Evofem Biosciences (NASDAQ: EVFM, $EVFM) 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 consider taking 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 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 for potentially exponential growth. Better still, the recent 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, are adding fuel to that bullish presumption. But 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.
Video Link: https://www.youtube.com/embed/wg12AQY93z4
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 formulation that reduces sperm mobility by controlling pH levels. Its unique makeup is earning product-preferred status by developing and commercializing an innovative product approach to address women's health decisions conveniently without potential effects from daily hormone intake. Actually, Phexxi's differences are its advantages.
Foremost, it's not a pill and doesn't need to be taken daily. Moreover, when used correctly, Phexxi boasts a 93% efficacy. And remember, the biggest attraction to the product is that it's hormone-free, which is a significant 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 same period. 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 common STIs. The more excellent news is that topline data on that study is expected in October, which puts a potential near-term catalyst into play.
By the way, market opportunities treating those 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 is enormous, with a combined target market opportunity 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; 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 its trend-line, and guidance, indicate higher sales, lower operating costs, and increasing demand even before the known outcome of its October readout. Thus, results could be appreciably better following a positive readout.
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, which could combine to offer EVFM investors a bullish ride into the back half of 2022. In fact, with perhaps millions more people needing and wanting what Evofem Biosciences is selling, that's a likely proposition. For any company, that's an excellent opportunity to exploit.
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