Femasys Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Femasys is a women’s-health biomedical company. FemVue is its marketed product; FemBloc and FemaSeed remain in clinical and regulatory development.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Sales | $326,006 | $183,234 | $655,781 | $443,746 |
| Gross margin | $218,379 (67.0%) | $127,959 (69.8%) | $455,112 (69.4%) | $315,283 (71.1%) |
| Operating loss | $1,901,075 | $1,483,633 | $3,727,623 | $3,703,801 |
| Net loss | $1,083,059 | $1,485,451 | $2,913,291 | $3,687,178 |
| Net loss per share | $0.52 | $1.55 | $1.89 | $3.86 |
Sales are principally FemVue revenue. Cash and cash equivalents were $29.86 million at June 30, 2021, up from $3.32 million at year-end 2020. Current assets were $31.03 million and current liabilities $2.32 million. Total liabilities were $3.11 million, including $470,556 of current notes payable and $1.02 million of lease liabilities. Stockholders’ equity was $30.88 million; accumulated deficit was $78.12 million.
For the six months, operating cash use was $3.88 million, investing cash use was $12,512, and financing provided $30.43 million. The resulting increase in cash was $26.54 million. The June IPO raised $31.61 million net of underwriting discounts, commissions and legal expenses, according to the notes. Femasys reported that existing cash was expected to fund operations through at least 2022, but not to fund all product candidates through regulatory approval.
Changes versus comparable periods
- Q2 sales grew 77.9%; six-month sales grew 47.8%. Management attributed much of the comparison to lower 2020 sales amid COVID-19. U.S. sales increased, and international sales contributed $57,987 in Q2 2021 versus none in Q2 2020.
- Gross-margin percentage declined year over year, which management attributed to a greater international sales mix, where margins are lower.
- Q2 operating expenses rose 31.5%, driven mainly by higher general and administrative costs, including financing-related professional fees. Six-month operating expenses rose 4.1%; lower R&D and sales and marketing costs partly offset higher G&A costs.
- Q2 and six-month net losses improved, but included $821,515 of income from forgiveness of the PPP loan and accrued interest. Operating loss increased in Q2 and was slightly higher for the six-month period.
Outlook, developments and risks
- Management expects losses to increase as FemBloc and FemaSeed advance through development and says additional capital may be needed. Financing may not be available on acceptable terms; delays or reduced development could result if funding is insufficient.
- FemBloc’s pivotal-trial enrollment was paused following misinterpretation of the FemChec confirmation test and a higher-than-expected number of pregnancies. A small IDE study is evaluating proposed mitigations; resumption or a new pivotal trial depends on FDA action.
- FemaSeed received FDA IDE approval in April 2021, and its clinical study began in July 2021. FemBloc is not FDA-approved for marketing; FemaSeed requires FDA de novo classification before U.S. commercialization.
- COVID-19 had contributed to slower clinical-trial enrollment and could continue to disrupt trials and regulatory timelines. Other principal risks include regulatory uncertainty, product safety and adoption, reimbursement, supplier and sterilization dependence, and the need for additional financing.
- The SBA fully forgave the PPP loan in June 2021; the filing notes the SBA retains an indefinite right to audit it. The filing reported no material legal contingencies requiring accrual or disclosure.
- Management assessed disclosure controls as effective at a reasonable assurance level at June 30, 2021. Separately, the filing describes previously identified material weaknesses in internal control over financial reporting that had not been remediated as of December 31, 2020, and outlines planned remediation.
Most important facts for investors to verify
- Progress and FDA decisions on FemBloc’s paused pivotal-trial pathway and the FemaSeed study and de novo request.
- Cash burn, operating runway and any financing plans, given management’s stated expectation that further capital may be needed for full development and commercialization.
- Whether revenue growth continues and whether international sales mix affects gross margins.
- Remediation of the disclosed financial-reporting control weaknesses and any subsequent control findings.
- Potential effects of COVID-19, reimbursement changes, supplier constraints and the SBA’s retained PPP-loan audit rights.