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Evofem Biosciences Phase 3 EVOGUARD Trial Puts October Catalyst In Play, Here’s Why Investors Are Paying Attention ($EVFM)

Evofem Biosciences Phase 3 EVOGUARD Trial Puts October Catalyst In Play, Here's Why Investors Are Paying Attention ($EVFM)

Evofem Biosciences (NASDAQ: EVFM) shares are giving back a portion of its massive 185% surge since June, but once profit taking subsides, and it always does, EVFM prices may settle at a level too good to ignore. Remember, even with the pullback, EVFM shares are still significantly higher since June. And the reasons that inspired that jump are still very much in play. Actually, from an operational, financial, and legislative perspective, EVFM is better positioned today for potentially exponential growth than at any time in its history. 

That's not an overly exuberant presumption. Considering the business, personal health, and legislative climate, EVFM is positioned well to transform from an expected $30 million revenue-generating company into one posting upwards of $100 million in the next 24 months. That's an expectation shared by many of the EVFM bulls. But it's not only the investor community that's voicing optimism. 

Evofem believes that a positive readout of topline data from its Phase 3 EVOGUARD trial in October could be a catalyst of significant value. And with the cash on hand to expedite additional product commercialization to target two new indications for its flagship product, Phexxi, investors and the company may be proven right. 

And remember, EVFM isn't hanging all its hopes on a positive read from its EVOGUARD trial. While it would potentially add significantly to revenues, without it, EVFM is still expecting revenues to score a 325% increase over last year. That makes taking advantage of EVFM share prices at current levels more than just an attractive proposition; it's timely.

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Opportunity Exposed With Market Pullback

Yes, the rally in Evofem shares' started after the June Supreme Court decision. But make no mistake, EVFM earned its gains, having the products, cash, and management to justify its run. In fact, with many considering their Phexxi product a best-in-class women's health option that could score tremendous new indication interest and resulting sales, the recent surge in price may be the precursor of better things to come. Product data and consumer opinion support that sentiment.

The biggest attraction to Phexxi is that it's different. And it's a difference that's an advantage. Unlike many competing products, Phexxi is a non-hormonal gel formulation that reduces sperm mobility by controlling pH levels. Its unique formulation is helping it earn product-preferred status by addressing women's health decisions conveniently without the sometimes harmful effects of daily hormone intake. Actually, Phexxi's differences are what's driving consumer interest.

Foremost, it's not a pill and doesn't need to be taken daily. Moreover, when used correctly, Phexxi boasts a 93% efficacy. And the biggest attraction to the product appears to be that it's hormone-free, a significant difference and a compelling reason for its jump in popularity. Furthermore, a 48-month shelf life doesn't hurt the marketing teams' chances of placement. Instead, the sum of its parts has made sales growth impressive, with guidance into the back half of 2022 suggesting sales could generate record numbers. And the clues to that happening are published.

Revenues Surge, More Pipeline Growth Expected

Evofem just reported consecutive quarterly revenue growth of 42% for Phexxi. While significant, higher revenues are expected at the back end of this year. In fact, EVFM guidance is decidedly bullish, saying it expects fiscal year 2022 net product sales to reach at least $30 million and perhaps reach its stretch goal of $35 million. Compared to last year, reaching that stretch level would give EVFM a more than 325% jump in comparative period revenues. But that's not all driving value. 

In addition to expected revenue growth, EVFM announced strengthening margins and a sharp reduction in operating costs. Those cost reductions are significant, with EVFM saying it's 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 same period. That's not all. 

Evofem Biosciences also expects more revenue-generating firepower to come online after completing its registrational Phase 3 EVOGUARD trial evaluating Phexxi to prevent common STIs. The excellent news on that front is that topline data on that study is expected in October, which puts a potential near-term catalyst into play. 

It's a timely one, too, if results publish as expected. Market opportunities treating two new targeted indications are significant, with reports showing that in 2018, over two million cases of Phexxi's targeted infections were reported. Those numbers translate to substantial opportunities, noting that if the conditions are left untreated, they can lead to adverse health outcomes, including pelvic inflammatory disease, infertility, ectopic pregnancy in women, and epididymitis in men. The dollar market potential in play is also substantial, with a combined market opportunity expected to reach upwards of $186 billion by 2027. 

Thus, by all measures, 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 Rich 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 that is the case, even its bullish guidance could prove conservative. Remember, Evofem isn't looking to treat symptoms only; it's hoping to prevent them. 

So, while its 42% Q2 revenue jump to $6 million on a sequential basis is impressive, the better news may be that from a forward-looking perspective, if everything goes to plan, the next revenue leg higher could be potentially exponential on a comparative basis. Indeed, coupled with lower operating costs and increasing demand even before the known outcome of its October readout, EVFM is working from a recipe that could deliver significant near-term increases in shareholder value. And assuming its October trial data is strong, revenue growth into 2023 could be appreciably more substantial. 

Hence, all indicators point to Evofem Biosciences exploiting a perfect storm of opportunities. And that's just the knowns. An approved product through its EVOGUARD trial would put all covering analysts on notice to update their models and generate a price target more consistent with higher forecasted income and prospects for next year. 

Still, while many investors are banking on income from the new indications, the EVFM story is compelling as is. Actually, many investors consider the recent pullback just a pause in what could be a sustained rally. And evaluating the strengthened fundamentals, operational updates, and guidance over the daily ticker, they may very well be right. Thus, even ahead of the October EVOGUARD readout, Evofem Biosciences looks to be a value-based investment opportunity too good to ignore. Perhaps the best course of action, therefore, is not to.


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