estimated
Life
$
— $
—
49
179
14,328
14,328
(85)
$ 14,243
14,203 7 years
14,431
(387)
$ 14,044
Upon successful completion of the validation of the commercial manufacturing process for Twirla by the Company’s
contract manufacturer, Corium, and the announcement of the commercial launch of Twirla in December 2020,
manufacturing equipment with a cost of $14.3 million was placed into service and started being depreciated.
7. Accrued Liabilities
Accrued liabilities consist of the following:
Employee bonuses
Accrued professional fees and other
Total accrued liabilities
8. Leases
December 31, December 31,
2020
1,697
1,651
3,348
$
$
2019
1,437
367
1,804
$
$
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (ROU)
model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer
than 12 months. Leases are classified as either finance or operating, with classification affecting the pattern of expense
recognition in the statement of operations. The Company adopted ASU No. 2016-02 on January 1, 2019 for leases that
existed on that date. The Company has elected to apply the provisions of ASC 842 modified retrospectively at January 1,
2019 through a cumulative-effect adjustment. Prior period results continue to be presented under ASC 840 based on the
accounting standards originally in effect for such periods. The Company recorded a lease asset and lease liability of
approximately $0.3 million on its balance sheet as of January 1, 2019, with no impact on its statement of operations.
The Company has no finance leases and one operating lease for office space in Princeton, NJ. On November 11, 2020,
the Company entered into an extension for this location through December 31, 2021 and simultaneously reduced the
amount of space it was leasing. Operating lease expense was $190 and $193 for the years ended December 31, 2020 and
2019, respectively.
Operating cash flows used for operating leases during the years ended December 31, 2020 and 2019 were $184 and
$152, respectively. As of December 31, 2020, the weighted-average remaining lease term was 1.0 years and the weighted
average discount rate was 15.2%.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
Future minimum lease payments under non-cancellable leases as of December 31, 2020 were as follows:
2021
Total
Less: Interest
Present value of lease liability
9. Credit Agreement and Guaranty
$
$
$
150
150
(12)
138
On February 10, 2020 (the “Closing Date”), the Company entered into a Credit Agreement and Guaranty with
Perceptive Credit Holdings III, LP, a related party (“Perceptive”), for a senior secured term loan credit facility of up to
$35.0 million, (the “Perceptive Credit Agreement”). A first tranche of $5.0 million was funded on execution of the
Perceptive Credit Agreement. A second tranche of $15.0 million was funded as a result of the approval of Twirla by the
FDA. Another $15.0 million tranche will be available to the Company based on the achievement of certain revenue
milestones. On February 26, 2021 the Perceptive Credit Agreement was amended (“Amended Perceptive Credit
Agreement”) to increase the total amount available to the Company to $45.0 million by creating a fourth tranche of $10.0
million that will be available based on the achievement of a revenue milestone.
The facility will mature on February 10, 2024 (“Maturity Date”). The Company is scheduled to make interest-only
payments on the loans under the Perceptive Credit Agreement until February 10, 2023. Thereafter, the Company is
required to make monthly principal payments in an amount equal to 1.50% of the principal amount of the outstanding loans
until February 10, 2024.
Borrowings under the Amended Perceptive Credit Agreement will accrue interest at an annual rate equal to the London
Interbank Offered Rate for one-month deposits (“LIBOR”) plus 10.25%, provided that LIBOR shall not be less than 1.5%.
The rate of interest in effect as of the Closing Date and at December 31, 2020 was 11.75%. Upon the occurrence and
during the continuance of any event of default under the Amended Perceptive Credit Agreement, the interest rate
automatically increases by 3.0% per annum.
The Company may prepay any outstanding loans in whole or in part. Any such prepayment of the loans is subject to a
prepayment fee of 10.0% if such prepayment occurs on or prior to February 10, 2021; 8.0% if such prepayment occurs
after February 10, 2021 and on or prior to February 10, 2022; 4.0% if such prepayment occurs after February 10, 2022 and
on or prior to February 10, 2023; and 2.0% if such prepayment occurs after February 10, 2023 and prior to February 10,
2024.
All of the Company’s obligations under the Amended Perceptive Credit Agreement are secured by a first-priority lien
and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property.
The Amended Perceptive Credit Agreement contains certain representations and warranties, affirmative covenants,
negative covenants and conditions that are customary for similar financings. The negative covenants restrict or limit the
ability of the Company to, among other things and subject to certain exceptions contained in the Perceptive Credit
Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as
mergers or acquisitions, or changes to the Company’s business activities; make certain investments or restricted payments
(each as defined in the Amended Perceptive Credit Agreement); change its fiscal year; pay dividends; repay other certain
indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the
impact of restricting the Company’s ability to make loan repayments under the Amended Perceptive Credit Agreement. In
addition, the Company must (i) at all times prior to the Maturity Date maintain a minimum cash balance of $3.0 million;
and (ii) as of the last day of each fiscal quarter commencing with the fiscal quarter ending June 30, 2021, report revenues
for the trailing 12-month period that exceed the amounts set forth in the
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
Amended Perceptive Credit Agreement, which range from $3.8 million for the fiscal quarter ending June 30, 2021 to $87.1
million for the fiscal quarter ending December 31, 2023. The Company received a covenant waiver pertaining to the
existence of substantial doubt about the Company’s ability to continue as a going concern as disclosed in Note 1. The
Company was in compliance with the remaining covenants under the Amended Perceptive Credit Agreement as of
December 31, 2020.
In connection with the Perceptive Credit Agreement, the Company issued to Perceptive two warrants to purchase an
aggregate of 1,400,000 shares of the Company’s common stock (together, the “Perceptive Warrants”). The first warrant is
exercisable for 700,000 shares of common stock at an exercise price of $3.74 per share. The second warrant is exercisable
for 700,000 shares of common stock at an exercise price of $4.67 per share. The Perceptive Warrants contain anti-dilution
provisions and other warrant holder protections. The Perceptive Warrants are not exercisable to the extent that Perceptive
would beneficially own more than 19.99% of the Company’s common stock as a result of the exercise. The Perceptive
Warrants expire on February 10, 2027. In connection with the Amended Perceptive Credit Agreement, the Company
issued to Perceptive a warrant to purchase 450,000 shares of the Company’s common stock.
The Company allocated the proceeds of $20.0 million in accordance with ASC 470 based on the relative fair values of
the debt and warrants. The relative fair value of the warrants of approximately $3.6 million at the time of issuance, which
was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the
carrying value of the debt. The significant assumptions used in preparing the option pricing model for valuing the
Company’s warrants issued to Perceptive include (i) volatility (70.0%), (ii) risk free interest rate of 1.47% (estimated using
treasury bonds with a 3-year life), (iii) strike prices of $3.74 and $4.67 for the common stock warrants, (iv) fair value of
common stock ($4.01) and (v) expected life (7 years). The fair value of the warrants as well as the debt issue costs incurred
in connection with the entry into the Perceptive Credit Agreement, including a facility fee of 1% of the total amount of
loans available under the facility, are presented as a direct deduction from the carrying amount of the term loan on the
consolidated balance sheet as detailed below.
Notes payable
Debt issuance costs
Warrant discount
Long-term debt
10. Stockholders’ Equity
December 31,
2020
20,000
(828)
(2,791)
16,381
$
$
The Company’s Certificate of Incorporation, among other things: (i) authorizes 150,000,000 shares of common stock;
(ii) authorizes 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Board in one
or more series; (iii) provides that the Board be divided into three classes with staggered three-year terms, with one class of
directors to be elected at each annual meeting of the Company’s stockholders; (iv) provides that directors may only be
removed with cause and only upon the affirmative vote of holders of at least 75% of the voting power of all then-
outstanding shares of capital stock of the Company entitled to vote generally in the election of directors; (v) provides that
only the Board, the chairman of the Board or the chief executive officer may call a special meeting of stockholders; and
(vi) requires that any action instituted against the Company’s officers or directors in connection with their service to the
Company be brought in the State of Delaware.
Shelf Registration Statements
On October 2, 2020, the Company filed a universal shelf registration statement with the SEC for the issuance of
common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of $200.0 million
(“the 2020 Shelf Registration Statement”). On October 14, 2020, the 2020 Shelf Registration Statement was declared
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
effective by the SEC. Prior to the 2020 Shelf Registration Statement, the Company had filed a universal shelf registration
statement in November 2018 for the issuance of up to $100.0 million of securities, (“the 2018 Shelf Registration
Statement”), which was declared effective by the SEC on November 14, 2018.
On January 23, 2019, the Company filed a prospectus supplement to the 2018 Shelf Registration Statement registering
an at-the-market offering program entered into for the sale of up to $10.0 million of shares of the Company’s common
stock. In the year ended December 31, 2019, the Company sold a total of 1,801,528 shares of the Company’s common
stock under the ATM program resulting in net proceeds of approximately $2.5 million.
In August 2019, the Company filed a prospectus supplement to the 2018 Shelf Registration Statement registering a
public offering of 14,526,315 shares of common stock at a price of $0.95 per share. Proceeds from the public offering, net
of underwriting discounts, commissions and offering expenses, were approximately $12.7 million.
On November 8, 2019, the Company filed a prospectus supplement to the 2018 Shelf Registration Statement
registering an at-the-market offering program entered into for the sale of up to $20.0 million of shares of the Company’s
common stock. In the year ended December 31, 2019, the Company sold a total of 10,440,908 shares of common stock
under this ATM program, representing all of the capacity, resulting in net proceeds of approximately $19.3 million.
On February 21, 2020, the Company filed a prospectus supplement to the 2018 Shelf Registration Statement
registering a public offering of 17,250,000 shares of common stock at a price of $3.00 per share. Proceeds from the public
offering, net of underwriting discounts, commissions and offering expenses were approximately $48.4 million.
Private Placement
In March 2019, the Company completed a private placement of 8,426,750 shares of common stock at $0.93 per share.
Proceeds from the Company’s private placement, net of offering costs were approximately $7.8 million.
11. Equity Incentive Plans
Stock options
The Company had granted stock options under an amended and restated 1997 Equity Incentive Plan (the “1997 Plan”)
and a 2008 Equity Incentive Plan (the “2008 Plan”). The plans provided for the granting of incentive and non-statutory
options and stock awards to consultants, directors, officers and employees. Such options are exercisable for a period of ten
years and generally vest over a four-year period. In conjunction with the adoption of the 2008 Plan in April 2008, no
additional grants were made from the 1997 Plan and issued options from the 1997 Plan remain outstanding. In 2014, the
Board approved the 2014 Incentive Compensation Plan (the “2014 Plan”). The 2014 Plan is the successor to the
Company’s 2008 Plan and 1997 Plan. In conjunction with the adoption of the 2014 Plan in 2014, no additional grants were
made from the 2008 Plan and options from the 1997 Plan and the 2008 Plan remain outstanding. In June 2018, the 2014
Plan was amended and restated, and the Amended and Restated 2014 Incentive Compensation Plan is now referred to as
the Amended 2014 Plan. As of December 31, 2020, there were 1,980,203 shares available for future grant under the
Amended 2014 Plan.
Through December 31, 2020, the Company granted options to certain employees and nonemployees to purchase shares
of common stock at exercise prices ranging from $0.60 to $10.75 per share. The Company recorded noncash
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
stock-based compensation expense for the years ended December 31, 2020, 2019 and 2018 based on the fair market value
of the options and shares granted at the grant date. Stock-based compensation expense was as follows:
Cost of goods sold
Research and development
General and administrative
Total
2020
$
14
651
2,153
$ 2,818
Year Ended
December 31,
2019
2018
$
— $
522
1,240
$ 1,762
—
1,274
2,356
$ 3,630
The following assumptions were used to compute employee stock-based compensation under the Black-Scholes option
pricing model:
Risk‑free interest rate
Expective volatility
Expected dividend yield
Expected life (in years)
2020
2019
2018
.40% - 1.68 % 1.74% ‑ 2.61 %
65 %
0 %
65% ‑ 106 %
0 %
2.57 %
70 %
0 %
6.25
6.25
6.25
Risk-free interest rate. The Company bases the risk-free interest rate assumption on observed interest rates appropriate
for the expected term of the stock option grants.
Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid
cash dividends and has no present intention to pay cash dividends.
Expected volatility. The expected volatility assumption was based on volatilities of a peer group of similar companies
whose share prices are publicly available until August 2020. The peer group was developed based on comparable
companies in the biotechnology and pharmaceutical industries. In August 2020, the Company transitioned to its own
expected volatility based on sufficient historical data.
Expected term. The expected term represents the period of time that options are expected to be outstanding. Because
the Company does not have historic exercise behavior, management determined the expected life assumption using the
simplified method, which is an average of the contractual term of the option and its ordinary vesting period.
Forfeitures. The Company has elected to record forfeitures as they occur.
As of December 31, 2020, the unrecorded deferred stock-based compensation balance related to stock options was
approximately $4.0 million and will be recognized over an estimated weighted-average amortization period of 2.8 years.
The weighted average grant date fair value of options granted during the year ended December 31, 2020 was $1.70.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
The following table summarizes the options outstanding, options vested and the options exercisable as of December
31, 2020, 2019 and 2018:
Weighted
Options outstanding at December 31, 2018
Options granted
Options exercised
Options cancelled/forfeited
Options outstanding at December 31, 2019
Options granted
Options exercised
Options cancelled/forfeited
Options outstanding at December 31, 2020
Options exercisable at December 31, 2020
Vested and expected to vest at December 31, 2020
Average
Weighted
Average Remaining
Exercise Contractual
Life (Years)
7.4
Aggregate
Intrinsic Value
Options
5,687,901
2,805,600
(92,271)
(1,208,873)
7,192,357
2,539,403
(503,448)
(709,226)
8,519,086
5,300,428
8,519,086
Price
4.34
1.18
1.78
2.70
3.42
2.80
1.21
6.20
3.13
3.46
7.2
7.3
6.3
$
$
$
6,153
5,086
6,153
Intrinsic value in the tables was calculated as the difference between the Company's stock price at December 31, 2020,
of $2.87 per share, and the exercise price, multiplied by the number of options.
Restricted Stock Units
During the year ended December 31, 2017, the Company granted a total of 247,694 RSUs to executive officers and
directors of the Company. These RSUs vested ratably over a two-year period for the executive officers and on the one-year
anniversary of the grant date for the directors.
During the year ended December 31, 2018, the Company granted a total of 108,254 RSUs to executive officers of the
Company representing payment for 2017 target bonuses. These RSUs vested on the one-year anniversary of the grant date.
During the year ended December 31, 2020, the Company granted a total of 52,651 RSUs to executive officers of the
Company. These RSUs vest on the one-year anniversary of the grant date. During the year ended December 31, 2020, the
Company granted a total of 107,144 RSUs to directors of the Company. These RSUs vest ratably over one and three years.
As of December 31, 2020, the unrecorded deferred stock-based compensation balance related to RSUs was
approximately $0.2 million and will be recognized over an estimated weighted-average amortization period of 1.0 years.
111
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
The following table shows the Company's restricted stock unit activity during the years ended December 31, 2020, and
2019:
Restricted stock units outstanding at December 31, 2018
Vested
Restricted stock units outstanding at December 31, 2019
Granted
Restricted stock units outstanding at December 31, 2020
Performance Based Restricted Stock Awards
Shares
147,554
(147,554)
—
159,795
159,795
Weighted Average
Grant Date Fair Value
3.03
3.03
Aggregate
Intrinsic Value
$
—
129
2.81
$
458
In January 2018, the Company granted up to 365,000 shares of performance-based restricted stock units ("Performance
Units") under the 2014 Plan primarily to executive officers, which were largely contingent upon the achievement of
performance goals during the performance period beginning on the date of grant and ending on December 31, 2019 as set
forth in each individual's Performance Unit agreement. Performance Units granted in January 2018 replaced Performance
Units granted in April 2017 which expired. During 2018, 50,000 Performance Units were cancelled and as of December
31, 2018 315,000 Performance Units remained outstanding. The remaining 315,000 Performance Units expired in
December 2019 as the performance goals were not achieved, and there are no Performance Units outstanding as of
December 31, 2020.
12. Accumulated Other Comprehensive Income
The change in accumulated other comprehensive income, which is reported as a component of stockholders’ equity,
for the year ended December 31, 2020 is summarized below:
Balance December 31, 2019
Other comprehensive income
Balance December 31, 2020
13. Income Taxes
Unrealized
Gain on
Marketable
Securities
$
$
—
3
3
On December 22, 2017, the then President of the United States signed into law an Act to provide for reconciliation
pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (commonly known as “the Tax
Cuts and Jobs Act or the “TCJA”), which introduced a comprehensive set of tax reforms. The Tax Cuts and Jobs Act
significantly revises U.S. tax law by, among other provisions, lowering the Company’s corporate tax rate from 34% to 21%
and eliminating or reducing certain income tax deductions.
In December 2017, in accordance with the SEC Staff Accounting Bulletin (“SAB”) 118–Income Tax Accounting
Implications of the TCJA, the Company recorded tax effects on a provisional basis based on a reasonable estimate. The
TCJA did not have a material impact on the Company's financial statements because its deferred temporary differences are
fully offset by a valuation allowance and the Company does not have any offshore earnings from which to record the
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
mandatory transition tax. During 2018, the Company completed its analysis under SAB 118 and no additional tax effects
due to rate-remeasurement were required to be recorded.
On March 27, 2020 the US government enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act) which includes numerous modifications to income tax provisions, including a limitation on business interest expense
and net operating loss provisions and the acceleration of alternative minimum tax credits. Given the Company’s history of
losses, the CARES Act did not have a material impact on its tax provision.
As of December 31, 2020, the Company had available net operating loss carryforwards (“NOLs”) of approximately
$281.7 million for federal and $107.2 million for state income tax reporting purposes. Under the TCJA, the federal NOLs
generated after 2017, approximately $84.0 million, can be carried forward indefinitely, while the NOLs generated through
taxable years ending December 31, 2017, approximately $197.7 million, are available to offset future federal taxable
income, if any, through 2037. The Company also has research and development tax credit carryforwards of approximately
$6.5 million and $1.8 million for federal and state income tax reporting purposes, respectively, which are available to
reduce federal income taxes, if any, through 2040 and state income taxes, if any, through 2035.
The Internal Revenue Code of 1986, as amended (the “Code”) provides for a limitation on the annual use of NOLs and
other tax attributes (such as research and development tax credit carryforwards) following certain ownership changes, as
defined by the Code that could significantly limit the Company’s ability to utilize these carryforwards. At this time, the
Company has not completed a study to assess whether an ownership change under Section 382 of the Code has occurred,
or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities
associated with such a study. The Company is likely to have experienced various ownership changes, as defined by the
Code, as a result of past financings. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may
be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes.
Therefore, the Company may not be able to take full advantage of these carryforwards for federal and state income tax
purposes. The Company does not have any significant unrecognized tax benefits.
As of December 31, 2020, the Company has not accrued interest or penalties related to uncertain tax positions. The
Company’s tax returns for the years ended December 31, 2017 through December 31, 2019 are still subject to examination
by major tax jurisdictions. However, the Internal Revenue Service (“IRS”) and state tax jurisdictions can audit the NOLs
generated in prior years in the years that those NOLs are utilized.
