Although money cannot buy happiness, it certainly allows you to choose your own form of misery.. ”― Groucho Marx
Today we are looking at a small biopharmaceutical concern that pops up from time to time in comments from Seeking Alpha subscribers. The company has also been in the news lately. Stocks have been in a long-term swoon and the stock is basically a dollar”lottery ticket” at present. Is equity worth a small bet? An analysis follows below.
Evofem Biosciences, Inc. (NASDAQ:EVFM) is based in San Diego. The Company focuses on the development and commercialization of various products to address the unmet sexual and reproductive health needs of women. The company has an approved product in the market called Phexxi, which is a vaginal gel for pregnancy prevention. The product was approved for this indication in the summer of 2020.
The company is also working on the development of Phexxi for the prevention of urogenital transmission of Chlamydia trachomatis infection and Neisseria gonorrhoeae infection in women. The company is expected to release key data from a Phase 3 “EVOGUARD” study for the prevention of chlamydia and gonorrhea in the second half of 2022. Currently, the stock is selling for just over $1.00 per share and has an approximate market capitalization of $35 million. .
First quarter results:
On May 4, Evofem released its first quarter results. The company had net revenue of approximately $4.3 million, up nearly 300% from the same period a year ago. Phexxi sales increased 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 also fell for the third straight quarter, but still hit $28.9 million.
In early June, the FDA extended the shelf life of Phexxi from three to four years. Phexxi also recently won a nice patent and also signed an agreement with one of the biggest pharmaceutical benefit managers to cover the product. This agreement will bring Phexxi into the company’s National Model Forms without any restrictions. Finally, the company published an encouraging post-study analysis of its phase 3 trial around Phexxi which showed that the product prevented 99% of all pregnancies.
Analysts’ comments and review:
Since the Q1 earnings release, Stifel Nicolaus ($3 price target) and Piper Sandler ($2 price target) have reissued their buy ratings on the stock while Laidlaw has launched the stock as as a new buy with a price target of $3.50. 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 stock on May 27. This is the only insider activity in stocks so far in 2022. The company ended the first quarter with $2.8 million in unrestricted cash and $4.2 million in restricted cash. limitations. At the end of May, Evofem then raised $26.6 million via a secondary offering. The price of the capital increase was high as it included 12.835 million pre-funded warrants (at 75 cents each) to purchase common stock in lieu of common stock from certain investors and warrants to purchase up to 71 million common shares.
According to the current analyst consensus, Evofem is posting a significant loss this year, even as revenue nearly quadrupled to more than $31 million. Next year, they expect a loss north of $1.10 per share as sales hit $67 million. It should be noted that there is a wide range of sales estimates (approximately $40-90 million) for fiscal year 2023.
Currently, the stock is trading at around 50% of consensus earnings for fiscal year 2023. That looks cheap on the surface. The stock is also selling for roughly the amount of money it just raised via a secondary offering. The recent reversal of Roe Vs. Wade put birth control names in the spotlight. There are a myriad of competitors in this industry. The company has been trying to find a marketing partner to distribute Phexxi in Europe and Asia for over a year, but so far this venture has failed.
Unfortunately, Evofem appears to be heading for substantial losses over the next couple of years at least. Another dilutive capital raise is also likely to be somewhere on the horizon. The company also recently announced a 15-to-1 stock split. Add to that the company’s long history of destroying shareholder value (see above), and it’s hard to get excited about the future of the action, even at a dollar apiece.
You can be young without money, but you can’t be old without money. » Tennessee Williams