Femasys Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; filed November 12, 2021. Femasys is a women’s-health biomedical company focused on reproductive health. FemVue is approved and generates sales; FemBloc and FemaSeed are in clinical development.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Sales | $269,581 | $313,208 | $925,362 | $756,954 |
| Gross margin | $164,178 (60.9%) | $222,773 (71.1%) | $619,290 (66.9%) | $538,056 (71.1%) |
| Operating expenses | $2,415,623 | $1,787,650 | $6,598,358 | $5,806,734 |
| Operating loss | $(2,251,445) | $(1,564,877) | $(5,979,068) | $(5,268,678) |
| Net loss | $(2,259,701) | $(1,568,295) | $(5,172,992) | $(5,255,473) |
| Basic and diluted loss per share | $(0.19) | $(1.64) | $(1.04) | $(5.50) |
- Cash and liquidity: Cash and cash equivalents were $27.28 million at September 30, 2021, versus $3.32 million at December 31, 2020. Current assets were $28.33 million and current liabilities $1.82 million. Management said available cash was expected to fund operations through at least 2022 and for at least one year after issuance of the financial statements.
- Cash flow, nine months: $5.68 million used in operations; $188,245 used in investing; $29.83 million provided by financing. Cash increased by $23.96 million.
- Debt and other liabilities: $320,866 of notes payable was current, mainly insurance-premium financing; no long-term notes payable remained. Total liabilities were $2.51 million, including lease liabilities and clinical holdbacks. The PPP loan was forgiven.
- Accumulated deficit: $80.38 million at September 30, 2021. The company reported no income tax expense and paid no dividends.
Material changes versus comparable periods
- Q3 sales fell 13.9% year over year, primarily because U.S. unit sales declined after a pandemic-related rebound in Q3 2020; international sales were unchanged at $58,045.
- Nine-month sales rose 22.2%, with U.S. sales up 17.6% and international sales up 47.2%, reflecting recovery from pandemic-affected 2020 comparisons.
- Gross margin percentage declined to 60.9% in Q3 and 66.9% year to date from 71.1% in both 2020 comparisons. Management attributed pressure to production inefficiencies among recently hired staff and, year to date, international sales mix.
- Q3 operating expenses increased 35.1%; general and administrative expense rose 82.2%, largely due to public-company professional costs. Year-to-date operating expenses increased 13.6%, with higher G&A partly offset by lower R&D and sales and marketing costs.
- Year-to-date net loss improved slightly, but included $821,515 of PPP loan forgiveness income. Excluding that unusual income, operating results remain loss-making.
- The June 2021 IPO issued 2.65 million shares at $13 per share, and preferred shares converted into common stock. The filing reports differing IPO net-proceeds figures in its disclosures; see investor verification items below.
Outlook, commentary and risks
- Management expects losses to increase over the next few years as FemBloc and FemaSeed advance through clinical development. It says current cash will not fund all product candidates through regulatory approval and anticipates needing additional capital.
- FemBloc was completing a validation study under an FDA-approved IDE. FemaSeed received FDA IDE approval in April 2021 and its clinical study began in July 2021. Regulatory approval, successful trials, commercialization and market acceptance are not assured.
- Management expects manufacturing efficiency and planned equipment automation to improve gross margins; this is a forward-looking expectation, not a reported outcome.
- Risks include the need and ability to obtain future financing on acceptable terms, clinical and regulatory uncertainty, commercialization and reimbursement, manufacturing execution, competition, and potential COVID-19 effects. If financing is unavailable, the company says it may delay or curtail development or seek collaborations on terms that could require relinquishing rights.
- The SBA may audit the forgiven PPP loan for an indefinite period. The filing reported no material legal contingencies requiring accrual or disclosure. Management assessed disclosure controls as effective at a reasonable-assurance level and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the IPO proceeds disclosures: the notes report net proceeds of $31.61 million, while the cash-flow discussion gives $30.03 million and the cash-flow statement separately lists issuance proceeds and offering-cost payments.
- Track operating cash burn, remaining cash runway, and whether additional financing is required before clinical or regulatory milestones.
- Monitor FemBloc validation and FemaSeed clinical progress, trial costs, and FDA timelines.
- Assess whether FemVue sales recover and whether production improvements deliver the expected gross-margin gains.
- Review the impact of the $821,515 PPP forgiveness income when comparing reported net loss across periods.