For all years through December 31, 2020, the Company generated research credits but has not conducted a study to
document the qualified activities. This study may result in an adjustment to the Company’s research and development
credit carryforwards; however, until a study is completed and any adjustment in known, no amounts are being presented as
an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development
credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset
established for the research and development credit carryforwards and the valuation allowance.
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented
below:
December 31,
2020
2019
Deferred tax assets:
Net operating loss carryforwards
Research credit carryforward
Stock options and other
Total gross deferred tax assets
Valuation allowance for deferred tax assets
Net deferred tax assets
$ 66,907
7,909
1,962
76,778
(76,778)
$
$ 55,216
7,609
3,225
66,050
(66,050)
—
— $
The net change in the valuation allowance for the years ended December 31, 2020 and 2019 was an increase of
$10.6 million and an increase of $5.3 million, respectively.
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
2020
December 31,
2019
2018
Federal income tax at statutory rate
State income tax benefit, net of federal benefit
Research and development tax credits
Other
Increase to valuation allowance
Effective income tax rate
Sale of New Jersey Net Operating Losses
1.0 %
0.7 %
(2.0)%
21.0 % 21.0 % 21.0 %
6.0 %
3.0 %
(4.0)%
(20.7)% (28.0)% (24.0)%
2.0 %
7.0 %
4.0 %
(4.0)%
0.0 %
0.0 %
The Company has participated in the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the
“Program”) sponsored by The New Jersey Economic Development Authority. The Program enables approved
biotechnology companies with unused NOLs and unused research and development credits to sell these tax benefits for at
least 80% of the value of the tax benefits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. The
Program is administered by The New Jersey Economic Development Authority and the New Jersey Department of the
Treasury’s Division of Taxation. In January 2018, the Company completed the sale of NOLs totaling approximately $0.5
million. This amount is a current state tax benefit and is reflected in the statement of operations for the year ended
December 31, 2018. The Company had previously reached the maximum lifetime benefit of $15.0 million under the
historical Program, however in January 2021 the Program was amended to extend the maximum lifetime benefit to $20.0
million. The Company is currently evaluating the potential sale of NJ NOLs under this new threshold.
14. 2019 Retention Plan
In July 2019, the Company adopted a retention plan (the “2019 Retention Plan”) for all employees (with the exception
of the Chairman and Chief Executive Officer) in order to induce such employees to remain employed by the Company
through at least the extended PDUFA goal date of February 14, 2020.
Each employee who participated in the 2019 Retention Plan and remained continuously employed by the Company
through the approval of Twirla was to be paid a lump-sum cash payment in an amount determined for each eligible
employee by the Compensation Committee at the time of the adoption of the 2019 Retention Plan. If an eligible employee
terminated employment prior to the approval for any reason, no such retention payment was payable to the
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
eligible employee. With the approval of Twirla in February 2020, the cash portion of the 2019 Retention Plan in the
amount of approximately $0.3 million was expensed and paid to eligible employees in February 2020.
All employees (with the exception of the Chairman and Chief Executive Officer) who were employed by the Company
as of July 3, 2019 were also granted a stock option to purchase the number of shares of common stock as approved by the
Compensation Committee, with a per share exercise price of $1.48, representing the closing price of the Company’s
common stock as reported by Nasdaq on the date of grant. For each option, 50% of the option vested on July 3, 2020 and
the remaining 50% vested on December 31, 2020.
In addition, the vesting schedule for the stock options granted in January 2019 was amended for all employees (with
the exception of the Chairman and Chief Executive Officer) holding such options who were employed on July 3, 2019 as
follows: 50% of the option vested on January 29, 2020, 25% vested on June 30, 2020 and the remaining 25% vested on
December 31, 2020. The change in vesting schedule was approved by the Compensation Committee and did not have a
material impact on the Company’s statement of operations.
15. Commitments and Contingencies
The Company has several firm purchase commitments, primarily related to the manufacture and supply of Twirla and
the supply of a field force of sales representatives to provide certain detailing services, sales operation services, compliance
services, and training services. Future firm purchase commitments under these agreements, the last of which ends in 2030,
total $16.3 million. This amount does not represent all of the Company’s anticipated purchases in the future, but instead
represents only purchases that are the subject of contractually obligated minimum purchases. The minimum commitments
disclosed are determined based on non-cancelable minimum spend in 2021 or termination amounts. Additionally, the
Company purchases products and services as needed with no firm commitment.
The Company records a provision for contingent losses when it is both probable that a liability has been incurred and
the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an
adverse effect on the Company's operations or its financial position. As of December 31, 2020, the Company has not
recorded a provision for any contingent losses.
16. Subsequent Event
On February26, 2021, the Company entered into the Amended Perceptive Credit Agreement, which amends the Credit
Agreement and Guarantee dated February 10, 2020 between the Company and Perceptive. The Amended Perceptive Credit
Agreement increases the total amount of credit available to the Company under the Credit Agreement to $45.0 million by
creating a fourth tranche of $10.0 million that will be available based on the achievement of a revenue milestone. The
interest rate and 1% fee payable upon the drawing of a tranche set forth in the Credit Agreement will also apply to the
fourth tranche created by the Amended Perceptive Credit Agreement. Perceptive will receive an additional warrant to
purchase 450,000 shares of common stock in connection with entering into the Amended Perceptive Credit Agreement.
17. Quarterly Data (Unaudited)
The following tables summarize the quarterly results of operations for each of the quarters in 2020 and 2019. These
quarterly results are unaudited, but in the opinion of management, have been prepared on the same basis as our audited
115
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Agile Therapeutics, Inc.
Notes to Financial Statements (Continued)
December 31, 2020
(in thousands, except share and per share data)
financial information and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair
presentation of the information set forth herein (in thousands, except per share amounts).
March 31, June 30,
September 30, December 31,
2020
2020
2020
2020
Total revenue
Gross profit
Operating expenses
Net loss
Basic and diluted net loss per common share
Total revenue
Operating expenses
Net loss
Basic and diluted net loss per common share
— $
— $
749
— $
$
467
— $
$
17,208
$
$ 7,617
$ (7,883) $ (10,826) $ (15,524) $ (17,620)
(0.20)
$ (0.10) $
— $
— $
$
(0.12) $
(0.18) $
$ 10,039
14,656
March 31, June 30, September 30, December 31,
2019
2019
2019
— $
— $
$
$ 4,707
$
$ (4,669) $ (3,484) $
$ (0.13) $ (0.08) $
$ 3,547
— $
4,499
$
(4,432) $
(0.08) $
2019
—
6,105
(6,021)
(0.10)
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of
a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to management, including our principal executive and principal financial officers, as
appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our chief
executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were
effective at the reasonable level.
Management’s Annual Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.
Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act and
is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected
by our board of directors, management and other personnel, to:
● Provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, and includes those
policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of our assets;
● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of our management and directors; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our
management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31,
2020. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control—Integrated Framework.
Based on its evaluation, our management has concluded that, as of December 31, 2020, our internal control over
financial reporting was effective.
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Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to the attestation by our
independent registered public accounting firm because as a non-accelerated filer, we are exempt from this requirement.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended December 31, 2020 that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.
Item 11. Executive Compensation
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.
Item 14. Principal Accounting Fees and Services
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as a part of this Annual Report on Form 10-K:
(a) Financial Statements
The information concerning our financial statements, and Report of Independent Registered Public Accounting Firm
required by this Item is incorporated by reference herein to the section of this Annual Report on Form 10-K in Item 8,
entitled “Financial Statements and Supplementary Data.”
(b) Financial Statement Schedules
All schedules have been omitted because the required information is not present or not present in amounts sufficient to
require submission of the schedules, or because the information required is included in the Financial Statements or notes
thereto.
(c) Exhibits
The list of exhibits filed with this report is set forth in the Exhibit Index immediately preceding the signature page and
is incorporated herein by reference.
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
4.5
Amended and Restated Certificate of Incorporation of the Registrant. (Incorporated by reference, Exhibit 3.1 to
Company’s Current Report on Form 8-K, file number 001-36464, filed May on 30, 2014.)
Amended and Restated Bylaws of the Registrant. (Incorporated by reference, Exhibit 3.2 to Company’s
Current Report on Form 8-K, file number 001-36464, filed on May 30, 2014.)
Specimen Certificate evidencing shares of Registrant’s common stock. (Incorporated by reference, Exhibit 4.1
to Company’s Third Amendment of Registration Statement on Form S-1, file number 333-194621, filed on
May 9, 2014.)
Warrant Agreement between Agile Therapeutics, Inc. and Perceptive Credit Holdings III, LP, dated as of
February 10, 2020 (Incorporated by reference, Exhibit 4.1 to Company’s Current Report on Form 8-K, file
number 001-36464, filed on February 12, 2020.)
Warrant Agreement between Agile Therapeutics, Inc. and Perceptive Credit Holdings III, LP, dated as of
February 10, 2020 (Incorporated by reference, Exhibit 4.2 to Company’s Current Report on Form 8-K, file
number 001-36464, filed on February 12, 2020.)
Warrant Agreement between Agile Therapeutics, Inc. and Perceptive Credit Holdings III, LP, dated as of
February 26, 2021.
Description of Capital Stock (Incorporated by reference, Exhibit 4.4 to Company’s Annual Report on Form 10-
K, file number 001-36464, filed on February 20, 2020.)
10.1+
Form of Indemnification Agreement. (Incorporated by reference, Exhibit 10.1 to Company’s Second
Amendment of Registration Statement on Form S-1, file number 333-194621, filed on May 5, 2014.)
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Exhibit
Number
10.2+
10.3+
Agile Therapeutics, Inc. Amended and Restated 1997 Equity Incentive Plan, as amended, and form of Stock
Option Agreement thereunder. (Incorporated by reference, Exhibit 10.2 to Company’s Registration Statement
on Form S-1, file number 333-194621, filed on March 17, 2014.)
Agile Therapeutics, Inc. Amended and Restated 2008 Equity Incentive Plan and form of Nonqualified Stock
Option Agreement and form of Incentive Stock Option Agreement thereunder. (Incorporated by reference,
Exhibit 10.3 to Company’s Registration Statement on Form S-1, file number 333-194621, filed on March 17,
2014.)
10.4+
Form of Performance Unit Issuance Agreement (Incorporated by reference, Exhibit 10.1 to Company’s Current
Report on Form 8-K, file number 001-36464, filed on January 26, 2018.)
10.5
10.6
10.7
10.8
10.9
Lease Agreement, dated November 19, 2010, by and between the Registrant and Bunn Farm Associates, LLC,
as modified by the Lease Amendment, dated November 20, 2012, by and between the Registrant and Bunn
Farm Associates, LLC, and the Second Lease Amendment, dated July 24, 2013, by and between the Registrant
and Bunn Farm Associates, LLC, (Incorporated by reference, Exhibit 10.11 to Company’s Registration
Statement on Form S-1, file number 333-194621, filed on March 17, 2014.)
Third Lease Amendment, dated August 20, 2015, by and between the Registrant and Bunn Farm Associates,
LLC. (Incorporated by reference, Exhibit 10.1 to Company’s Quarterly Report on Form 10-Q, file number 001-
36464, filed on November 9, 2015.)
Fourth Lease Amendment, dated April 22, 2016, by and between the Registrant and Bunn Farm Associates,
LLC and Fifth Lease Amendment dated December 1, 2016, by and between the Registrant and Bunn Farm
Associates, LLC. (Incorporated by reference, Exhibit 10.15 to Company’s Annual Report on Form 10-K, file
number 001-36464, filed on March 12, 2018.)
Sixth Lease Amendment, dated November 11, 2020, by and between the Registrant and Bunn Farm Associates,
LLC (Incorporated by reference, Exhibit 10.5 to Company’s Quarterly Report on Form 10-Q, file number 001-
36464, filed on November 12, 2020.)
Common Stock Sales Agreement dated November 8, 2019 by and between the Registrant and H.C. Wainwright
& Co., LLC (Incorporated by reference, Exhibit 1.1 to Company’s Current Report on Form 8-K, file number
001-36464, filed on November 8, 2019.)
10.10
Credit Agreement and Guaranty among Agile Therapeutics, Inc., the guarantors from time to time party
thereto, the lenders from time to time party thereto and Perceptive Credit Holdings III, LP, dated as of February
10, 2020 (Incorporated by reference, Exhibit 10.1 to Company’s Current Report on Form 8-K, file number
001-36464, filed on February 12, 2020.)
10.11 Waiver and First Amendment to Credit Agreement and Guaranty among Agile Therapeutics, Inc., the
guarantors from time to time party thereto, the lenders from time to time party thereto and Perceptive Credit
Holdings III, LP, dated as of February 26, 2021.
10.12*
Project Agreement, dated April 30, 2020, by and between the Registrant and inVentiv Commercial Services,
LLC (Incorporated by reference, Exhibit 10.1 to Company’s Quarterly Report on Form 10-Q, file number 001-
36464, filed on August 11, 2020.)
10.13*
First Amendment to Project Agreement, dated June 1, 2020, by and between the Registrant and inVentiv
Commercial Services, LLC
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Exhibit
Number
10.14* Master Service Agreement, dated October 11. 2017, by and between the Registrant and inVentiv Commercial
Services, LLC (Incorporated by reference, Exhibit 10.2 to Company’s Quarterly Report on Form 10-Q, file
number 001-36464, filed on August 11, 2020.)
10.15*
First Amendment to Master Service Agreement, dated April 30, 2020, by and between the Registrant and
inVentiv Commercial Services, LLC (Incorporated by reference, Exhibit 10.3 to Company’s Quarterly Report
on Form 10-Q, file number 001-36464, filed on August 11, 2020.)
10.16* Manufacturing and Commercialization Agreement, dated April 30, 2020, by and between the Registrant and
Corium, Inc. (Incorporated by reference, Exhibit 10.4 to Company’s Quarterly Report on Form 10-Q, file
number 001-36464, filed on August 11, 2020.)
10.17+
Agile Therapeutics, Inc. Amended and Restated 2014 Incentive Compensation Plan (Incorporated by reference,
Appendix A to Registrant’s Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934,
file number 001-36464, filed on April 25, 2018.)
10.18
10.19
10.20
10.21
10.22
Clinical Research Agreement, dated October 26, 2018, by and between the Registrant and TKL Research, Inc.
(Incorporated by reference, Exhibit 10.24 to Company’s Annual Report on Form 10-K, file number 001-36464,
filed on March 12, 2019.)
Amended and Restated Employment Agreement, dated August 14, 2020 by and between the Registrant and
Alfred Altomari (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, file
number 001-36464, filed on August 17, 2020).
Amended and Restated Employment Agreement, dated August 14, 2020 by and between the Registrant and
Robert Conway (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, file
number 001-36464, filed on August 17, 2020).
Amended and Restated Employment Agreement, dated August 14, 2020 by and between the Registrant and
Geoffrey Gilmore (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K,
file number 001-36464, filed on August 17, 2020).
Amended and Restated Employment Agreement, dated August 14, 2020 by and between the Registrant and
Dennis Reilly (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, file
number 001-36464, filed on August 17, 2020).
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
31.2
32.1
32.2
101
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated March 12, 2019.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002, dated March 12, 2019.
Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, dated March 12, 2019 (furnished herewith).
Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, dated March 12, 2019 (furnished herewith).
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) Balance Sheets, (ii) Statements of Operations
and Comprehensive Loss, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Statements of Cash
Flows, and (v) the Notes to Financial Statements.
122
Table of Contents
+
*
Indicates management contract or compensatory plan or arrangement.
Portions of this exhibit have been redacted in accordance with Regulation S-K Item 601(b)(10).
Item 16. Form 10-K Summary
None.
123
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 1, 2021.
Signatures
AGILE THERAPEUTICS, INC.
By
/s/ ALFRED ALTOMARI
Alfred Altomari
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ ALFRED ALTOMARI
Alfred Altomari
Chief Executive Officer and Director
(Principal Executive Officer)
March 1, 2021
/s/ DENNIS P. REILLY
Dennis P. Reilly
Chief Financial Officer (Principal Financial
Officer)
March 1, 2021
/s/ JASON BUTCH
Jason Butch
Chief Accounting Officer (Principal
Accounting Officer)
/s/ SHARON BARBARI
Director
Sharon Barbari
/s/ SANDRA CARSON
Sandra Carson, M.D., FACOG
/s/ SETH H.Z. FISCHER
Seth H.Z. Fischer
/s/ JOHN HUBBARD
John Hubbard, Ph.D.
/s/ AJIT S. SHETTY
Ajit S. Shetty, Ph.D.
/s/ JAMES TURSI
James Tursi, M.D.
Director
Director
Director
Director
Director
124
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
March 1, 2021
Exhibit 4.4
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS MAY BE REQUIRED TO BE EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT
AGILE THERAPEUTICS, INC.
Common Stock Warrant Shares: 450,000
Dated: February 26, 2021
THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that, for value received,
Perceptive Credit Holdings III, LP or its assigns (the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof, and on or
prior to the close of business on February 26, 2028 (the “Expiration Date”) but not thereafter, to subscribe for and
purchase from Agile Therapeutics, Inc., a Delaware corporation (the “Company”), up to four hundred and fifty
thousand (450,000) shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The
purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined
in Section 2(b).
This Warrant is issued pursuant to that certain Credit Agreement and Guaranty dated as of February 10,
2020 (the “Credit Agreement”) by and among the Company, as borrower, the subsidiaries of the Company from
time to time party thereto as guarantors, the lenders from time to time party thereto, and Holder, as administrative
agent for the lenders, as amended by the First Amendment to Credit Agreement and Guaranty dated as of the date
hereof.
Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this
Warrant, (a) capitalized terms used and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement, and (b) the following terms shall have the following meanings:
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 405 under the Securities Act.
“Closing Bid Price” means for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the last reported closing bid price
for Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg, L.P., (b) if the Common Stock is not then listed or quoted
for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets”
published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock so reported, or (c) in all other cases,
the fair market value of a share of Common Stock as determined by an independent appraiser selected in good
faith by the Holder and reasonably acceptable to the Company, the reasonable, actual and documented fees and
reasonable, actual and documented out-of-pocket expenses of which shall be paid by the Company.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other
class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Deemed Outstanding” means, at any given time, the sum of (i) the number of shares of
Common Stock actually outstanding at such time, plus (ii) the number of shares of Common Stock issuable upon
exercise of Options actually outstanding at such time, plus (iii) the number of shares of Common Stock issuable
upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually
outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in
each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time;
provided that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any of its wholly owned subsidiaries.
“Common Stock Equivalents” means any securities of the Company or its wholly owned subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any
debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Convertible Securities” means any debt, equity or other securities that are, directly or indirectly,
convertible into or exchangeable for Common Stock.
