Evofem Biosciences shares have been on fire and show no signs of cooling off. And that’s excellent news for those already long the stock. But, good fortunes for those paying attention to this under-the-radar opportunity are expected to continue. And with the bullish sentiment into last week’s close, newbies to the stock may want to grab a position.
Why? Because from an operational, financial, and legislative perspective, EVFM has never looked better positioned for near and long-term growth. With that the case, and despite its more than 185% surge since June, EVFM still presents an investment opportunity that could be too good to ignore.
That’s not an overly optimistic assessment, either. The business and legislative climate have exposed EVFM as an undiscovered, or at the very least, an unpolished and undervalued gem. While its stock price is up, so are the numbers of reasons supporting the bullish run. Surging revenues, lower operating costs, and the Supreme Court striking down Roe v. Wade are several. But, there’s plenty more to like about this NASDAQ traded company. And trading volume indicates plenty of investors are taking notice of and advantage of what could be an appreciably undervalued investment opportunity. Their timing is right.
Work over the past several quarters, along with some legislative changes, has positioned EVFM to transform itself from having a single FDA-approved and commercialized product into a potential revenue-generating juggernaut. Actually, the Supreme Court decision, an expected topline data read from its Phase 3 EVOGUARD trial in October, and having the cash on hand to expedite additional product commercialization, could add a multiple to that already bullish expectation. That’s not all attracting the EVFM bulls.
Bullish guidance from management about the back half of 2022 is also perking up ears and opening investment wallets. Perhaps rightfully so. They suggested that revenues are in line to score a 325% increase over last year, which makes taking advantage of EVFM share prices at current levels more than just an attractive proposition; it’s timely. Remember, too, there’s a near-term catalyst in play as well.
A Deserved Rally On Several Fronts
Indeed, Evofem shares’ rally started after the June Supreme Court decision. But make no mistake, EVFM wasn’t included in its sector rally on sympathy; they have the products, cash, and management to justify its run. Moreover, with many considering their Phexxi product a best-in-class option that could score tremendous new indication interest and resulting sales, EVFM has the unique ability to blaze its own trail. Product data and consumer opinion support that sentiment.
Unlike most competing products, Phexxi is a non-hormonal gel birth-control product that reduces sperm mobility by controlling pH levels. It has a four-year shelf life and is convenient by only needing to be used before sex. Now, while some market analysts were suggesting that many contraceptive providers would be hurt by the decision before its being made, most have reversed course, suggesting that demand for such products as Phexxi may reach a fever pitch. Of course, that type of thinking makes sense as contraception is a means to alleviate unwanted pregnancy concerns. But, it’s still not that simple, and not all companies in the sector enjoy the same positive attention as Evofem. That’s understandable.
Evofem has done what many others can’t, earning its product-preferred status by developing and commercializing innovative products to address unmet needs in women’s sexual and reproductive health. That includes hormone-free, woman-controlled contraception and protection from chlamydia and gonorrhea.
Keep in mind that EVFM is already commercializing products, with Phexxi its first FDA-approved hormone-free, on-demand prescription contraceptive vaginal gel. The differences are its advantages. Foremost, it’s not a pill and is used only before sexual activity. Moreover, it’s easy to use.
Phexxi users utilize the pre-filled applicator 0-60 minutes before sex. It’s that easy and about 93% successful when used correctly. If not, Phexxi boasts 86% success in stopping pregnancies. But that’s not the whole story. The most significant advantage to Phexxi is being hormone-free, which is a reason for its jump in popularity.
Furthermore, a 48-month shelf life doesn’t hurt the marketing teams’ chances of placement. Instead, sales growth has been impressive, with guidance into the back half of 2022 suggesting sales could generate record numbers. And the clues to that happening are published.
A Surge In Comparative Revenue, More In The Pipeline
Evofem reported consecutive quarterly revenue growth of 42% for Phexxi. While significant, higher revenues are expected in this year’s back half. In fact, EVFM guidance is decidedly bullish, expecting its fiscal year 2022 net product sales to reach between $30 million to $35 million. Compared to last year, scoring the top end of the range would give EVFM a more than 325% jump in revenues compared to 2021. But keep in mind that there are more value drivers expected.
Along with expected revenue growth, EVFM announced strengthening margins and a sharp reduction in operating costs. By the way, those cost reductions are significant, and the company announced being on track to meet its goal of reducing costs by $50 million in 2022. So far, they reported cutting operating expenses by $25.3 million compared to last year’s comparable. That’s not all.
As noted, Evofem Biosciences has more revenue-generating firepower expected to come online. The company announced completing its registrational Phase 3 EVOGUARD trial evaluating Phexxi to prevent chlamydia and gonorrhea. The more excellent news is that topline data on that study is expected in October, which puts a potential near-term catalyst into play. Market opportunities treating those indications are significant, with chlamydia and gonorrhea the most commonly reported sexually transmitted infections (STIs) in the United States.
Reports show that in 2018, 1,758,668 cases of chlamydia and 583,405 cases of gonorrhea were reported. That’s a lot of opportunities, and it’s in play, noting that if the conditions are left untreated, the infections can lead to adverse health outcomes, including pelvic inflammatory disease, infertility, and ectopic pregnancy in women and epididymitis in men. The dollar market potential is enormous.
Chlamydia is expected to present a more than $12 billion market opportunity, increasing at a 10% CAGR. The combined Global STD Diagnostics Market is expected to reach $186 Billion by 2027. Thus, Evofem is in the right markets at the right time. More importantly, they appear to have the right products to meet the demand for a better class of hormone-free treatment options.
Most important to any growth story, Evofem Biosciences has the cash to accelerate the commercialization of an approved EVOGUARD study-produced Phexxi.
Cash On Hand To Target New Treatment Indications
In fact, if results from its Phase 3 EVOGUARD trial post as expected, Evofems’s more than $19 million of unrestricted cash could help commercialize and monetize targeted indications sooner than later. If so, even its own bullish guidance could prove conservative. Remember, Evofem isn’t looking to treat symptoms only. The topline data expected in October 2022 from its registrational Phase 3 EVOGUARD clinical trial evaluating Phexxi for two potential new indications – prevention of chlamydia and prevention of gonorrhea in women.
So, while its 42% Q2 revenue jump to $6 million on a sequential basis is impressive, the better news may be that its trend-line and guidance indicate higher sales, lower operating costs, and increasing demand without the known outcome of its October readout. Results could differ materially, to the upside, on a positive readout. Better still, the downside may be mitigated if endpoints get missed, with Phexxi sales continuing to gain market traction and new user adoption.
Hence, is there a perfect storm of opportunity brewing at Evofem Biosciences? Indicators say yes. And best of all, those indicators are justified by operating and product performance. And better yet, with a likely increase in contraceptive practices and government programs expected to help subsidize the cost, EVFM may ride a bullish tide of being in a sector that is staring down billions in market opportunity.
The world didn’t change after Roe v. Wade, but perceptions have. And with that, potentially billions more people may need what Evofem Biosciences is selling. If so, and early indicators show that’s the case, the EVFM bulls could be in for a heckuva ride in 2022-23.
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