VXF - Evofem Biosciences: An Evaluation

• Today, we take a deeper look at a birth control biopharma concern called Evofem Biosciences, Inc. whose shares have plummeted to a buck a piece.
• Its flagship product Phexxi is seeing impressive revenue growth and has seen some positive news flow of late as well.
• An investment analysis follows in the paragraphs below.

While money can't buy happiness, it certainly lets you choose your own form of misery .”? Groucho Marx

Today, we take a look at a small biopharma concern that comes up from time to time in comments from Seeking Alpha followers. The company has also been in the news lately. The shares have been in a long term swoon and the stock is basically a one buck " lottery ticket" at the moment. Is the equity worth a small bet? An analysis follows below.

Company Overview:

Evofem Biosciences, Inc. ( EVFM ) is based in San Diego. The company is focused on developing and commercializing various products to address unmet needs in women's sexual and reproductive health. The company has one approved product on the market called Phexxi, which is a vaginal gel for the prevention of pregnancy. The product was approved for this indication in the summer of 2020.

The company is also working on developing Phexxi for the prevention of urogenital transmission of Chlamydia trachomatis infection and Neisseria gonorrhoeae infection in women. The company should post top-line data from a Phase 3 study "EVOGUARD" for the prevention of chlamydia and gonorrhea in the second half of 2022. Currently the stock sells for just over a $1.00 a share and sports an approximate market capitalization of $35 million.

First Quarter Results:

On May 4th, Evofem posted first quarter results. The company had net sales of some $4.3 million, up nearly 300% from the same period a year ago. Sales of Phexxi were up 19% sequentially from the fourth quarter of 2021. Total operating expenses decreased 19% to $33.2 million in the quarter from $41 million in the fourth quarter of last year. Net operating loss fell for the third straight quarter as well, but still came in at a whopping $28.9 million.

In early June, the FDA extended the shelf life of Phexxi from three to four years. Phexxi also recently picked up a nice patent win and also inked an agreement with one of the largest pharmacy benefit managers to cover the product. This agreement will get Phexxi into the company's national template formularies with no restrictions. Finally, the company posted encouraging post study analysis of its phase 3 trial around Phexxi that showed the product prevented 99% of all pregnancies.

Analyst Commentary & Balance Sheet:

Since first quarter results posted, Stifel Nicolaus ($3 price target) and Piper Sandler ($2 price target) have reissued their Buy ratings on the stock while Laidlaw initiated the shares as a new Buy with a $3.50 price target. Morgan Stanley maintained its Sell rating and $2 price target on EVFM.

Nearly six percent of the outstanding float is currently held short. The CEO bought nearly $50,000 worth of shares on May 27th. That is the only insider activity in the shares so far in 2022. The company ended the first quarter with 2.8 million in unrestricted cash and $4.2 million in restricted cash. Evofem in late May then raised $26.6 million via a secondary offering. The price of the capital raise was steep as it included 12.835 million pre-funded warrants (at 75 cents a piece) to purchase common stock in lieu of common stock to certain investors and warrants to purchase up to 71 million shares of its common stock.

Verdict:

The current analyst consensus has Evofem posting a large loss this year even as revenues nearly quadruple to over $31 million. Next year they expect a loss north of $1.10 a share as sales rise to $67 million. It should be noted there are a wide range of sales estimates (roughly $40 million to $90 million) for FY2023.

Currently the stock trades at approximately 50% of the consensus revenues for FY2023. This seems cheap on the surface. The stock sells for near the amount of cash it just raised via secondary offering as well. The recent overturning of Roe Vs. Wade has put birth control names in the spotlight. There are myriad competitors in this sector. The company has been trying to find a marketing partner to distribute Phexxi in Europe and Asia for more than a year, but to this point has been unsuccessful in that endeavor.

Unfortunately, Evofem looks headed for substantial losses over at least the next two years. Another dilutive capital raise is also likely to be out there somewhere on the horizon. The company also recently announced a 15 to 1 reverse stock split. Add in the company's long history of destroying shareholder value (see above), and it is hard to get excited about the stock's future even at a buck a piece.

You can be young without money, but you can't be old without it .”? Tennessee Williams

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