“Excluded Issuance” means the issuance of (a) shares of Common Stock (or options with respect thereto)
issued or issuable to employees or directors of, or consultants to, the Company or any of its subsidiaries pursuant
to a plan, agreement or arrangement approved by the Board of Directors of the Company, (b) warrants issued
pursuant to the Credit Agreement and/or other securities exercisable or exchangeable for or convertible into shares
of Common Stock issued and outstanding on the date of this Warrant, provided that such securities have not been
amended since
2
the date of this Warrant to increase the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities (for purposes of clarity, any decrease in the exercise price, exchange price or
conversion price of such securities shall not be deemed an amendment thereto, if such decrease is as a result of
any price-based anti-dilution provision contained in such securities prior to the date hereof), (c) other securities
issued to financial institutions, institutional investors or lessors in connection with credit arrangements, equipment
financings or similar transactions approved by a majority of disinterested directors of the Company, (d) securities
issued pursuant to acquisitions or strategic transactions approved by a majority of disinterested directors of the
Company, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an
operating company in a business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company
is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing
in securities, provided further that the exclusion in this clause (d) shall be limited to 12,500,000 shares of
Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations,
stock dividends and recapitalizations), and (e) securities issuable under any at-the-market offering programs the
Company may establish in accordance with Rule 415(a)(4) under the Securities Act. In addition, for the
avoidance of doubt, “Excluded Issuances” also include the filing of any registration statement of the Company
with the Commission registering securities of the Company, or the filing of any amendments or supplements
thereto, provided that the determination of whether sales under any such registration statement is an Excluded
Issuance will be determined based on the preceding clauses (a) to (e) hereof.
“Fundamental Transaction” means (a) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person, (b) the Company,
directly or indirectly, effects any sale, lease, exclusive license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a series of related transactions, (c) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other
securities, cash or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding
Common Stock, (d) the Company, directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock (but, for the avoidance of doubt,
excluding any transaction, event or occurrence covered by Section 3(a)) or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or
property, (e) the Company, directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without
limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires
more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or associated or Affiliated with the other
Persons making or party to, such stock or share purchase agreement or other business combination).
“Marketable Securities” means securities that (a) are tradable on an established national U.S. or non-U.S.
stock exchange or reported through NASDAQ or a comparable established non-
3
U.S. over-the-counter trading system and (b) are not subject to restrictions on transfer under the Securities Act or
contractual restrictions on transfer.
“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or
Convertible Securities.
“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation,
joint venture, trust, incorporated organization or government or department or agency thereof.
“Prospectus” means the prospectus or prospectuses included in any Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other amendments and supplements to
the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus
or prospectuses.
“Registrable Securities” means (x) any shares of Common Stock held by Holder or issuable upon
conversion, exercise or exchange of any securities owned by Holder at any time (including Warrant Shares
exercisable upon exercise of this Warrant), and (y) any shares of Common Stock issued or issuable with respect to
any shares described in subsection (x) above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for
purposes of this Warrant, Holder shall be deemed to be a holder of Registrable Securities whenever Holder has the
right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has
actually been effected). As to any particular Registrable Securities, such securities shall cease to be Registrable
Securities when (i) a Registration Statement covering such securities has been declared effective by the SEC and
such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are
sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in
force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be
resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be
outstanding.
“Registration Statement” means any registration statement of the Company which covers any of the
Registrable Securities pursuant to the provisions of this Warrant, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials
incorporated by reference in such Registration Statement.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
“Trading Day” means a day on which the principal Trading Market is open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Global Market, the Nasdaq Capital
Market, the New York Stock Exchange, the OTCQB, the OTCQX
4
U.S. or the Nasdaq Global Select Market (or any successors to any of the foregoing).
“Transfer Agent” means Broadridge Corporate Issuer Solutions, the current transfer agent of the Company,
with a mailing address of P.O. Box 1342, Brentwood, NY 11717, and any successor transfer agent of the
Company.“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a)
if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock
is then listed or quoted as reported by Bloomberg L.P. (or an equivalent quotation service acceptable to the Holder
and the Company) (based on a Trading Day from 9:30 a.m. (local time in New York City, New York) to 4:00 p.m.
(local time in New York City, New York)) (b) if the Common Stock is not then listed or quoted for trading on a
Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC
Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported, or (c) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and
reasonably acceptable to the Company, the reasonable, actual and documented fees and reasonable, actual and
documented out-of-pocket expenses of which shall be paid by the Company.
Section 2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be
made, in whole or in part, at any time or times before the Expiration Date by delivery to the Company (or
such other office or agency of the Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile
or electronic copy of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”) and
within two (2) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company
shall have received payment of the aggregate Exercise Price of the Warrant Shares thereby purchased by
wire transfer or cashier’s check drawn on a United States bank or pursuant to the cashless exercise
procedure specified in Section 2(c) below. No ink-original Notice of Exercise shall be required, nor shall
any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be
required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available
hereunder and this Warrant has been exercised in full, in which case, the Holder shall surrender this
Warrant to the Company for cancellation within two (2) Trading Days of the date the final Notice of
Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion
of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant
Shares purchased and the date of such purchases. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the
purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for
purchase
5
hereunder at any given time may be different than the amount stated on the face hereof. For the
avoidance of doubt, the Holder may request a new Warrant upon the partial exercise of this
Warrant.
In the event that immediately prior to the close of business on the Expiration Date, the Closing Bid Price
of one share of Common Stock is greater than the then applicable Exercise Price, this Warrant shall be
deemed to be automatically exercised as a “cashless exercise” pursuant to Section 2(c) below, and the
Company shall deliver the applicable number of shares of Common Stock to the Holder pursuant to the
provisions of Section 2(d) below.
(b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall
be $2.87, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. This Warrant may be exercised, in whole or in part, at any time by
means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A) (a “Cashless Exercise”), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder
elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the
applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in
accordance with the terms of this Warrant if such exercise were by means of a cash exercise
rather than a cashless exercise or, if only a portion of this Warrant is being exercised, the
portion of this Warrant being cancelled.
(d) Mechanics of Exercise.
(i) Delivery of Warrant Shares Upon Exercise. Warrant Shares purchased hereunder
shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s
prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian
system (“DWAC”) if the Company is then a participant in such system and the Warrant Shares are
eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144
or an available Registration Statement, and otherwise by physical delivery to the address specified
by the Holder in the Notice of Exercise by the date that is two (2) Trading Days after the delivery
to the Company, by 11 a.m. (local time in New York City, New York) on a Trading Day, of the
Notice of Exercise and payment of the aggregate Exercise Price as set forth above (including by
Cashless Exercise) (such date, the “Warrant Share Delivery Date”). The Warrant Shares shall be
deemed to have been issued, and the Holder or any other person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of
the date this Warrant has been
6
exercised, with payment to the Company of the Exercise Price (or by Cashless Exercise) and all
taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance of
such Warrant Shares, having been paid. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date,
other than a failure to deliver caused by the Holder’s failure to pay the applicable Exercise Price for
such Warrant Shares or to timely take such actions as are necessary to post such Warrant Shares in
DWAC, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty,
for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common
Stock on the date of the applicable Notice of Exercise), an amount equal to the Exercise Price per
Trading Day for each Trading Day after such Warrant Share Delivery Date until such Warrant
Shares are delivered or Holder rescinds such exercise.
(ii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised
in part, the Company shall, at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with this Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to
the Holder the Warrant Shares pursuant to Section 2(d)(i) by the third (3rd) Trading Day following
the Warrant Share Delivery Date, other than a failure to deliver caused by the Holder’s failure to
pay the applicable Exercise Price for such Warrant Shares or to timely take such actions as are
necessary to post such Warrant Shares in DWAC, then the Holder will have the right to rescind
such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon
Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the
Transfer Agent to transmit to the Holder the Warrant Shares pursuant to an exercise on or before
the second (2nd) Trading Day following the Warrant Share Delivery Date and such failure is not
caused by any act or omission of the Holder, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount,
if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (provided, Holder exercises reasonable efforts to
minimize the amount of such purchase price) exceeds (y) the amount obtained by multiplying (1)
the number of Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue by (2) the actual sale price at which the sell order giving rise
to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not
honored (in
7
which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued had the Company timely complied with its exercise
and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise to acquire
Warrant Shares with an aggregate sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the
amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver
Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.
(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the
Holder would otherwise be entitled to purchase upon such exercise, the Company shall round up to
the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other incidental expense in respect of the
issuance of Warrant Shares, all of which taxes and expenses shall be paid by the Company, and
such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in
a name other than the name of the Holder, this Warrant when surrendered for exercise shall be
accompanied by a completed Assignment Form in the form attached hereto duly executed by the
Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise and all fees to the Depository Trust
Company (or another established clearing corporation performing similar functions) required for
same-day electronic delivery of the Warrant Shares.
(vii) Closing of Books. The Company will not close its stockholder books or records in
any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
(e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to this Section 2 or
otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable
Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a
group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of the foregoing
8
sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to
which such determination is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates, and (ii) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder,
it being acknowledged by the Holder that the Company is not representing to the Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible
for any schedules required to be filed in accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall
be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in
determining the number of outstanding shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (B) a more recent public announcement by the
Company, or (C) a more recent written notice from the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written request of a Holder, the Company shall
within three (3) Trading Days confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership Limitation” shall be 19.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the applicable issuance of
shares of Common Stock issuable upon exercise of this Warrant, provided that the Holder may decrease
such Beneficial Ownership Limitation upon written notice to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the
terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitations contained in
this paragraph shall
9
apply to a successor holder of this Warrant.
(f) No Violation. The Company shall take all such actions as may be necessary to ensure that
all such Warrant Shares are issued without violation by the Company of any applicable law or
governmental regulation or of any requirements of any domestic securities exchange upon which shares of
Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise
(except for official notice of issuance which shall be immediately delivered by the Company upon each
such issuance).
Section 3. Certain Adjustments. In order to prevent dilution of the purchase rights granted under this
Warrant Certificate, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant
Certificate shall be subject to adjustment from time to time as provided in this Section 3. Notwithstanding
anything herein to the contrary, the provisions of Section 3(a), 3(c) and 3(g) (solely as it relates to transactions or
events of the type contemplated by the provisions of Section 3(a) and 3(c)) shall only be applicable during the
period commencing on the date hereof and ending on December 31, 2022.
(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Subject to Section 3(c), if
the Company shall, at any time after the date hereof (the “Issue Date”), issue or sell any shares of
Common Stock, whether directly or indirectly by way of Options or Convertible Securities (other than in
an Excluded Issuance or any event described in Section 3(d) or (e)), without consideration or for
consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale,
then immediately upon such issuance or sale, the Exercise Price in effect immediately prior to such
issuance or sale shall be reduced (and in no event increased) to an Exercise Price equal to the quotient
obtained by dividing:
(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed
Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the
Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company
upon such issuance or sale (or deemed issuance or sale); by
(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such
issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common
Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or
deemed issuance or sale);
provided, for the avoidance of doubt, the number of Warrant Shares issued pursuant to this Warrant
Certificate will not be adjusted in the event that the Exercise Price is adjusted under Section 3(a).
(b) Intentionally Omitted.
(c) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the
adjusted Exercise Price under Section 3(a), the following shall be applicable:
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(i) Issuance of Options. If the Company shall, at any time or from time to time after
the date hereof, in any manner grant or sell (whether directly or by assumption in a merger or
otherwise) any Options, whether or not such Options or the right to convert or exchange any
Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and
the price per share (determined as provided in this Section 3(c)(i) and in Section 3(c)(v)) for which
Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange
of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price
in effect immediately prior to the time of the granting or sale of such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued as of the date of granting or sale of
such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the
Exercise Price under Section 3(a)), at a price per share equal to the quotient obtained by dividing:
(A) the sum (which sum shall constitute the applicable consideration received
for purposes of Section 3(a)) of (1) the total amount, if any, received or receivable by the
Company as consideration for the granting or sale of all such Options, plus (2) the
minimum aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (3), in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the issuance or sale of all such Convertible Securities and the
conversion or exchange of all such Convertible Securities, by
(B) the total maximum number of shares of Common Stock issuable upon the
exercise of all such Options or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all such Options.
Except as otherwise provided in Section 3(c)(iii), no further adjustment of the Exercise Price shall
be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of
such Options or upon the actual issuance of Common Stock upon conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company shall, at any time or from time
to time after the Issue Date, in any manner grant or sell (whether directly or by assumption in a
merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange
any such Convertible Securities is immediately exercisable, and the price per share (determined as
provided in this Section 3(c)(ii) and in Section 3(c)(v)) for which Common Stock is issuable upon
the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such
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Convertible Securities, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of the total maximum amount of such Convertible Securities shall be
deemed to have been issued as of the date of granting or sale of such Convertible Securities (and
thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant
to Section 3(a)), at a price per share equal to the quotient obtained by dividing:
(A) the sum (which sum shall constitute the applicable consideration received
for purposes of Section 3(a)) of (1) the total amount, if any, received or receivable by the
Company as consideration for the granting or sale of such Convertible Securities, plus
(2) the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange of all such Convertible Securities, by
(B) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities.
Except as otherwise provided in Section 3(c)(iii), (A) no further adjustment of the Exercise Price
shall be made upon the actual issuance of Common Stock upon conversion or exchange of such
Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason
of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the
other provisions of this Section 3(c).
(iii) Change in Terms of Options or Convertible Securities. Upon any change in any of
(A) the total amount received or receivable by the Company as consideration for the granting or
sale of any Options or Convertible Securities referred to in Section 3(c)(i) or (ii), (B) the minimum
aggregate amount of additional consideration, if any, payable to the Company upon the exercise of
any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to
in Section 3(c)(i) or (ii), (C) the rate at which Convertible Securities referred to in Section 3(c)(i) or
(ii) are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares
of Common Stock issuable in connection with any Options referred to in Section 3(c)(i) or any
Convertible Securities referred to in Section 3(c)(ii) (in each case, other than in connection with an
Excluded Issuance), then (whether or not the original issuance or sale of such Options or
Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 3)
the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable,
to the Exercise Price which would have been in effect at such time pursuant to the provisions of
this Section 3 had such Options or Convertible Securities still outstanding provided for such
changed consideration, conversion rate or maximum number of shares, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the
Exercise Price then in effect is reduced.
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(iv) Treatment of Expired or Terminated Options or Convertible Securities. Upon the
expiration or termination of any unexercised Option (or portion thereof) or any unconverted or
unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its
original issuance or upon a revision of its terms) was made pursuant to this Section 3 (including
without limitation upon the redemption or purchase for consideration of all or any portion of such
Option or Convertible Security by the Company), the Exercise Price then in effect hereunder
automatically shall be changed to the Exercise Price which would have been in effect at the time of
such expiration or termination had such unexercised Option (or portion thereof) or unconverted or
unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior
to such expiration or termination, never been issued.
(v) Calculation of Consideration Received. If the Company shall, at any time or from
time to time after the Issue Date, issue or sell, or pursuant to Section 3(c) be deemed to have issued
or sold, any shares of Common Stock, Options or Convertible Securities: (A) for cash, the
consideration received therefor shall be deemed to be the net amount received by the Company
therefor; (B) for Marketable Securities, the amount of consideration received therefor shall be
deemed to be the market price (as reflected on any securities exchange, quotation system or
association or similar pricing system covering such security) for such securities as of the end of
business on the date of receipt of such securities; (C) for consideration other than cash or
Marketable Securities, the amount of consideration received therefor shall be deemed to be the fair
value of such consideration; (D) for no specifically allocated consideration in connection with an
issuance or sale of other securities of the Company, together comprising one integrated transaction,
the amount of consideration received therefor shall be deemed to be to be the fair value of such
portion of the aggregate consideration received by the Company in such transaction as is
attributable to such shares of Common Stock, Options or Convertible Securities, as the case may
be, issued in such transaction; or (E) to the owners of the non-surviving entity in connection with
any merger in which the Company is the surviving corporation, the amount of consideration
received therefor shall be deemed to be the fair value of such portion of the net assets and business
of the non-surviving entity as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be, issued to such owners. The net amount of any cash
consideration and the fair value of any consideration other than cash or Marketable Securities shall
be determined in good faith jointly by the Board of Directors of the Company and the Holder.
(vi) Record Date. For purposes of any adjustment to the Exercise Price or the number
of Warrant Shares in accordance with this Section 3, or any adjustment to the Number of Warrant
Shares pursuant to Section 3(d) or 3(e), in case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock
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deemed to have been issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or purchase, as the case
may be.
(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given
time shall not include shares owned or held by or for the account of the Company or any of its
wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or
retirement thereof or the transfer of such shares among the Company and its wholly-owned
subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section
3.
(d) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or
Combination of Common Stock. If the Company shall, at any time or from time to time after the Issue
Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock
of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii)
subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution
or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise
of this Warrant Certificate shall be proportionately increased. If the Company at any time combines (by
combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant
Certificate shall be proportionately decreased. Any adjustment under this Section 3(d) shall become
effective at the close of business on the date the dividend, subdivision or combination becomes effective.
(e) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification,
Consolidation or Merger. Unless the Holder otherwise consents (in its sole discretion), in the event of any
(A) capital reorganization of the Company, (B) reclassification of the stock of the Company (other than a
change in par value or from par value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), (C) Fundamental Transaction or (D)
other similar transaction (other than any such transaction covered by Section 3(d)), in each case which
entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock:
(i) this Warrant Certificate shall, immediately after such transaction, remain
outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of
Warrant Shares then exercisable under this Warrant Certificate, be exercisable for the kind and
number of shares of stock or other securities or assets of the Company or of the successor Person
resulting from such transaction to which the Holder would have been entitled upon such transaction
if the Holder had exercised this Warrant Certificate in full immediately prior to the time of such
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transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a
result of such exercise (without taking into account any limitations or restrictions on the
exercisability of this Warrant Certificate); and
(ii) appropriate adjustment (in form and substance satisfactory to the Holder) shall be
made with respect to the Holder’s rights under this Warrant Certificate to insure that the provisions
of this Section 3 shall thereafter be applicable, as nearly as possible, to this Warrant Certificate in
relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this
Warrant Certificate (including, in the case of any transaction in which the successor or purchasing
Person is other than the Company, an immediate adjustment in the Exercise Price to the value per
share for the Common Stock reflected by the terms of such transaction, and a corresponding
adjustment immediately shall be made to the number of Warrant Shares acquirable upon exercise
of this Warrant Certificate, without regard to any limitations or restrictions on exercise, if the value
so reflected is less than the Exercise Price in effect immediately prior to such transaction).
The provisions of this Section 3(e) shall similarly apply to successive reorganizations, reclassifications,
Fundamental Transactions or similar transactions.
Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other
transaction contemplated by this Section 3(e), the Holder shall have the right to elect, prior to the
consummation of such event or transaction, to exercise this Warrant instead of giving effect to
Section 3(e).
(f) Other Dividends and Distributions. If the Company shall, at any time or from time to time
after the Issue Date, make or declare, or fix a record date for the determination of holders of Common
Stock entitled to receive, a dividend or any other distribution payable in cash, securities of the Company
(other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in
respect of outstanding shares of Common Stock) or other property, then, and in each such event, the
Company shall ensure that provisions are made so that the Holder shall receive upon exercise of this
Warrant Certificate, in addition to the number of Warrant Shares receivable thereupon, the kind and
amount of cash, securities of the Company or other property which the Holder would have been entitled to
receive had this Warrant Certificate been exercised in full into Warrant Shares on the date of such event
and had the Holder thereafter, during the period from the date of such event to and including the date of
exercise, retained such cash, securities or other property receivable by them as aforesaid during such
period, giving application to all adjustments called for during such period under this Section 3 with respect
to the rights of the Holder; provided that no such provision shall be made if the Holder receives,
simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of
such securities, cash or other property in an amount equal to the amount of such securities, cash or other
property as the Holder would have received if this Warrant Certificate had been exercised in full into
Warrant Shares on the date of such event.
(g) Certain Events. If any event of the type contemplated by the provisions of
15
this Section 3 but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features in each case, other
than with respect to any Excluded Issuance) occurs, then the Board of Directors of the Company shall
make an appropriate adjustment in the Exercise Price of this Warrant Certificate so as to protect the rights
of the Holder in a manner consistent with the provisions of this Section 3; provided that (i) no such
adjustment pursuant to this Section 3(g) shall increase the Exercise Price or decrease the number of
Warrant Shares issuable as otherwise determined pursuant to this Section 3 and (ii) for the avoidance of
doubt, no adjustment pursuant to this Section 3(g) shall be made in connection with an Excluded Issuance.
(h) Certificate as to Adjustment. As promptly as reasonably practicable following any
adjustment of the Exercise Price, but in any event not later than three business days thereafter, the
Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail
such adjustment and the facts upon which it is based and certifying the calculation thereof. As promptly as
reasonably practicable following the receipt by the Company of a written request by the Holder, but in any
event not later than three business days thereafter, the Company shall furnish to the Holder a certificate of
an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the
amount, if any, of other shares of stock, securities or assets then issuable upon exercise of this Warrant
Certificate.
(i) Fundamental Transaction. If, at any time while this Warrant is outstanding, the Company
effects a Fundamental Transaction, then, upon any subsequent exercise of this Warrant, the Holder shall
have the right to receive, for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without
regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the
exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall
be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives
upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
Entity”) to assume in writing all of the obligations of the Company under this Warrant pursuant to written
agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall, at the option
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of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Warrant which is
exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant
(without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction,
and with an exercise price which applies the Exercise Price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares of capital stock and such
Exercise Price being for the purpose of protecting the economic value of this Warrant immediately prior to
the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and
substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Warrant and the other Loan Documents referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant and the other Loan Documents with the same
effect as if such Successor Entity had been named as the Company herein.
(j) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
(k) Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company,
or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or
property, (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company, or (F) the Company seeks to engage in a Fundamental Transaction, then,
in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon
the Warrant Register (as defined below) of the Company, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
Fundamental Transaction, reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected that holders of the
17
Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such Fundamental Transaction, reclassification, consolidation,
merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such
notice. To the extent that any notice required to be provided hereunder may contain information that
constitutes material, non-public information regarding the Company or any of its subsidiaries, the
Company shall obtain the Holder’s prior consent to receipt of such notice. If the Holder declines to receive
any such notice pursuant to the immediately preceding sentence, the Company shall not be deemed to have
breached its obligation to deliver such notice hereunder. The Holder shall remain entitled to exercise this
Warrant during the 20-day period commencing on the date of such notice through the effective date of the
event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Intentionally Omitted.
Section 5. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws, this Warrant
and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form attached hereto duly executed
by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the
denomination or denominations specified in such instrument of assignment, and shall issue to the assignor
a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case,
the Holder shall surrender this Warrant to the Company within two (2) Trading Days of the date the Holder
delivers to the Company a completed Assignment Form in the form attached hereto duly executed by the
Holder assigning all or any portion of this Warrant. This Warrant, if properly assigned in accordance
herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new
Warrant issued.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 5(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange
for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued
on transfers or exchanges shall be dated as of the Issue Date and shall be identical with this Warrant except
as to the number of Warrant Shares issuable pursuant thereto.
18
(c) Transferee Representations. If, at the time of the surrender of this Warrant in connection
with any transfer of this Warrant, the transfer of this Warrant shall not be eligible for resale without
volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the
Company may require, as a condition of allowing such transfer, that the Holder or transferee of this
Warrant, as the case may be, deliver a written statement from the transferee to the Company certifying that
the transferee is an “accredited investor” as defined in Rule 501(a) under the Securities Act, making the
representations and certifications set forth in Section 5(e) of this Warrant and making such additional
representations as the Company may, after consultation with its counsel, require in order to confirm
compliance with applicable securities laws.
(d) Warrant Register. The Company shall register this Warrant, upon records to be maintained
by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from
time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other
purposes, absent actual notice to the contrary.
(e) Representation by the Holder. The Holder, by the acceptance hereof, represents and
warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares
issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such
Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law,
except pursuant to sales registered or exempted under the Securities Act.
Section 6. Miscellaneous.
(a) No Rights as Stockholder Until Exercise; No Settlement in Cash. This Warrant does not
entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to
the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3. Without
limiting the rights of a Holder to receive Warrant Shares on a “cashless exercise,” in no event will the
Company be required to net cash settle an exercise of this Warrant.
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in the case of this Warrant, shall
not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor
and dated as of such cancellation, in lieu of such Warrant or stock certificate.
(c) Removal of Restrictive Legends. Neither this Warrant nor any certificates evidencing
Warrant Shares shall contain any legend restricting the transfer thereof in any of the following
circumstances: (A) following any sale of this Warrant or such Warrant Shares issued or delivered to the
Holder under or in connection herewith pursuant to
19
Rule 144, (B) if this Warrant or such Warrant Shares are eligible for sale under Rule 144(b)(1), or (C) if
such legend is not required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) (collectively, the “Unrestricted
Conditions”). In such circumstances, the Company shall seek to cause its counsel to issue a legal opinion
to the Transfer Agent if required by such Transfer Agent to effect the issuance of Warrant Shares, without
a restrictive legend or removal of the legend hereunder. If the Unrestricted Conditions are met at the time
of issuance of this Warrant, the Warrant Shares or such other shares of Common Stock, then this Warrant,
Warrant Shares or other Common Stock, as the case may be, shall be issued free of all legends.
(d) Replacement Warrant. The Company agrees that at such time as the Unrestricted
Conditions have been satisfied it shall promptly (but in any event within ten (10) Business Days) following
written request from the Holder issue a replacement Warrant or replacement Warrant Shares or
replacement shares in respect of such other Common Stock, as the case may be, free of all restrictive
legends (“Unlegended Shares”).
(e) Authorized Shares. The Company covenants that, during the period this Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares
to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this
Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such action as may be necessary to assure
that such Warrant Shares may be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common Stock is listed. The
Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
(f) No Impairment. Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking
of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not
increase the par value of any Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue unrestricted, fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such
20
authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as
may be, necessary to enable the Company to perform its obligations under this Warrant. Before taking any
action which would result in an adjustment in the number of Warrant Shares for which this Warrant is
exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having
jurisdiction thereof.
(g) Rule 144 Compliance. With a view to making available to the Holder the benefits of Rule
144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a
holder to sell securities of the Company to the public without registration or pursuant to a Registration
Statement, the Company shall:
(i) make and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act;
(ii) use reasonable best efforts to file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the Exchange Act; and
(iii) furnish to the Holder, promptly upon request, a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of
the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed or furnished by the Company as such
holder may reasonably request in connection with the sale of Warrant Shares without registration.
(h) Governing Law. This Warrant and the rights and obligations of the parties hereunder shall
be governed by, and construed in accordance with, the law of the State of New York, without regard to
principles of conflicts of laws that would result in the application of the laws of any other jurisdiction.
(i) Submission to Jurisdiction. The Company agrees that any suit, action or proceeding with
respect to this Warrant or any judgment entered by any court in respect thereof may be brought initially in
the federal or state courts in New York, New York or in the courts of its own corporate domicile and
irrevocably submits to the exclusive jurisdiction of each such court for the purpose of any such suit, action,
proceeding or judgment. This Section is for the benefit of the Holder only and, as a result, the Holder shall
not be prevented from taking proceedings in any other courts with jurisdiction. To the extent allowed by
any applicable law, the Holder may take concurrent proceedings in any number of jurisdictions.
(j) Waiver of Venue, Etc. The Company irrevocably waives to the fullest extent permitted by
law any objection that it may now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Warrant and hereby further irrevocably waives to the fullest
extent permitted by law any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. A final judgment (in respect of which time for all appeals has
elapsed) in any such
21
suit, action or proceeding shall be conclusive and may be enforced in any court to the jurisdiction of which
the Company is or may be subject, by suit upon judgment.
(k) Waiver of Jury Trial. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(l) No Waiver. No failure on the part of the Holder to exercise and no delay in exercising, and
no course of dealing with respect to, any right, power or privilege under this Warrant shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Warrant
preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies provided by law.
(m) Expenses. If the Company fails to comply with any provision of this Warrant, which
results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall
be sufficient to cover any actual, reasonable and documented attorneys’ fees, including those of appellate
proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
(n) Notices. All notices, requests, instructions, directions and other communications provided
for herein (including any modifications of, or waivers, requests or consents under, this Warrant) shall be
given or made in writing (including by telecopy or email) delivered, if to the Company or the Holder, to its
address specified on the signature pages hereto, or at such other address as shall be designated by such
party in a written notice to the other party. Except as otherwise provided in this Warrant, all such
communications shall be deemed to have been duly given upon receipt of a legible copy thereof, in each
case given or addressed as aforesaid. All such communications provided for herein by telecopy shall be
confirmed in writing promptly after the delivery of such communication (it being understood that non-
receipt of written confirmation of such communication shall not invalidate such communication).
(o) Limitation of Liability. No provision hereof, in the absence of any affirmative action by
the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(p) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to seek specific performance of its rights under this
Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to
assert the defense in
22
any action for specific performance that a remedy at law would be adequate.
(q) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights
and obligations evidenced hereby shall be binding upon and inure to the benefit of the successors and
permitted assigns of the Company and the successors and permitted assigns of the Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall
be enforceable by the Holder or any holder of Warrant Shares.
(r) Amendments, Etc. Except as otherwise expressly provided in this Warrant, any provision
of this Warrant may be modified or supplemented only by an instrument in writing signed by the Company
and the Holder.
(s) Severability. If any provision hereof is found by a court to be invalid or unenforceable, to
the fullest extent permitted by any applicable Law the parties agree that such invalidity or unenforceability
shall not impair the validity or enforceability of any other provision hereof.
(t) Captions. The captions and section headings appearing herein are included solely for
convenience of reference and are not intended to affect the interpretation of any provision of this Warrant.
(u) Counterparts. This Warrant may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the parties hereto may execute this
Warrant by signing any such counterpart.
(Signature Page Follows)
23
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto
duly authorized as of the date first above indicated.
AGILE THERAPEUTICS, INC.
By: /s/ Alfred Altomari
Name: /s/ Alfred Altomari
Title: Chairman and Chief Executive Officer
Address for Notices:
Agile Therapeutics, Inc.
101 Poor Farm Road
3rd Floor
Princeton, New Jersey 08540
Attention: Dennis Reilly
With a copy to (which shall not constitute notice):
Morgan, Lewis & Bockius LLP
170 I Market Street
Philadelphia, PA 19103-2921
Attention: Andrew Budreika
[Signature Page to Warrant dated February 26, 2021]
Accepted and Agreed,
Perceptive Credit Holdings III, LP
By: Perceptive Credit Opportunities GP, LLC, its general
partner
By: /s/ Sandeep Dixit
Name: Sandeep Dixit
Title: Chief Credit Officer
By: /s/ Sam Chawla
Name: Sam Chawla
Title: Portfolio Manager
Address for Notices:
Perceptive Credit Holdings III, LP
c/o Perceptive Advisors LLC
51 Astor Place, 10th Floor
New York, NY 10003
Attn: Sandeep Dixit
Email: Sandeep@perceptivelife.com
[Signature Page to Warrant dated February 26, 2021]
TO: AGILE THERAPEUTICS, INC.
NOTICE OF EXERCISE
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to
the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in
full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the
formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant
Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is
specified below:
Check applicable box and fill in information:
[ ] The Warrant Shares shall be delivered to the following DWAC Account Number:
[ ] The Warrant Shares shall be delivered by physical delivery of a certificate to:
[SIGNATURE OF HOLDER]
Name of Investing
Entity:
Signature of
Authorized Signatory
of Investing Entity:
Name of Authorized
Signatory:
Title of Authorized
Signatory:
Date:
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to
Name of Person
Transferred:
Address of Person
Transferred:
to Whom Warrant
is being
to Whom Warrant
is being
Number of Shares Subject
Transferred:
to Warrant being
Dated: ,
Holder’s Name:
Holder’s Signature:
Name of Authorized Signatory:
Title of Authorized Signatory:
Holder’s Address:
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT AND GUARANTY
This Waiver and First Amendment to Credit Agreement and Guaranty (herein, this “Agreement”) is
entered into as of February 26, 2021 (the “First Amendment Effective Date”), by and among Agile Therapeutics,
Inc., a Delaware corporation (the “Borrower”), the Lenders party hereto (each a “Lender” and collectively, the
“Lenders”) and Perceptive Credit Holdings III, LP, a Delaware limited partnership, as a lender and as
administrative agent for the Lenders (in such capacity, together with its successors and assigns, the
“Administrative Agent”).
EXHIBIT 10.11
RECITALS:
A. The Lenders have extended credit to the Borrower on the terms and conditions set forth in that
certain Credit Agreement and Guaranty, dated as of February 10, 2020 (the “Existing Credit Agreement”; the
Existing Credit Agreement as amended by this Agreement, the “Credit Agreement”).
B. The Borrower has advised the Administrative Agent that its Annual Report on Form 10-K, which
will be delivered to the Administrative Agent via the SEC’s EDGAR system pursuant to Section 8.01(b) of the
Existing Credit Agreement, will be subject to a “going concern” qualification in the accompanying opinion of
Ernst & Young LLP (the “Specified Event of Default”).
C. The Borrower has requested that the Administrative Agent and the Lenders agree to waive the
Specified Event of Default
D. The Administrative Agent and the Lenders are willing to grant such waiver in accordance with and
subject to the terms and conditions of this Agreement.
E. The Borrower has requested that the Administrative Agent and the Lenders agree to amend certain
provisions of the Existing Credit Agreement.
F. The parties hereto agree to amend the Existing Credit Agreement pursuant to the terms of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Incorporation of Recitals; Defined Terms. The parties hereto acknowledge that the Recitals set
forth above are true and correct in all material respects. The defined terms in the Recitals set forth above are
hereby incorporated into this Agreement by reference. All other capitalized terms used herein without definition
shall have the same meanings herein as such terms have in the Credit Agreement.
2. Limited Waiver. Upon satisfaction of the conditions set forth in Section 6 hereof, pursuant to
Section 13.04 of the Credit Agreement and subject to the terms and conditions hereof, the Administrative Agent
and the Lenders hereby waive the Specified Event of Default. For the avoidance of doubt, this waiver is effective
solely as a waiver of the Specified Event of Default and does not constitute a waiver or any other Default or Event
of Default.
3. First Amendment to Existing Credit Agreement. Upon satisfaction of the conditions set forth in
Section 6 hereof, the Borrower, the Lenders and the Administrative Agent hereby agree that the Existing Credit
Agreement is hereby amended by incorporating the changes shown on the marked copy of the Existing Credit
Agreement attached hereto as Annex C. Deletions of text in the Existing Credit Agreement as amended hereby
are indicated by struck-through red text, and insertions of text as amended hereby are indicated by underlined blue
text. Attached hereto as Annex D is a clean copy of the Credit Agreement conformed through the First
Amendment. Schedule 1 to the Existing Credit Agreement is hereby amended and replaced in its entirety with the
Schedule 1 attached hereto as Annex A. Exhibit H to the Existing Credit Agreement is hereby amended and
replaced in its entirety with the Exhibit H attached hereto as Annex B.
4. Acknowledgement of Liens. The Borrower hereby acknowledges and agrees that the Obligations
owing to the Administrative Agent and the Lenders arising out of or in any manner relating to the Loan
Documents shall continue to be secured by the Liens granted as security therefor in the Loan Documents, to the
extent provided for in the Loan Documents heretofore executed and delivered by the Borrower; and nothing
herein contained shall in any manner affect or impair the priority of the Liens created and provided for thereby as
to the indebtedness, obligations, and liabilities which would be secured thereby prior to giving effect to this
Agreement.
5. Representations And Warranties. In order to induce the Administrative Agent and the Lenders to
enter into this Agreement, the Borrower hereby represents and warrants to the Administrative Agent and the
Lenders as follows:
(A) After giving effect to this Agreement, the representations and warranties of the Borrower
contained in Article 7 of the Credit Agreement and in each other Loan Document shall be true and correct
in all material respects on and as of the date hereof; provided that to the extent that such representations and
warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of
such earlier date; provided further that any representation and warranty that is qualified as to “materiality”,
“Material Adverse Effect” or similar language shall be true and correct (after giving effect to any
qualification therein) in all respects on such respective dates.
(B) The execution, delivery and performance of this Agreement has been duly authorized by all
necessary corporate action on the part of, and duly executed and delivered by, the Borrower.
(C) No Default or Event of Default has occurred and is continuing or shall occur and be
continuing immediately after giving effect to this Agreement.
-2-
6. Conditions Precedent. The effectiveness of this Agreement is subject to the satisfaction of the
following conditions precedent:
(A) The Agent and the Lenders shall have received executed counterparts of this Agreement
duly executed and delivered by the Borrower.
(B) The Borrower shall have issued to the Administrative Agent a warrant that, among other
things, grants the holder thereof the right to purchase 450,000 shares of unrestricted common stock of the
Borrower.
(C) The Administrative Agent and the Lenders shall have received a favorable opinion, dated
as of the First Amendment Effective Date, of Morgan, Lewis & Bockius LLP, counsel to the Borrower in
form reasonably acceptable to the Lenders and their counsel.
(D) The Administrative Agent and the Lenders shall have been reimbursed by the Borrower for
all fees and expenses (including attorneys’ fees and expenses) incurred by the Agent and its counsel
outstanding as of the date hereof.
(E) The Administrative Agent and the Lenders shall have received (i) certified copies of the
Organizational Documents of the Borrower and of resolutions of the board of directors (or similar
governing body or committee of the board of directors, as applicable) of the Borrower approving and
authorizing the execution, delivery and performance of this Agreement, certified as of the First Amendment
Effective Date by its secretary or assistant secretary as being in full force and effect without modification or
amendment and (ii) a good standing certificate and/or compliance certificate from the applicable
Governmental Authority of the Borrower’s jurisdiction of incorporation, dated a recent date prior to the
First Amendment Effective Date.
7. Reference to and Effect on the Loan Documents; No Novation.
(A) This Agreement constitutes a Loan Document. On and after the date hereof, words of like
import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit
Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement after giving effect to this Agreement.
(B) Except as specifically set forth in this Agreement, the Credit Agreement and the other Loan
Documents shall remain in full force and effect and are hereby ratified and confirmed.
(C) Except as expressly set forth in this Agreement, the Loan Documents and all of the
obligations of the Loan Parties thereunder and the rights and benefits of the Administrative Agent and the
Lenders thereunder remain in full force and effect. This Agreement is not a novation nor is it to be
construed as a release, waiver or modification of any of the terms, conditions, representations, warranties,
covenants, rights or remedies set forth in the Loan Documents, except as specifically set forth herein.
Without limiting
-3-
the foregoing, the Loan Parties agree to comply with all of the terms, conditions, and provisions of the Loan
Documents except to the extent such compliance is irreconcilably inconsistent with the express provisions
of this Agreement. This Agreement may not be amended, supplemented, or otherwise modified except by a
written agreement entered into in accordance with Section 13.04 of the Credit Agreement. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8. Headings. The headings in this Agreement are included for convenience of reference only and will
not affect in any way the meaning or interpretation of this Agreement.
9. Governing Law. This Agreement, and all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York.
10. Incorporation of Sections 13.10 and 13.11 of the Credit Agreement. The provisions set forth in
Sections 13.10 (Jurisdiction, Service of Process and Venue) and 13.11 (Waiver of Jury Trial) of the Credit
Agreement shall apply to this Agreement in all respects.
11. Counterparts. This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by facsimile, DocuSign or a scanned copy by electronic mail shall be equally as
effective as delivery of an original executed counterpart of this Agreement.
12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
13. Binding Effect. This Agreement will be binding upon and inure to the benefit of and is enforceable
by the respective successors and permitted assigns of the parties hereto.
[SIGNATURE PAGES TO FOLLOW]
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the date first written above.
AGILE THERAPEUTICS, INC., as Borrower
By:/s/ Alfred Altomari
Name: Alfred Altomari
Title: Chairman and Chief Executive Officer
[Signature Page to First Amendment to Credit Agreement and Guaranty]
PERCEPTIVE CREDIT HOLDINGS III, LP,
as Agent and Lender
By:Perceptive Credit Opportunities GP, LLC, its general
partner
By:/s/ Sandeep Dixit
Name: Sandeep Dixit
Title: Chief Credit Officer
By:/s/ Sam Chawla
Name: Sam Chawla
Title: Portfolio Manager
[Signature Page to First Amendment to Credit Agreement and Guaranty]
ANNEX A
SCHEDULE 1
TO
CREDIT AGREEMENT
TRANCHE A TERM LOAN COMMITMENTS
LENDER
TRANCHE A TERM LOAN COMMITMENT
PERCEPTIVE CREDIT HOLDINGS III, LP
$5,000,000
TRANCHE B TERM LOAN COMMITMENTS
LENDER
TRANCHE B TERM LOAN COMMITMENT
PERCEPTIVE CREDIT HOLDINGS III, LP
$15,000,000
TRANCHE C TERM LOAN COMMITMENTS
LENDER
TRANCHE C TERM LOAN COMMITMENT
PERCEPTIVE CREDIT HOLDINGS III, LP
$15,000,000
TRANCHE D TERM LOAN COMMITMENTS
LENDER
TRANCHE C TERM LOAN COMMITMENT
PERCEPTIVE CREDIT HOLDINGS III, LP
$10,000,000
WARRANT SHARES
LENDER
NUMBER OF
CLOSING DATE
WARRANT
SHARES
NUMBER OF FIRST
AMENDMENT EFFECTIVE DATE
WARRANT SHARES
TOTAL WARRANT
SHARES
PERCEPTIVE CREDIT
HOLDINGS III, LP
1,400,000
450,000
1,850,000
ANNEX B
Exhibit H
to Credit Agreement
FORM OF BORROWING NOTICE
Date: [________________]
To: Perceptive Credit Holdings III, LP, as Administrative Agent
c/o Perceptive Advisors LLC
51 Astor Place, 10th Floor
New York, NY 10003
Attn: Sandeep Dixit
Email: Sandeep@perceptivelife.com
Re: Borrowing under Credit Agreement
Ladies and Gentlemen:
The undersigned, AGILE THERAPEUTICS, INC., a Delaware corporation (the “Borrower”), refers to the
Credit Agreement and Guaranty, dated as of February 10, 2020 (as from time to time amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), among Borrower, the Guarantors from time to
time party thereto, the Lenders from time to time party thereto and PERCEPTIVE CREDIT HOLDINGS III, LP,
as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). The terms defined in the
Credit Agreement are herein used as therein defined.
Borrower hereby gives you notice irrevocably, pursuant to Section 2.01[(b)] [(c)] [d] of the Credit
Agreement, of the borrowing of the Term Loans specified herein:
1. The proposed Tranche [B] [C] [D] Term Loan Borrowing Date is [________________].
2. The amount of the proposed Borrowing is $[15,000,000] [10,000,000].
3. The payment instructions with respect to the funds to be made available to Borrower are as
follows:
H-1
Bank name: [________________]
Bank Address: [________________]
Routing Number: [________________]
Account Number: [________________]
Swift Code: [________________]
Borrower hereby certifies that the following statements are true on the date hereof, and will be true on the
date of the proposed borrowing of the Term Loans, before and after giving effect thereto and to the application of
the proceeds therefrom:
(a) the representations and warranties of the Obligors contained in Article 7 of the Credit Agreement
and each other Loan Document are true and correct in all material respects on and as of the Tranche [B] [C] [D]
Term Loan Borrowing Date; provided that to the extent that such representations and warranties specifically
refer to an earlier date, they are true and correct in all material respects as of such earlier date; provided further
that any representation and warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar
language is true and correct (after giving effect to any qualification therein) in all respects.;
(b) the conditions set forth in Section [6.02] [6.03] [6.04] of the Credit Agreement have been satisfied
on or prior to the Tranche [B] [C] [D] Term Loan Borrowing Date; and
(c) no Default exists or will result from the proposed Borrowing or from the application of the
proceeds therefrom.
[signature to follow]
H-2
IN WITNESS WHEREOF, Borrower has caused this Borrowing Notice to be duly executed and delivered
as of the day and year first above written.
BORROWER:
AGILE THERAPEUTICS, INC.
By:
Name:
Title:
H-3
ANNEX C
Marked Credit Agreement
ANNEX D
Conformed Credit Agreement
(First Amendment)
Information in this exhibit identified by [***] is confidential and has been excluded pursuant to Item 601(b)
(10)(iv) of Regulation S-K because it is both (i) not material and (ii) would likely cause competitive harm to
the registrant if publicly disclosed.
Exhibit 10.13
FIRST AMENDMENT TO
PROJECT AGREEMENT
(DETAILING – FIELD TEAM AND TELESOLUTIONS)
This First Amendment (the “Amendment”) dated June 1, 2020 (the “Effective Date”) is made by and
between inVentiv Commercial Services, LLC, a Syneos Health® group company, with an office at 500 Atrium
Drive, Somerset, N.J. 08873 (“Syneos Health”) and Agile Therapeutics, Inc. with an office located at 100 Poor
Farm Road, Princeton, New Jersey 08540 (the “Client”). Syneos Health and Client may each be referred to herein
as a “Party” and, collectively, as the “Parties.”
W I T N E S S E T H:
WHEREAS, Syneos Health and Client are parties to a Project Agreement (Detailing – Field Team and
Telesolutions) made as of April 30, 2020 (the “Agreement”); and
WHEREAS, Syneos Health and Client desire to amend the Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, it is agreed as follows:
1. Except as provided in this Amendment, the terms and conditions set forth in the Agreement shall
remain unaffected by execution of this Amendment. To the extent any provisions or terms set forth in this
Amendment conflict with the terms set forth in the Agreement, the terms set forth in this Amendment shall govern
and control. Terms not otherwise defined herein, shall have the meanings set forth in the Agreement.
2. The Sales Team in Exhibit A, “Detailing Services,” is hereby deleted in its entirety and replaced with
the Amended and Restated Exhibit A attached hereto and made a part hereof.
3. Exhibit B, “Telesolutions Services,” is hereby deleted in its entirety and any and all references to
“Telesolutions Agents” or “Telesolutions Team” are likewise deleted in their entirety.
4. All references to “Wave Two” are hereby deleted in their entirety.
5. Exhibit A-1, “Field Operations Services,” is hereby deleted in its entirety and replaced with the
Amended and Restated Exhibit A-1 attached hereto and made a part hereof.
6. Exhibit F, “Compensation – Fixed Fees, Variable Fees and Pass-through Costs,” is hereby deleted in its
entirety and replaced with the Amended and Restated Exhibit F attached hereto and made a part hereof.
7. This Amendment may be executed simultaneously in multiple counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
Amendment – v050114
Page 1
same instrument. Execution and delivery of this Amendment by exchange of facsimile copies or via pdf file
bearing the facsimile signature of a party hereto shall constitute a valid and binding execution and delivery of this
Amendment by such party. Such facsimile copies and/or pdf versions shall constitute enforceable original
documents.
8. The terms of this Amendment are intended by the Parties to be the final expression of their agreement
with respect to the subject matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement. The Parties further intend that this Amendment constitute the complete and
exclusive statement of its terms and shall supersede any prior agreement with respect to the subject matter hereof.
WHEREFORE, the parties hereto have caused this Amendment to be executed by their duly authorized
representatives.
AGILE THERAPEUTICS, INC.
INVENTIV COMMMERCIAL SERVICES, LLC
By:
/s/ Al Altomari
Name: Al Altomari
By:
/s/ Todd Tomasoski
Name:Todd Tomasoski
Title: Chairman and CEO
Title: Vice President, Global Deal Management
Date: 11/24/2020
Date: 12/9/2020
Syneos Health Project Code: 7007244
Page 2
AMENDED AND RESTATED
EXHIBIT A
THE DETAILING SERVICES
Syneos Health will provide Client with a field force that shall consist of up [***] full-time sales
representatives (the “Representatives”) and [***] regional sales representatives (the “RS Reps” and collectively
with the Representatives, the “Syneos Health Sales Representatives” or “Sales Representatives”). The Sales
Representatives shall detail the Client’s Product by making calls pursuant to a Call Plan on Targets. The Sales
Representatives will be managed by up to [***] regional sales managers (the “RSMs”) who will also be Syneos
Health employees. Syneos shall also provide [***] national sales director (the “NSD”). The Sales
Representatives, RSMs and NSD may be referred to collectively herein as the “Project Team”.
For purposes of clarity, the Implementation Fees and Fixed Monthly Fees outlined in Section I(a) and (b)
of Exhibit F includes the headcount for the Project Team as set forth in the table below.
Position
Headcount
Project Team
Representatives
RS Reps
RSM
NSD
[***]
[***]
[***]
[***]
In the event that the Parties desire to increase the type and / or number of Project Team members providing
Services under this Project Agreement they may do so by utilizing a Project Team Member Request Form (the
“Request Form”) in a format that is substantially similar to the one attached hereto as Attachment 1. The details
set forth in the Request Form shall be mutually agreed upon by the Parties. For clarification, the Request Form
may not be used in those situations where it is the intent of the Parties to amend terms and conditions of this
Project Agreement other than those specific items set forth on the Request Form.
I.
ADDITIONAL DEFINED TERMS
(a)
“Call” means the activity undertaken by a Sales Representative to detail the Product, further
described as a face-to-face presentation by a in Sales Representative to a Target and will include providing the
Product Literature (as directed by Client).
(b)
“Call Plan” means a plan jointly designed by Client and Syneos Health, which is intended to
enhance the efficiency and effectiveness of the Project Team in making Calls. The Call Plan will be maintained
by Syneos Health at its offices with a copy of such Call Plan maintained by Client at its offices, and may be
amended or reconfigured from time to time solely at Client’s written request (limited quarterly updates are
included in the current fee) with Client paying Syneos Health a fee pursuant to the Standard Pricing Table outlined
in Exhibit A-1, Section 3.1.1(d)(5), as agreed upon in writing, for the performance of such amendment or
reconfiguration services. Client may add products to the call plan, which may be either products
Syneos Health Project Code: 7007244
Page 3
owned by the Client or those for which the client has entered into a co-promotion agreement without having an
impact on the monthly fees. If a Call Plan requires amending or reconfiguration a Change of Scope document
would be executed by both Parties and the Standard Pricing Table see Exhibit A, Section 3.1.1(d)(5) would apply
as applicable.
(c)
“Deployment Date” means the date of the first Call by a Syneos Health Sales Representative,
which is anticipated by the Parties to be on or about [***]. Notwithstanding the date set forth herein, the
Deployment Date will be the actual date of the first Call by a Syneos Health Sales Representative.
(d)
“Healthcare Professional” or “HCP” means a person, other than an individual
patient, including, without limitation, any medical or health care professional or entity in a position to
purchase, lease, recommend, use, influence or arrange for the purchase or lease of, or prescribe the
Products with whom Syneos Health Sales Representatives come in contact with in connection with
providing the Services hereunder.
(e)
(f)
“Product” shall mean Twirla®.
“Product Literature” shall mean promotional, informative and other written
information concerning the Product. All Product Literature shall be prepared and provided by Client.
The Syneos Health Sales Representatives shall utilize the Product Literature when making Calls.
(g)
“Project Team member Hire Date” means the date the first Syneos Health Sales
Representative is assigned to the Project Team.
(h)
“Targets” mean the licensed practitioners who are identified by Client as potential
prescription writers and/or customers for the Product as provided by Client to Syneos Health.
II.
HIRE STATUS, FLEET, TRAINING AND MEETINGS
(a)
Hire Status—Generally. Upon completion and approval by the parties of the field alignment and
profile (including approval of the final number of Project Team members), Syneos Health will commence
recruiting and hiring activities for the Project Team members. In the event that Syneos Health receives
notification to commence recruiting and hiring activities with respect to a position or territory, and that position or
territory is subsequently cancelled by Client at any time after [***] from the date of such notification, then Client
shall pay a cancellation fee to Syneos Health in the amount of [***] for each such cancelled position or territory.
(b)
Hire Status—Provisioning. Syneos Health shall provide following:
(i) Salary, benefits, and incentive compensation as agreed by Client to the Project Team members.
(ii)
Fleet Vehicles and fleet management services for the Sales
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Representatives include the following:
(1)
Coordination of department of motor vehicle (“DMV”) checks and confirmation of
completion for all employees in Fleet Vehicles
(2)
(3)
Management of vendor involvement for accidents, fuel cards, and insurance
Coordination of delivery of bridge rentals or Fleet Vehicles dependent upon
background and DMV check completion, timeline of deployment and vehicle availability
(4)
(5)
Recommendations for snow belt vehicles as applicable for project
Ordering new vehicles or transfer of existing surplus vehicles dependent upon team
size, availability and Client budget
(6)
Timely pick-up of fleet vehicles through third-party vendor for terminations and
leaves of absence (“LOAs”) as appropriate
(iii)
The above stated fleet management services shall assume the following:
(1)
Timely notification of territory and district locations for vehicle placement
(iv)
to, the following:
Human resources management services for the Project Team to include, but not be limited
(1)
(2)
Creation, distribution, and tracking of offer letters and onboarding documents
Distribution of emails from background and drug screening vendors to complete
required data for background screening and drug screen
(3)
(4)
Tracking of background and drug screening results (follow-up may be required)
New hire orientation
(5) Works with project lead coordination on investigations of policy non-compliance,
background and other performance issues
(6)
(7)
Coordination with leave and benefits administration as required
Delivery of termination notices, participation in notification calls regarding
downsizing and conversions
(v)
Human resources management services assume the following:
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(1)
new hires
Timely completion of background vendor required information through its link for
(2)
Information regarding vacation, incentive compensation, expectations are available
for inclusion in the offer letters
(vi)
Information technology hardware for the Sales Representatives to include iPads and laptop
computers (including sales force automation software) and printers.
(vii) CRM and operational support for the Sales Representatives as further described in Exhibit
A-1.
(c)
Training - The training responsibilities of the Parties are as follows:
(i)
Exhibit E.
Syneos Health shall be responsible for training members of the Project Team pursuant to
(ii)
Client shall be responsible for training members of the Project Team concerning all Product
specific information including Product complaint handling procedures, applicable specific Client health
care compliance policies and Client customer service policies and procedures, orientation to Client’s
business, compliance with Applicable Law, and adverse event reporting policies and procedures. The
Parties agree to work together to mutually determine if, when, and at what cost additional training shall be
provided to members of the Project Team.
(d)
All expenses associated with Plan of Action (POA) meetings and national training meetings shall
be pre-approved by Client and be paid for by Client as a pass-through expense or direct billed to Client.
(e)
Syneos Health will be responsible for providing credit cards to any Syneos Health Project Team
member as requested by Client who establishes credit-worthiness in accordance with standards established by
Syneos Health’s corporate credit card provider. Client and Syneos Health shall establish appropriate limitations
on the amount of available credit. In the event a Syneos Health Sales Representative is unable to establish credit
worthiness, Client shall determine if it nevertheless desires to have a credit card issued to such Syneos Health
Sales Representative. All credit card expenses shall be submitted and processed through the Syneos Health
expense reimbursement system. In the event of a default on a credit card invoice by any Syneos Health Sales
Representative (i.e., the expenses/receipts are not input into the Concur system), Client shall nevertheless
reimburse Syneos Health for all business related expenses properly incurred by such field personnel in accordance
with the Project Agreement which are substantiated through credit card statement documentation, and not
otherwise entered in the expense management system.
III.
PERFORMANCE
If Client believes in good faith that the performance of any Syneos Health Project Team member is
unsatisfactory or is not in compliance with the provisions of this Project Agreement,
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Client shall notify Syneos Health and Syneos Health shall promptly address the performance or conduct of such
person in accordance with its internal human resource policies. In the event that Client determines in good faith
that a Syneos Health Project Team member has violated any applicable law, regulation or policy, Client shall
notify Syneos Health in writing. Syneos Health shall promptly address the issue and take all reasonable and
appropriate action (including but not limited to termination of such employee). No such action shall be contrary
to Syneos Health’s internal human resource policies and procedures, provided such human resource policies and
procedures are in compliance with all Applicable Laws. If, despite any foregoing action by Syneos Health,
Client is still reasonably unsatisfied with the performance of any Syneos Health Project Team member, Client
may request the removal of such Syneos Health Project Team member by promptly notifying Syneos Health in
writing, and Syneos Health shall remove the Syneos Health Project Team member from the provision of Services
hereunder. Any action taken pursuant to this Section III will be in accordance with Syneos Health’s internal
human resource policies and procedure and the Applicable Laws governing employees. Syneos Health shall
promptly notify Client if it becomes aware that any Project Team member has violated or is alleged to have
violated any applicable law, regulation or policy.
IV
CALLS AND TARGETS
The Syneos Health Project Team shall provide Product Literature and Product samples (as needed) when
making Calls as directed and approved by Client. Client is solely responsible for the content, production and
distribution (to the Syneos Health Sales Representatives) of the Product Literature. Each Syneos Health Sales
Representative shall record information concerning each Call, including but not limited to Product sample
distribution, and concerning the profile of each individual Target (or other physician called upon) on whom the
Syneos Health Sales Representative calls. Client shall permit Syneos Health to access and use all Target, sales
and Call-related data that supports or is associated with the Services that are performed in accordance with this
Project Agreement (the “Data”). The Data shall be used by Syneos Health for the purpose of evaluating the
performance of its Project Team members; and, provided that Syneos Health de-identifies all Client and Product
specific components of the Data, for business development and analytics purposes.
V.
THE PRODUCTS
The Product shall be promoted by Syneos Health under trademarks owned by or licensed to Client and are
Products which Client has all lawful authority necessary to market and sell the Products in all geographic areas
where the Products are to be promoted under this Project Agreement. This Project Agreement does not constitute
a grant to Syneos Health of any property right or interest in the Products or the trademarks owned by or licensed
to Client. Syneos Health recognizes the validity of and the title of Client to all its owned or licensed trademarks,
trade names and trade dress in any country in connection with the Products, whether registered or not. Client
represents to Syneos Health that neither those trademarks, trade names and trade address nor the promotion of the
Products by Syneos Health infringes on any intellectual property right of any other person or entity.
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VI.
HIRING PROFILE
In selecting Project Team members, Syneos Health will use the preferred hiring profile approved by
Client. Syneos Health will take reasonable steps to confirm the accuracy of information concerning background
and experience received from applicants for positions of Project Team members. Syneos Health shall not
knowingly employ or otherwise retain, or permit to be retained as a Project Team member, a practicing physician
or a person affiliated on a professional level with or employed by any physician, physician practice or other
healthcare professional or provider or a person who is in a position to unduly influence the purchase of the
Products.
VII. BACKGROUND CHECKS
Syneos Health shall be responsible for performing drug testing and background checks of all Project Team
members. Syneos Health represents and warrants that it will complete or cause to be completed a thorough
background check of all Project Team members. This will include, Criminal Check, Social Security Check, Drug
Screen, Motor Vehicle Record Check, Education Check, Past Employer Check. Syneos Health further represents
and warrants that it will perform or cause to be performed background checks to confirm that no Sales
Representative:
a.
is an excluded person on the Office of Inspector General’s List of Excluded Individuals/Entities
and is not on the General Services Administration Excluded Parties List (as of the date the background check is
performed);
b.
c.
is, so far as it is aware, an unfit or an improper individual for the performance of the Services;
is, so far as it is aware, engaged in any fraudulent or unlawful activity, or other inappropriate
conduct as measured by the other requirements of this Project Agreement.
Syneos Health shall institute prompt corrective or disciplinary action against any Project Team member
who fails to meet the requirements set forth in this Exhibit A. Syneos Health further agrees to cooperate and
comply with all investigations by or on behalf of Client with respect to wrongdoing, or alleged or suspected
wrongdoing, in respect of any obligations of Syneos Health or any Project Team members under this Project
Agreement.
VIII. REPRESENTATIONS AND UNDERTAKINGS
(a)
(b)
[***]
Client represents that:
(i)
it recognizes that for Syneos Health to comply with its obligations hereunder, it shall need
the good faith cooperation of Client to provide Syneos Health with the
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necessary materials and assistance required to enable Syneos Health to perform the Services;
(ii)
the Services being provided by Syneos Health are in furtherance of Client’s program of
marketing and promoting the Products and as such, Client is responsible for ensuring, and further, Client
represents and warrants, that the Client’s program being implemented by Syneos Health pursuant to the terms
hereof (but not the implementation thereof by Syneos Health), strictly adheres to all applicable state and federal
statutes, laws, ordinances, and the rules and regulations of all governmental and regulatory authorities, including
but not limited to, the Federal Food, Drug, and Cosmetic Act and the Prescription Drug Marketing Act;
(iii)
it shall ensure that none of its employees add, delete or modify claims of efficacy or safety
of the Products, nor makes any changes (including but not limited to, underlining or otherwise highlighting any
language or adding any notes thereto) in the Product Literature, during the training on the Products or during any
communications with Syneos Health employees;
(iv)
it shall ensure that none of its employees working with the Project Team or in connection
with the Services, directly or indirectly instruct any Syneos Health employee to pay, offer or authorize payment of
anything of substantial value (either in the form of compensation, gift, contribution or otherwise) to any person or
entity in a position to order, recommend or purchase the Products contrary to any law; and
(v)
neither it nor any of its employees directly or indirectly instruct any Syneos Health
employee to make any representations or warranties relating to the Products that conflict, or are inconsistent with,
applicable laws or the Food and Drug Administration approved labeling for the Products.
(vi)
Client shall:
for the provision of Product samples (as applicable).
A. provide Syneos Health Project Team members with all Product Literature and arrange
inform Syneos Health promptly of any changes which Client believes are necessary or
appropriate in the Product Literature or in information concerning the Products in order to be in compliance with
all applicable federal and state law, regulations and administrative guidance.
B.
communicated to Syneos Health from any licensed practitioner and communicated by Syneos Health to Client.
C. Arrange for a timely and appropriate response to any inquiry concerning a Product
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AMENDMENT AND RESTATED
EXHIBIT A-1
FIELD OPERATIONS SERVICES
1.0
Executive Summary
This Exhibit A-1 describes the scope of work, deliverables, and assumptions for field operations initial
implementation and ongoing annual support for the Project (as defined in Section 3.1.1(a)). Any changes to the
assumptions, deliverables, or scope of work described in this Exhibit A-1, or any new work request(s), will follow
Section 3.1.1(d), Change Control Process of this Exhibit A-1.
2.0
Scope of Services
The following service areas are part of field operations initial implementation and ongoing annual support:
· Operations Management
· Customer Relationship Management (CRM)
· Customer Master Source Data & Validation
·
·
Travel and Expense Management
Transparency Reporting
· Data Management
· Analytics and Reporting
·
·
·
·
·
Targeting, Alignment and Call Plan Administration
Incentive Compensation Management
Field Support Services
Technology Training Services
LMS System Support
· Quality Management and Assurance
·
Field Trigger Email with Veeva Engage
3.0
Scope of Work Definition
3.1
Operations Management
3.1.1 As part of operations management, Syneos Health will provide the following:
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Project Management. Syneos Health will provide a fully integrated project
(a)
management approach for the implementation of the operations services (the “Project”)
including the following:
(1)
Leadership of Project kick-off meeting to include review of scope, timelines,
and assumptions for each functional area, Sales Team member introduction, and
status reporting formats and meetings.
Integration of all Project activity, timelines, and deliverables across all
(2)
functional areas into a consolidated Project schedule.
Leadership, facilitation, and documentation of all meetings, including
(3)
meeting notes and action items.
(4)
Management of the Project schedule including task management, escalation
of issues, risk identification, and interdependencies through Project documentation
including:
(i)
(ii)
(iii)
Issue tracker;
Milestone tracker; and
Action item tracker.
Project status meetings and Project status reporting, including weekly status
(5)
reports and plan reviews with the Client.
(6)
Project close-out and lessons learned session to include any information that
can be applied to the ongoing operational support of the Client after the initial
implementation is complete.
(7)
Project management implementation deliverables including the following:
Weekly implementation schedule identifying Project activities and
(i)
target completion dates.
(ii) Weekly implementation log of risks, actions, issues, and key
decisions (“RAID”).
Technical Operations Management. Technical operations Project implementation
(b)
deliverables include the following:
(1)
Ongoing communication plan;
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Technical operations
(2)
standard
deliverables and key business rules – delivered within six (6) weeks of the first day
in the field;
deliverables document
identifying
(3)
(4)
(5)
Monthly technical operations status report;
Monthly operation leadership meeting and supporting documents; and
Quarterly business review meeting and supporting documents.
(c)
Field Administrative Management.
administrative tasks, including the following activities:
Syneos Health will oversee all field
(1)
Project set up and roster management using Syneos Health’s
Field Administrative Management—Implementation.
(i)
proprietary master roster system;
(ii)
Onboarding of new hires, including all aspects of administrative
systems and processes (e.g., travel, CRM system, business cards, welcome
memo, conference call accounts, fleet coordination, credentialing, licensure);
(iii) Meeting planning logistics for national and POA meetings;
(iv)
sourcing/booking, meal and events
arrangements, ground transportation set up, flight arrangements, travel letter
development, and budget tracking for national and POA meetings;
(v)
(vi)
One (1) resource for on-site meeting support available, as needed;
Training development and coordination;
sourcing, hotel
Venue
·
Identify and coordinate Syneos Health/Client courses for LMS
upload
· Coordinate presenters/training schedules & agendas
·
·
LMS course completion monitoring
Post launch mastery training plan development
(vii)
Team Expense Travel and Budget Policy development.
(2)
Field Administrative Management—Ongoing Support.
(i)
Roster management and distribution;
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Continuation of meeting planning logistics, as described above,
Coordination with sample management and fulfillment vendor (if
Review of monthly invoicing and budgets for adherence to Project
(ii)
either with Client vendor(s) or as a stand-alone offering;
(iii) Monitoring Project parameters and managing eligibility and payout
of incentive compensation and awards within approved Project guidelines;
(iv)
Coordinate, route, track, and report operational initiatives, questions,
or directives across all of the internal administrative departments, as well as
external vendors and Client home office;
(v)
P&L;
(vi)
applicable);
(vii) Coordination with Syneos Health compliance on HCP expense
monitoring and reporting;
(viii) Onboarding of backfill new hires to include all aspects of
administrative systems and processes;
(ix)
(x)
(xi) Monthly field employee roster audits; and
(xii)
(xiii) Review and ensure all field expense reporting is completed, to
include HCP reporting;
(xiv) Field communication to include the following for the team
conference call:
Coordination of communication to the field;
Ad hoc reporting (e.g., turnover/vacancy reports, budget tracker);
Payroll processing;
·
FAQ development with HR and business lead
· Communication script
·
Project exit check list and acknowledgement
(xv) Monitor return of Syneos Health property;
(xvi) Monitor return of Client property (i.e., samples, marketing materials,
etc.);
(xvii) Coordination with fleet department on return of vehicle (if
applicable); and
(xviii) Deactivations of all Project specific accounts (i.e., conference
call/WebEx, etc.).
(d)
Change Control Process. During the Term of this Project Agreement, the Parties
may mutually agree to alter the Field Operations Services outlined in this Exhibit A-1.
Such changes will be addressed as follows:
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Assess the impact of scope changes on Project schedules, resources and
(1)
pricing;
Provide a formal vehicle for approval to proceed with any changes to the
(2)
Project Agreement;
Provide a Project audit record of all material changes to the original Project
(3)
Agreement; and
If requirements arise that are outside the scope of this Exhibit A-1, a Change
(4)
of Scope document (or an amendment to the Project Agreement, as applicable) will
be submitted for Client approval following the below process:
Client requests additional requirements for new functionality or
(i)
deliverables outside the scope of work provided herein.
(ii)
Syneos Health reviews change, meets with Client and internal team
members to understand and scope Client expectations regarding business
need, timelines, and other deliverable expectations.
(iii)
Syneos Health provides Change of Scope (or Amendment or new
Project Agreement, as applicable) document, which outlines work effort,
timeline and pricing impacts of the change. Pricing will be determined
based on standard rates provided below.
Client accepts proposal and signs Change of Scope (or Amendment
(iv)
or new Project Agreement, as applicable) document which authorizes work
to begin on the change request.
(5)
Standard Pricing Table.
Role
Software Development
CRM Configuration
Data Management
Alignment/Call Planning
Incentive Comp Modeling/Design
Analytics & Reporting
Project Management/Business Analysis/Solution Design
Price/HR
[***]
[***]
[***]
[***]
[***]
[***]
[***]
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Role
Testing
IC Administration
Training (Content/Delivery)
Hardware/Help Desk
Price/HR
[***]
[***]
[***]
[***]
3.2
Customer Relationship Management (“CRM”)
3.2.1 CRM; Client Configuration and Available Functionality. Syneos Health will provide a
CRM application. Additionally, within its CRM application, Syneos Health will set-up a single,
Client-specific, dedicated CRM environment configured specifically to the Client’s business rules
(the “Client Configuration”). The core functionalities within the Client Configuration are as
follows, and will be configured by Syneos Health upon selection by Client:
(a)
(b)
Customer profile management across account types (individuals and organizations);
Call recording, reporting, and loading of Call plans;
Closed-Loop Marketing (“CLM”), loading and presentation of digital media as part
(c)
of integrated call record;
Sample management and recording of samples and physician signature capture as
(d)
part of integrated call record, including Prescription Drug Marketing Act (PDMA), CFR
Part 11 Validation, if requested by Client;
(e)
(f)
Medical Inquiry Request Form (“MIRF”) including physician signature capture;
Field Coaching Report (FCR) configuration;
Pre-established reports and dashboards to enable field and field management
(g)
performance (online only); and
iPad/online platform options including online/home office PC, field tablet PC, and
(h)
iPad to support mobility needs and improved customer interaction.
3.2.2 CRM; Client Configuration Development and Implementation. CRM implementation will
be led using an agile development approach including the following deliverables:
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Project
Deliverable
Initial
Requirements
Alpha Review
Configuration
Requirements
Document
(“CRD”)
Beta Review
Definition
Demonstration of the Client Configuration; and discussion
of Client needs and business environment to support the
general usage and end-user experience; will include
accounts, functions, Call types, products, customer profile
maintenance, etc.
First iteration of the Client configuration based on
requirements gathered in the Initial Requirements session.
Detailed demonstration of the Client Configuration for
more in-depth review of Client requirements.
After the Alpha Review, Syneos Health will provide the
Client with a draft CRD document which summarizes all
end-user system requirements taken from both the Initial
Requirements and Alpha Review sessions. The CRD will
form a basis for the final Client Configuration
specifications, risk assessment, testing, training, and
validation (if applicable).
The final phase of the Client requirements will be a Beta
Review, which will allow for any changes to the Client
Configuration system requirements for final testing and
production readiness.
CRD Sign-Off Any changes or additions to the Client Configuration
requirements during the Beta Review will be incorporated
into the final CRD and submitted to the Client after the
Beta Review session for final approval and signature.
3.2.3 Client Configuration Assumptions. The scope of the Client Configuration CRM delivery
and associated timelines for the Project assumes the following:
(a)
Necessary Client members are available for the Initial Requirements, Alpha Review,
and Beta Review meetings (each typically 3 hours), based on the weeks assumed in the
agreed upon Project plan (Alpha Review/Beta Review may be done via WebEx);
(b)
(c)
(d)
Sign-off of documentation within 5 days of delivery by necessary Client members;
No customization of code outside of CRM provided configuration capabilities;
Use of standard MIRF functionality and data extracts to medical information;
(e)
Client Configuration/CRM does not include Adverse Events/Pharmacovigilance
(“AE”) reporting or recording. An alert is setup in the CRM system to remind field users
of the appropriate number/process to communicate to HCPs;
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(f)
Linking to company or external web-based systems within CRM tab structure;
(g)
Access to Syneos Health Veeva Vault for Client approved content including: CLM
presentations and approved email templates. Alternatively, Syneos Health Veeva Vault may
be setup to attach directly to Client internal Veeva Vault system in cases where Client is
using Veeva Vault for internal Medical, Legal, Review (“MLR”). Syneos Health Veeva
Vault is not used for internal Client MLR usage, only for field delivery of approved content;
Sample management functionality, if required, and data feeds for sample shipments,
(h)
SLN validation, and sample product information as determined by Client requirements;
(i)
Inclusion of sales data within standard Veeva reporting functionality (online only);
Field Coaching Report originates from manager, not representative, including data
(j)
entry only. Form will not be pre-populated with any data from any source;
Call history within the Sales Force Automation (“SFA”) system not to exceed 15
(k)
months (5 Quarters) without purchasing additional data storage from Salesforce.com;
External access for Client home office administrators can be granted with change
(l)
control processes in place to ensure integrity of Syneos Health production environment,
with additional license costs as dictated by home office license pricing in contract; and
Ongoing support for CRM system including tier 2/technical support for escalated
(m)
calls from field support desk, and home office support needs;
3.3
Customer Master Source Data and Validation
3.3.1 Veeva Network and Veeva OpenData Validation.
(a)
Syneos Health shall provide a near real-time customer validation process leveraging
the integration of Veeva Network and Veeva OpenData. This combination gives direct
access to Veeva OpenData for adding and changing of HCP and HCO data, which allows
for field users to search, add, and immediately pull-down HCPs/HCOs industry standard
identifiers and compliance information, such as SLN and DEA, upon adding the new
prescriber, as opposed to waiting the standard 2-3 weeks for weekly data exports and
validation.
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(b)
Client and Syneos Health’s targeting and alignment team will also have access to
Veeva OpenData for sales or marketing research, such as to identify initial target universe,
ongoing target adjustments, new product or market evaluations, etc.
(c)
The Veeva Network service includes the following:
(1)
Configuration and support for utilizing Veeva OpenData and the Veeva
Network to allow for this Customer Master Data solution to control the universe in
the CRM system and to provide for data stewardship services via Veeva OpenData
provided controls.
(2)
Data change requests can be submitted by field users to the Veeva OpenData
data stewards, which increases efficiency and decreases timelines associated with
routine action request processing for universe changes discovered by the field.
(3)
The Veeva Network account search will allow for the field to search the
Veeva OpenData Customer Master Data for any HCP or HCO that meets the search
criteria, and provides the ability to add that HCP or HCO to their Veeva CRM
territory. The information included is pre-validated by Veeva OpenData so an
eligible HCP can be sampled immediately. Additionally, all valid address
information known for that account will be brought down with the HCP or HCO
selected.
(d)
The Veeva OpenData service includes access to the following data set:
(1)
Licensed field and home office users have access to entire customer
universe (HCPs, HCOs, addresses, affiliations) in the Veeva OpenData customer
universe.
Usage of compliance data scrub – for industry standard identifiers SLN,
(2)
NPI, DEA #s for initial and ongoing data validation.
Usage of data hygiene scrub – for HCP demographic data such as address,
(3)
specialty etc. for initial data validation.
(4)
Access to email address data is not included in standard offering but may be
available on a per record basis for marketing initiatives as needed and is
recommended for usage if Client is implementing enhanced approved email
functionality (not included in base CRM license).
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3.4
Travel and Expense Management
3.4.1 Travel & Expense Set-Up and Ongoing Services. Syneos Health shall leverage its then
current travel and expense (“T&E”) management system application (and solution provider)
(collectively, the “T&E Management Solution”), currently Concur, for capture and reimbursement
of all expenses incurred by Syneos Health employees recruited for the Client’s Project, and for
HCP data capture necessary for transparency reporting. The T&E Management Solution assumes
the following:
(a)
Required Client members are identified and available for requirements gathering;
Client’s requirements align with the standard baseline Concur configuration, (i.e.
(b)
able to utilize existing expense types, approval workflow, etc., without customization);
Completion of Configuration Request document for Project set-up based on Client
(c)
spend limits and business rules;
Acceptance of Syneos Health universe for HCP selection utilizing Medpro Concur
(d)
Connect;
Ongoing support for Concur T&E management system including tier 2/technical
(e)
support for escalated calls from field support desk;
(f)
Changes to or additional audit rules may be requested post-deployment;
On-going roster management as teams expand or re-align (including territory and
(g)
manager changes);
Information on areas such as Amex cards, mileage rates, report approvers, etc. are
(h)
communicated and decided on at onset of implementation based on Client business rules;
(i)
T&E management system setup and support is only provided for Syneos Health
employees. If any Client employees are supported, Client will be responsible for the
deployment of the T&E management system and capture of any HCP meal spend, etc. for
the Client employees;
Coordination of Learning Management System (“LMS”) Project set-up and
(j)
communication of system access and viewing of Concur module to new hires/end users;
(k)
(l)
Inclusion of Expense Management in Technology Training sessions; and
Tracking of completed Concur module review in LMS per user.
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3.4.2 Travel & Expense Deliverables. The T&E management system application work stream
will be managed by the Operations Manager, the Concur system subject matter expert, and the
compliance lead, and will include the following deliverables:
Project Deliverable
T&E Guidelines
Compliance Business Rules
Document
ERD (Expense Requirements
Document)
Training Documentation
3.5
Transparency Reporting
Definition
General Syneos Health guidelines
provided to assist the Client in
developing their T&E program; this can
be reviewed and modified by Client as
required.
Detailed document describing all
compliance business rules associated
with the Client Project. A draft will be
provided with Syneos Health’s base
business rules and guidance with review
and modifications as needed, and
approval by Syneos Health and Client.
Detailed document describing standard
Concur functionality and Client-specific
business rules based on requirements
gathering and configuration request.
Following internal review, final
document will be reviewed and approved
by Syneos Health and Client.
Training documentation provided to field
users and management with guidance on
T&E management system application
and compliance business rules and usage.
3.5.1 Background. H.R. 3590, Section 6002: “Transparency Reports and Reporting of Physician
Ownership or Investment Interests,” also referred to as the “National Physician Payment
Transparency Program” a/k/a the “OPEN PAYMENTS” or “Sunshine Act” and H.R. 3590, Section
6004: “Prescription Drug Sample Transparency,” requires certain data collection and reporting
regarding payments or transfers of value and drug sample distribution to physicians.
3.5.2 Data Management. Syneos Health will provide the following data management services to
Client:
(a)
Regular reports of HCP-related meal expenses in Syneos Health’s standard format;
Regular reports Syneos Health’s standard format of items of value non-sample items
(b)
left with HCPs;
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(c)
Syneos Health will run full-cycle system testing and support UAT testing; and
All reports will be clearly defined in terms of layout, content and delivery in the
(d)
Data Requirements Document.
Syneos Health will work with Client in the data requirements process to confirm the file format,
data elements, file delivery process and frequency to meet Client specifications for transparency
reporting and Client System Integration. Syneos Health’s Monitoring and Auditing processes for
transparency reporting is detailed in Exhibit C, below.
3.6
Data Management
3.6.1 Generally.
Syneos Health will provide data loads and data integration services for standard data
(a)
imports and exports. Data management services includes data flowing to and from the
Veeva CRM application, including Client data sources, third parties (i.e. sales data), or
service partners. The data management team will work with the Veeva CRM, and analytics
and reporting tools, to ensure that all Client business rules and data requirements are
understood and planned for in the overall implementation plan.
(b)
A full description of all data files and formats for data interfaces will be provided in
the Data Requirements Document (“DRD”), which will be included as part of the Project
Plan with necessary approvals from the Client and Project leads. The DRD will also
include a Production Schedule, for ongoing data management services.
3.6.2 Data Loads, Imports and Extracts—Standard. The Project assumes use of standard data
loads and file formats for all initial and ongoing data support as provided below:
Standard initial data loads shall use agreed upon Syneos Health/Client formats
(a)
including:
(1)
(2)
(3)
(4)
Territory hierarchy;
Customer universe, alignments, and Targets/Call plans;
Product information; and
Call history (if required).
Standard reoccurring data imports shall be conducted at set frequencies and in
(b)
agreed upon formats within five (5) business days of receipt as needed for the following:
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(1)
(2)
(3)
(4)
Prescriber/account sales data (weekly & monthly);
Prescriber payer data (weekly & monthly);
Call Plan/Targets (quarterly); and
Customer universe updates—validation responses (weekly).
Standard reoccurring data extracts shall be provided at set frequencies to either
(c)
home office or third-party vendors as needed for processing to include:
Call/activity data (weekly or monthly – Syneos Health to provide within 5
(1)
business days from the end of the cycle);
(2)
Medical inquiries (daily);
Sample activity (weekly or monthly – Syneos Health to provide within 5
(3)
business days from the end of the cycle);
Extracts supporting Transparency Reporting in Section 3.5 (monthly or
(4)
quarterly);
(i)
(ii)
DME Spend data from Concur;
Items of value, open payments reports;
(iii)
Hand-carry sample reports for ACA 6004 (Knipper clients only); and
Customer Universe Validation Requests (weekly – Syneos Health to provide
(5)
within 5 business days from the end of the cycle).
Standard data maintenance services will be provided for the ongoing support of the
(d)
systems and data at fixed frequencies as defined below to include:
(1)
(2)
(3)
State license validation process to reduce field impact in sampling (weekly);
PDRP flagging on accounts (monthly);
Routine merging of accounts (quarterly);
Setup of integration between Veeva CRM and data warehouse, which allows
(4)
roster, Territory hierarchy and Product management to be seamless (daily);
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(5)
(6)
Processing of action requests (Client data changes) (quarterly);
Time off Territory and holiday updates (monthly);
Ongoing maintenance of sales and payer data (weekly or monthly based on
(7)
sales data provider availability);
(8)
Training database setup and management (quarterly);
Tier 2/technical support for data issues routed from the Field Support Desk
(9)
(daily);
Customer sales data extracts for IC (as defined in Section 3.10) processing
(10)
(monthly); and
(11) Customer sales data and Call/activity extracts for A&R processing
(monthly).
3.6.3 Assumptions. The scope of the data management delivery and associated timelines for the
Project assumes the following:
Project
Deliverable
Initial
Requirements
Definition
Discussion of client needs regarding data loads, extracts, and
imports and finalization of Project plan and scope based on
SOW assumptions and change management process
Third Party
Agreements
(TPA)
Syneos Health will secure, in coordination with Client, any
rights and licenses that Syneos Health needs from external
vendors such as sales data companies which require TPA for
data services to be provided
DRD (Data
Requirements
Document)
Syneos Health will provide the Client with a DRD document
which summarizes all data loads, imports, and extracts, as
well as any business rules, frequencies, and formats
associated with the data services to be provided as part of
implementation and ongoing data management services, the
DRD draft will be reviewed, modified as needed, and signed
by the Client to confirm Project deliverables
Test Files
The Client or third parties will provide needed test files in
specified formats and agreed dates in the Project plan based
on the implementation schedule
Final
Production
Files
The Client or third parties will provide final production files
in specified formats and agreed dates in the Project plan
based on the implementation schedule
3.6.4 Non-Standard; Changes. Any additional data feeds not included in the standards as defined
above, or changes to data exchanges or maintenance subsequent to the approved DRD will follow
the change control process and rate schedule set forth in Sections 3.1 and 3.1.1(d) respectively.
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3.7
Analytics and Reporting
3.7.1 Veeva CRM Dashboard Reporting.
(a)
Reporting Generally; User Types. The Project assumes general field activity
reporting will be provided in the Veeva CRM Dashboard Reporting environment utilizing
Syneos Health’s pre-configured reporting tools to optimize field performance and
implementation setup time. Syneos Health reporting will be provided for the following user
types aggregated based on the user type’s span of control:
(1)
(2)
(3)
Representative (Territory level);
Field Management (regional level); and
Home Office (national level).
3.7.2 Veeva Report Configuration and Templates.
(a)
Syneos Health will configure the reporting tools to include Client specific fields and
terminology, where applicable, within Veeva and SalesForce.com guidelines. Veeva
requirements, development, and deployment will follow the requirements and format as
provided in the Veeva CRD as stated in Section 3.2, and may include the following: field
activity, including the following: Call activity, Call plan adherence, sample activity, CLM
utilization, synchronization monitoring, manager exceptions, and/or administration.
Report Templates. The Veeva template field reporting package is designed to drive
(b)
sales behavior in the following ways:
Evaluation of prescriber sales for pre-Call planning from account summary
(1)
report;
Measure that the most valuable drivers of sales were detailed and sampled in
(2)
accordance with the recommended Call plan - account/physician –
Average Calls per day –reviews Call activity against Target or
(i)
segmentation;
(ii)
(iii)
(iv)
Reach and frequency can be found on analytics tab;
Call plan information can be found on the Call plan tab; and
Call Plan Analysis Report can be found on the analytics tab.
(3)
Measure the impact of detailing and sampling on sales –
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(i)
Effort vs. results report can be found on the analytics tab.
Examine the landscape for the product to identify top sales accounts and
(4)
potential –
Territory sales analysis—reviews trends in Client Product and
(i)
competitive landscape; can be found on analytics tab;
Territory payer analysis –examines payer information; can be found
(ii)
on analytics tab; and
(iii)
Territory comparison report—compares sales performance at the
Territory level for all territories within span of control; can be found on
analytics tab.
(5)
Report Template Table.
Template
Reports
Base Assumptions
Account
Summary
Prescriber based product level
prescription data
Standard
Frequency
At same frequency
as sales data (aka
prescription data)
delivery to Client
Activity/
Administrative
1. Reviews key territory and/or
district performance indicators
with drill down details for:
Real time as of last
synchronization and
refresh
a.
Interactions
b. Detailing
c. Sampling
2. Review key territory and/or
district administrative metrics
with drill down details
3. Any information collected within
a check box or drop down list
into the Veeva systems can be
aggregated into a dashboard
element.
4. Text box information can be
rolled into a report but not the
dashboard.
5. Dashboards can have up to 20
measurement elements
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Standard
Frequency
Template
Reports
Base Assumptions
6. All Dashboard elements are
pictorials which aggregate data
from an underlying report
7. All pictorials are flexible but
limited to two dimensions
8. Color selection is not an option
9. Filters can be applied to
comparable data
10. Reports can be filtered by user
level (Field, Management, Home
Office)
11. Other Reportable Activity:
a. System Utilization
b. Pending Interaction
(Exception/incomplete
information)
c. Time off Territory
d. Synchronization Reports
e.
Interaction by Date and Time
f. Field Action Requests
12. Account Demographics
a. Target/Non-Target
b. Account Type (practitioner,
pharmacy, staff, etc.)
c. Specialty
d. Segmentation
e. Custom Profile Attributes
13. Closed Loop Marketing (CLM)
a. Slide Utilization as % of Calls
b. View Duration
c. Ranking of Slides by View
count and Average Duration
d. Viewer Reaction (Positive,
Neutral, Negative)
Reach and
Frequency
Adapted to specific activity
measurements and goals within set up
matrix (calls, targets only, reach,
frequency, sample distribution)
Real Time as of last
synchronization and
refresh
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Template
Reports
Average Calls
Per Day
Base Assumptions
Average Calls Per Day versus goal
Territory Sales
Analysis
1. Adapted to specific
product/market definition
Territory
Comparison
(Mgmt.
supplement)
2. Monthly prescriber-based product
level prescription data; Up to 3
promoted products
1. Adapted to specific
product/market definition
2. Monthly prescriber-based
product level prescription data;
Up to 3 promoted products
3. Comparison of sales data
amongst the assigned span of
control
Territory Payer
Analysis
1. Monthly payer-based product
level prescription data
2. Analysis of the prescriber payer
3. Top payers
4. Comparison of payer market
products
Effort vs.
Results aka
Impact Report
1. Adapted to specific
product/market definition
2. Up to 3 promoted products
3. Monthly prescriber-based product
level prescription data
Standard
Frequency
Real Time as of
last
synchronization
and refresh
At same frequency
as sales data (aka
prescription data)
delivery to Client
At same frequency
as sales data (aka
prescription data)
delivery to Client
At same frequency
as sales data (aka
prescription data)
delivery to Client
At same frequency
as sales data (aka
prescription data)
delivery to Client
3.7.3 Custom Analysis & Insights.
Additional work-effort will require work estimates and Change of Scope as detailed in
Section 3.1.1(d), to be coordinated by the PM.
3.8
Targeting, Alignment and Call Plan Administration
3.8.1 Generally. Syneos Health will provide targeting and sales force alignment services for
optimization of key targets. The goal of these services is to:
Optimize geographic coverage on the most valuable Targets while balancing
(a)
Territory workload;
Target list generation based on business-specific workload parameters including the
(b)
incorporation of any segmentation, detailing and frequency provided; and
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(c)
Identification of uncovered white space geography.
3.8.2 Deliverables.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Metropolitan Statistical Area (MSA) overview;
Alignment summary including coverage of top targets;
Uncovered geography summary;
Mapping at territory, district and national levels;
Zip-Terr;
Span of control; and
Target list.
3.8.3 Assumptions.
(a)
The scope assumes the following:
Alignment will be created utilizing Syneos Health’s preferred alignment
(1)
software;
Territory workload parameters and Project assumptions are agreed upon
(2)
before work starts;
(3)
All third-party agreements are signed off on before work starts;
If third-party data purchased by Syneos Health will be passed through to
(4)
Client;
Client will supply physician level universe which will include best address.
(5)
Any workload specific data points will be mutually agreed upon by the Parties (i.e.,
Rx, Deciles, etc.);
One (1) per-deployment interactive alignment session for the field managers
(6)
for minor geographic tweaks; and
(7)
Quarterly Target or Call plan updates will be managed through the Veeva
Action Request process, with timing provided for call plan updates that represent
[***] changes in territories, geographies or segmentation. This will be done for
alignment and Target updates each quarter, with District Manager/Sales
Management reviews, per the agreed upon process between Client and Syneos
Health. Additional work-effort will require work estimates and Change of Scope
as detailed in Section 3.1.1(d), to be coordinated by the PM.
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(b)
Items not included in the assumptions:
(1)
Major realignments or re-targeting exceeding [***] changes in territories,
geography, or segmentation such as new Target strategy, expansions, or down-
sizing; and
(2)
Additional mapping and data analysis.
3.9
Incentive Compensation Management
3.9.1 Generally. Syneos Health incentive compensation management will design and /or
implement an annual incentive compensation (“IC”) plan and administer quarterly payouts.
Syneos Health IC personnel will facilitate an IC assessment meeting to ascertain scope of
work, IC plan parameters, data availability, budget, IC plan goals and incentive
compensation culture. Sessions will be led by Syneos Health IC employees experienced in
the discipline of IC plan design and field performance measurements. The assessment
sessions are strategically structured to aid in the IC plan design, consisting of metrics
aligned to business strategy. After the IC plan design has been approved by the parties, the
Syneos Health incentive compensation department will implement, manage and administer
IC plan.
3.9.2 Standard IC Services are inclusive of the following:
Post the launch year, which will include at least one full year from the date of
(a)
launch, a single annual IC plan for each Client team (i.e. Sales and Sales Managers) for the
covered field employees, with no more than two (2) Plan Updates (as defined herein) per
year. A “Plan Update” is defined as a change, which does not alter the IC plan structure
thus resulting in an amendment to the IC plan. Changes to IC plan structure, which require
a new set of modeling, design work, and/or plan communication documentation are
considered a “New Plan,” and may be subject to a separate Statement of Work (“SOW”).
(b)
The components of an IC plan will include the following:
(1)
(2)
Plan concept presentation deck;
Formal plan document with electronic signature;
(i)
Inclusive of:
Plan design measurements
·
· Business rules
· Data crediting
· Calculations
·
·
Participation rules
Terms and Conditions
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(ii)
IC Plan document will be reviewed by the following:
·
·
·
·
Syneos Health Sales Leadership
Syneos Health Human Resources
Syneos Health Corporate Compensation
Syneos Health Authorized Legal
Monthly spreadsheet (“IC Grid”) of calculated results (dependent on data
(3)
availability and IC plan design);
Monthly field scorecards (dependent on data availability and IC plan
(4)
design);
Quarterly payout administration in accordance with the Syneos Health
(5)
payroll calendar;
(6)
A single contest/special performance for field force per year to include:
(i)
(ii)
Contest Concept Presentation Deck;
Formal Plan Document with electronic signature;
Single payout administration in accordance with the Syneos Health
(iii)
payroll calendar; and
(iv)
Single contest grid and/or scorecard of contest results.
(7)
A single annual President’s Club contest/trip to include:
Results published in conjunction with the monthly IC reporting
(i)
process.
Additional services and changes will be subject to the Change Control
(8)
Process and subject to an amendment.
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3.9.3
IC Plan Deliverables and Timelines.
(a)
Design Phase.
Category
IC Plan
Meeting(s)
Description
Initial Meeting to discuss:
● Corporate Philosophy
● Sales Goals/Objectives
● Sales/Marketing Strategy
● Business Rules
● Data Inputs
● Eligibility Requirements
IC Modeling
Based on inputs derived from
initial IC meeting(s), Syneos
Health will create/provide IC
deck illustrating:
● Recommended IC plan(s)
● Payout
Scenarios/Distribution
Field
Communication
IC Plan communication includes:
● PowerPoint deck
(Management Team &
Sales force)
Duration/Timeline
1 day – initial
meeting; subsequent
follow-up meetings
may be held to
discuss pending
topics or matters
requiring further
discussion from
initial meeting.
Maximum timeline 3
weeks
● 1 week to provide
recommendation
● 1 week for
feedback/follow-
up
● Additional time
may be needed if
data is required
for modeling
3 weeks (maximum)
once IC plan has been
finalized.
● Word/PDF document (for
IC plan
participants/acknowledgement)
(b)
Implementation Phase.
Category
IC Plan
Programming
Description
● Data Process Setup
● SQL Programming
● User Interface Setup
● Report/Scorecard
Programming
● KPI/MBO Programming (if
applicable)
Duration/Timeline
Maximum of 3 weeks
after receipt of initial
sales data file in final
format
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Category
Description
Duration/Timeline
● Acknowledgement Portal
Setup
● Administration Portal Setup
● Programming QC & Testing
● Validation & QC of IC plan
programming (independent of
Programming QC)
● Minor changes (cosmetic,
etc.)
(c)
Maintenance/Management Phase.
Category
Plan
Administration
Description
IC plan processing
● Report Generation
Duration/Timeline
4 weeks after receipt
of monthly sales
data file
o Payout
Grid/Summary
o Scorecard
o Management
Summary
● IC plan QC
● Report Distribution
● Roster Management
● Eligibility; LOA; PIP;
New Hire
● IC Portal Maintenance
● Acknowledgment
● Administration
As IC is a passthrough expense to Client, Syneos Health encourages Client input on
IC plan design. In instances where Client has given input into the IC plan design or when
Syneos Health implements an IC plan design created by Client, Client acknowledges and
agrees that it shall use best efforts to timely approve such IC plan design. The foregoing
notwithstanding, in the event field force goals, dependent data, Client requested input,
and/or plan documentation are not approved by Client and/or acknowledged by the field
force within forty-five (45) calendar days into the then current IC plan period, Syneos
Health reserves the right to implement either the IC plan which was utilized in the prior IC
period or an Syneos Health standard best practice IC plan, and Client
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acknowledges that by engaging Syneos Health to perform incentive compensation
management, Client is expressly consenting to the foregoing.
3.10
Field Support Services
3.10.1 Help Desk. The Syneos Health field support service desk supports Syneos Health systems
and operational processes for field user readiness and performance.
Field support service desk hours are Monday through Friday, 8am-10pm, Eastern
(a)
Standard Time
(b)
(c)
Standard Syneos Health metrics and KPIs for call and ticket resolution
Field Support can be reached via telephone or via email
Knowledge base will be supplied for field support service desk based on Client
(d)
business rules and system configuration
Standard monthly reporting will be provided along with post-rollout daily
(e)
monitoring reporting for 2 weeks following each field deployment
3.10.2 Asset Management.
Syneos Health will provide asset management services ranging from hardware
(a)
procurement, to configuration and deployment, and includes tracking IT assets throughout
the life of the Project. Syneos Health maintains a suite of standard Windows images and
custom images available as needed. Client hardware is asset tagged, scanned and secured
in a locked area with restricted access for designated IT personnel.
(b)
Standard hardware platform includes:
(1)
(2)
(3)
Field laptop with carrying case
Apple iPad with cover
Printer
Users are given Syneos Health-hosted email boxes with the option to configure with
(c)
Client-like domains/addresses to give the look and feel of a Client employee.
(d)
All Client launches include a [***] spare pool of hardware to be used as
replacements in the event of breakage or theft/loss. Repairs/replacements are shipped out to
the end-users within 48 hours of receipt of broken hardware.
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(e)
Passcode-protected iPads are deployed using our mobile device management
software with remote-wipe capabilities for added security. App packaging and deployment
capabilities are available. For clients opting for iPads with data plans, we can activate with
one of the major carriers prior to shipment and then maintain that data plan throughout the
life of the contract.
3.11 Technology Training Services
3.11.1 Generally. Syneos Health will provide technology training services for the Sales Team.
The technology training services format follows Syneos Health’s core training content and
facilitation approach. Training delivery assumes the following structure:
(a)
(b)
(c)
Pre-learning home study training (e-modules)
Face-to-face training (up to 1 day)
Post-training mastery (up to 2 hours WebEx)
3.11.2 Content. The training content will include key Syneos Health supported field hardware and
applications including the following topics: iPad basics, Concur T&E, HCP Spend Capture, Veeva
CRM, Veeva Analytics & Dashboards, and Customer Maintenance. New hire training will be
delivered using the same content developed for implementation and offered at the frequency of one
class per quarter, with the preferred Client format of either WebEx or face-to-face delivery.
Additional training is offered as needed following the Change of Scope process in Section 3.1.1(d)
of this Exhibit A-1.
3.12 Learning Management System (LMS)
Syneos Health will supply Client with our standard LMS system for the delivery and tracking of all
online training. Standard LMS reporting will be provided to internal Syneos Health leadership and
Client for communication of training completion and verification of required compliance training.
The LMS can contain a combination of Syneos Health and Client-created content to enable its use
across all product, selling skills, soft skills, and compliance training and service as a central
repository for all training records.
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Standard LMS Service Levels are indicated in the below table:
Standard SLA Agreement - Content Load*
Task/Request
Simple PDF Load
Simple SCORM Load
Simple Assessment
Registrations/Assignments for existing activities and
users
Add Additional users (upon notice)
Transcripts
Complex Assessment
Complex Course with Assessment
High Stakes/Large Assessment
3.13 Quality Management and Assurance
Timeline
1-2 days
2-4 days
2-3 days
24 hours
End of next business
day
24 hours
3-5 days
5-7 days
5-7 days
3.13.1 Quality Management System (QMS). All Client implementations are managed via an
approved set of Standard Operating Procedures (SOPs) which are part of Syneos Health’s Quality
Management System (QMS) under the Head of Quality Assurance. Key processes such as project
governance, document control, CRM implementation and training are required for assigned
operations personnel. Other SOPs such as Change Control, security and access control, asset
provisioning, and CRM end-user training are additional required training for implementation
teams, which are also delivered and tracked within Syneos Health’s Learning Management System
(LMS).
3.13.2 System Validation (Sampling Only). When required by sampling, formal Computer System
Validation (CSV) is conducted by professional validation resources following Syneos Health’s
System Validation SOP. The work is driven by the approved Configuration Requirements
Document (CRD), and includes a Validation Plan, Operational Qualification, Performance
Qualification, Test Evidence (typically screen shots), Deviation Reports, Traceability Matrix and a
Validation Summary Report.
3.14
Field Trigger Email with Veeva Engage
3.14.1 Field Trigger Email with Veeva Engage. Syneos Health will provide field-trigger email
follow-up to HCPs to reinforce key messages in the Call and distribute the Prescribing
Information. Syneos Health leverages Veeva’s approved email capabilities to ensure
compliance and a controlled environment
the HCP
communication. Approved content for email templates may be stored in the Syneos Health
Veeva Vault or the Client’s internal Veeva Vault (if applicable) and linked with the CRM
Client Configuration. The solution will also include Veeva Engage to deliver built in virtual
voice and video capabilities in a single solution for the field teams.
integrity of
to protect
the
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4.0
Operations Services Termination and Data/System Conversion
Syneos Health will retain all documented business requirements, system configurations, and data collected
during the term of the Project Agreement. If the Client wishes to convert the field team pursuant to the Project
Agreement, Client may have the option to continue on with Syneos Health-provided operations services to limit
the disruption of field operations and leverage custom built systems, business rules and data integration. In such a
case, a separate agreement will be established to confirm the scope and fees for any stand-alone operations
services required. Alternatively, the parties may agree to convert the pre-built CRM configuration utilized for
Client, for a fee mutually agreed to by the parties, to cover the migration of data, requirements documentation, and
transfer of CRM configuration ownership, training on Client configuration settings and administration, as well as
the Project management of the operations conversion, all to ensure a successful migration. Additionally, if the
Client does not want to migrate the Syneos Health CRM configuration, the option may be made for Syneos Health
to transfer Client data, business rules documentation, current data production schedules, and custom reporting
formats for a fee mutually agreed to by the parties. If Syneos Health provides any migration or materials, Client is
solely responsible for the system knowledge and performance post-conversion. Syneos Health may provide
additional services based on the standard rates provided in the Change Control 3.1.1(d) of this Exhibit A-1.
[Remainder of Page Intentionally Left Blank]
Syneos Health Project Code: 7007244
Page 36
AMENDMENT AND RESTATED
EXHIBIT F
COMPENSATION - FIXED FEES, VARIABLE FEES AND PASS-THROUGH COSTS
I.
FIXED FEES
The Fixed Fees provided in this Exhibit F are based on per position headcount as follows:
Position
Project Team
Sales Representatives
RS Reps
RSM
NSD
Headcount
[***]
[***]
[***]
[***]
The Fixed Fees will be proportionally modified based on the final headcount.
(a)
Implementation Fee
(i)
Client has paid, or shall pay, [***] pursuant to the Initial Service Agreement (the “ISA”) by
and between Client and Syneos Health dated as of March 30, 2020, which will be applied as a credit
against the Implementation Fee invoice.
(ii)
Client shall pay Syneos Health an Implementation Fee of [***] associated with performance
of the Services for the Project Team.
(b)
Fixed Monthly Fees
(i)
Commencing on the Project Team Hire Date, Client shall pay Syneos Health a Fixed
Monthly Fee as follows:
PERIOD
Year One
Year Two
PROJECT TEAM
FIXED MONTHLY
FEE
[***]
[***]
Syneos Health shall adjust the Fixed Monthly Fee prior to the initial fill of any Syneos Health Sales
Representative or RSM, prorated for any partial months, according to the Fixed Monthly Fee table outlined in
subsection (c)(i), below.
The Implementation Fee and/or Fixed Monthly Fee set forth above are based upon the assumptions set
forth in the recruitment/training timeline agrees to by the Parties. In the event that the assumptions set forth in the
recruitment/training timeline are changed, the
Syneos Health Project Code: 7007244
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Implementation Fee and/or Fixed Monthly Fee shall be re-calculated and agreed-upon by the Parties.
(c)
Scale Up/Down
(i)
Client may increase the number of Representatives, RS Reps, or RSMs above the number
outlined in Exhibit A (a “Scale Up”) upon written notification to Syneos Health. In the event of a Scale
Up, Client shall pay to Syneos Health an additional Implementation Fee and Fixed Monthly Fee as
follows:
Position
Per Representative
Per RS Rep
Per RSM
Implementation Fee
[***]
[***]
[***]
Position
Per Representative
Per RS Rep
Per RSM
Fixed Monthly Fee
(Year One)
[***]
[***]
[***]
Fixed Monthly
Fee
(Year Two)
[***]
[***]
[***]
(ii)
Client may decrease the number of Representatives, SR. Reps, Telesolutions Agents or
DMs below the number outlined in Exhibit A (a “Scale Down”) upon [***] prior written notice to Syneos
Health; provided, however, that the Client may not perform a Scale Down prior to the [***] anniversary of
the Deployment Date. In the event of a Scale Down, Syneos Health shall reduce the Fixed Monthly Fee as
follows:
Position
Per Representative
Per RS Rep
Per RSM
Fixed Monthly
Fee
(Year Two)
[***]
[***]
[***]
(iii)
Up/Scale Down.
The Parties shall meet to agree upon Project Team composition in the event of a Scale
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(d)
Salary Reconciliation
The parties agree that the Fixed Monthly Fees set forth in Section I(b), above, are based on the
annual salary per the below table (the “Annual Salary”).
Position
Per Representative
Per RS Rep
Per RSM
Salary
(Year One)
[***]
[***]
[***]
Salary
(Year Two)
[***]
[***]
[***]
Syneos Health and Client will reconcile actual salaries and payroll taxes at [***] (pricing assumption),
excluding incentive compensation, measured by actual days worked, for each Syneos Health Sales Representative
and RSM in such calendar month against an amount equal to the appropriate percentage of the Annual Salary.
The parties agree that the Annual Salary does not include incentive compensation for the Syneos Health Sales
Representatives or RSM (plus the applicable employer portion of taxes). If any review shows that Syneos
Health’s actual annual salary per Syneos Health Sales Representative or RSM is below the Annual Salary, then
Syneos Health shall issue a credit for the entire amount of such difference to Client. If any review shows that
Syneos Health’s actual salary per Syneos Health Sales Representative or RSM is above the Annual Salary, then
Syneos Health shall bill the difference to Client.
(e)
Vacancy Credit
Syneos Health agrees to fill vacant territories as requested by Client. Syneos Health will continue
to invoice Client the amounts set forth above as Fixed Monthly Fee during any such vacancy period. Syneos
Health will provide a monthly credit to Client, prorated for the number of business days per month that a territory
is vacant, for each vacant territory, including leaves of absence lasting longer than [***], until such territory is
filled, as set forth in the following table:
Monthly Vacancy
Credit*
Per Representative
Per RS Rep
Per RSM
Year One
[***]
[***]
[***]
* Within the month a territory becomes vacant.
Monthly Vacancy
Credit*
Per Representative
Per SR. Rep
Per RSM
*
Subsequent months of vacancy.
Year One
[***]
[***]
[***]
Year Two
[***]
[***]
[***]
Year Two
[***]
[***]
[***]
Syneos Health Project Code: 7007244
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(f)
Backfill Recruiting
Client agrees to pay Syneos Health a fee, per the table below, for recruiting and onboarding costs
associated with any backfill for a vacant territory, provided that Client shall only pay such fee in the event that
such territory becomes vacant [***] after the applicable hire date.
Position
Per Sales Representative
Per RS Rep
Per RSM
Backfill
Recruiting Fee
[***]
[***]
[***]
II.
VARIABLE FEES
(i)
Client shall pay Syneos Health the following monthly fees per Client employee receiving
operations support (Veeva and LMS Licenses) commencing on the date a Client employee is provided
such support.
Position
Veeva License Only Per Client User
LMS License Only Per Client User
Monthly Fee
(Year One)
[***]
[***]
Monthly Fee
(Year Two)
[***]
[***]
(ii)
Client shall pay Syneos Health an annual fee of [***] for each Client employee to have
access to a list of Client programs on the LMS System (same environment as the Syneos Health Project
Team – i.e., no customization per view set-up) commencing on the date a Client employee is provided
such support.
(iii)
Team as incurred.
Syneos Health shall invoice Client the following Variable Fees associated with the Project
Additional Services
Variable Fee
Phone Append Access (up to 13,000 Records)
Phone Append Access, per Record (After 13,000 Records)
Phone Append Transfer (up to 650 Records)
Phone Append Transfer, per Record (After 650 Records)
Outbound Fax, per page
E-mail, each
[***]
[***]
[***]
[***]
[***]
[***]
Syneos Health Project Code: 7007244
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III.
PASS-THROUGH COSTS
In addition to the Fixed Fees, certain expenses will be charged to Client on a pass-through basis. These
expenses will be billed to Client at actual cost. Pass-through costs include:
-
Incentive compensation payments for the Syneos Health Sales Representatives, RSMs and NSD(plus
applicable employer portion of taxes at [***])
Sales TRx data and any third party data acquisition expenses
Syneos Health Sales Representative product storage units
- Travel expenses (e.g. transportation, lodging, meals etc.)
- Costs for all meetings, including but not limited to POA Meetings
- Marketing expenses and costs (e.g. Lunch & Learns, etc.)
-
-
- Data plan overages
-
- Business cards
- Managers’ severance
- Licensing and credentialing expenses
-
- Other expenses which have been approved by Client
- Costs associated with Project Team Protective Equipment (PPE)
Shipping, freight, and postage of samples (if incurred)
Interview expenses (including turnover recruiting)
IV.
INCENTIVE FEES
(a)
Included in the Fixed Monthly Fees (set forth in Section I(b)(i), above) is Syneos Health’s
management fee, a portion of which (the “Incentive Fee”) is subject to Syneos Health’s achievement of certain
performance objectives (the “Performance Objectives”) which will be mutually agreed upon by the Parties.
(b)
The monthly Incentive Fee for the annual period from the Deployment Date through the end of
Year One is equal to [***] and the monthly Incentive Fee during Year Two is equal to [***].
(c)
In the event of a Scale Up or Scale Down, the monthly Incentive Fee shall be adjusted by [***] per
Syneos Health Sales Representative from the Deployment Date through the end of Year One, and [***] per Syneos
Health Sales Representative during Year Two.
(d)
In the event of termination of this Project Agreement by the Client, effective as of the date of
notification of such termination from the Client, the Performance Objectives shall no longer be applicable and the
outstanding incentive fees will be earned at [***]; unless Project Agreement is terminated due to material breach
by Syneos Health in accordance with Section 12(ii) of the MSA.
Syneos Health Project Code: 7007244
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V.
SERVICE CREDITS
Syneos Health shall issue to Client annual service credits of [***] per Syneos Health Sales Representative
(estimated to be [***] in Year One and [***] in Year Two). Credits shall be earned at a rate of [***] per month per
Syneos Health Sales Representative territory, for which a fee has been paid, commencing on the Deployment
Date. Client may use all expected credits at any time during the Term and shall repay Syneos Health at the end of
the Term for any credits used, but never accrued. The service credits shall be used to purchase additional services
from Syneos Health’s Affiliates. The term Affiliate means, with respect to any entity, any other entity directly or
indirectly, through one or more intermediaries, controlling, controlled by or under common control with such
entity. As used in this definition, the term “control” (including “controlled by” or “under common control with”)
means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of an entity, whether through ownership of voting securities, as trustee, by contract or otherwise. For
purposes of clarity, Client shall not be permitted to apply the credits against any of the fees or costs associated
with Services provided under this Work Order or any others services provided by Syneos Health, it being
understood that the credits are applicable only for services provided by a Syneos Health Affiliate. The credits shall
be valid until expiration or termination of this Work Order. Syneos Health shall not provide any form of refund,
rebate or any other form of monetary incentive to Client in lieu of the credits.
VI.
INVOICES; BILLING TERMS
The Implementation Fees outlined in Section I(a), above, shall be invoiced to Client upon execution of the
Project Agreement. [***] of Sales Team Fixed Monthly Fee and [***] of Agents Fixed Monthly Fee (the
“Advanced Fees”) shall be paid by Client to Syneos Health which will be invoiced to the Client [***] prior to the
sales representative hire date. The Advanced Fees shall be held as a deposit and credited to Client upon expiration
or termination of the Project Agreement. Thereafter, commencing on the Project Team Hire Date, Client will be
billed monthly in advance the amounts stated above as the Fixed Monthly Fees. Pass-through Costs will be billed
to Client at actual cost as incurred by Syneos Health.
Invoices are due in accordance with Section 5 of the MSA. All invoices shall include the following:
- A/P Email
- A/P Telephone
- A/P Mailing Address
- A/P E-invoice System
- Other Contacts to be Included on Submission of Invoice
- Accountant
Syneos Health Project Code: 7007244
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Payment to Syneos Health may be made by the following method:
- ACH Payment (Preferred Method)
[***]
ACH # [***]
Account # [***]
Advice transmittals should be directed to [***].
In the event Client will be issuing purchase orders for payment of Syneos Health invoices, Client shall
issue such purchase orders within [***] following the execution of this Project Agreement. A purchase order shall
include the following:
-
-
-
-
PO Number
PO Contact Name
PO Contact E-mail
PO Contact Telephone
Purchase Orders should be directed to [***].
The Parties understand and agree that all terms and conditions set forth in a purchase order are null and
void, it being understood and agreed that this Project Agreement provides the terms and conditions governing the
relationship between the Parties.
Syneos Health Project Code: 7007244
Page 43
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements:
(1) Registration Statement (Form S-8 No. 333-199441), pertaining to the Agile Therapeutics, Inc. 2014 Incentive
Compensation Plan,
(2) Registration Statement (Form S-8 No. 333-205116), pertaining to Agile Therapeutics, Inc. 2014 Incentive
Compensation Plan,
(3) Registration Statement (Form S-8 No. 333-210045), pertaining to Agile Therapeutics, Inc. 2014 Incentive
Compensation Plan,
(4) Registration Statement (Form S-8 No. 333-217807), pertaining to Agile Therapeutics Inc. 2014 Incentive
Compensation Plan,
(5) Registration Statement (Form S-8 No. 333-228151), pertaining to Agile Therapeutics, Inc. Amended and Restated
2014 Incentive Compensation Plan,
(6) Registration Statement (Form S-8 No. 333-232989) pertaining to Agile Therapeutics, Inc. Amended and Restated 2014
Incentive Compensation Plan (filed on August 2, 2019), and
(7)
Registration Statement (Form S-3 No. 333-249273) of Agile Therapeutics, Inc.
of our report dated March 1, 2021, with respect to the financial statements of Agile Therapeutics, Inc., included in this Annual Report
(Form 10-K) of Agile Therapeutics, Inc. for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Iselin, New Jersey
March 1, 2021
Exhibit 31.1
CERTIFICATION OF PERIODIC REPORT
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alfred Altomari, certify that:
1. I have reviewed this Annual Report on Form 10-K of Agile Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 1, 2021
/s/ ALFRED ALTOMARI
Alfred Altomari
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PERIODIC REPORT PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Dennis P. Reilly, certify that:
1. I have reviewed this Annual Report on Form 10-K of Agile Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 1, 2021
/s/ DENNIS P. REILLY
Dennis P. Reilly
Chief Financial Officer
(Principal Financial Officer)
STATEMENT OF CHIEF EXECUTIVE OFFICER OF
AGILE THERAPEUTICS, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Agile Therapeutics, Inc. (the “Company”) on Form 10-K for the year ended December 31,
2020 as filed with the Securities and Exchange Commission (the “Report”), I, Alfred Altomari, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 1, 2021
/s/ ALFRED ALTOMARI
Alfred Altomari
Chief Executive Officer
(Principal Executive Officer)
STATEMENT OF CHIEF ACCOUNTING OFFICER OF
AGILE THERAPEUTICS, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Agile Therapeutics, Inc. (the “Company”) on Form 10-K for the year ended December 31,
2020 as filed with the Securities and Exchange Commission (the “Report”), I, Dennis P. Reilly, Chief Accounting Officer of the
Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, based on my
knowledge:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: March 1, 2021
/s/ DENNIS P. REILLY
Dennis P. Reilly
Chief Financial Officer
(Principal Financial Officer)