Shares of Evofem Biosciences (NASDAQ:EVFM) sunk by more than 36% in pre-market trading on Tuesday after pricing a $50 million stock and warrant offering at a discount to yesterday’s closing price. EVFM stock ended trading on Monday at $1.28 a share.
Each share of common stock is being sold together with one short-term warrant to purchase one share of common stock at a combined public offering price of $1.00 per share of common stock and accompanying common warrant, less underwriting discounts and commissions. The short-term warrants have an exercise price of $1.00 per share, are exercisable immediately, and will expire two years following the date of issuance.
Evofem is a biopharmaceutical company that develops and sells various products to address unmet needs in women’s sexual and reproductive health. The company is headquartered in San Diego, California.
The stock was highlighted in March by InvestorPlace contributor Mark Putrino, after the share price suffered a steep decline. It lost more that 50% of its value when the price dropped from $5 to under $2.50 following a disappointing earnings call. Saundra Pelletier, Evofem CEO, bought 45,249 shares of EVFM on March 9 at an average price of $2.28 a share.
EVFM Stock Dilution Shows Biotech Risk
The dilution-related drop today in EVFM stock illustrates the risk typically inherent with the sector. Biotech stocks are not an appropriate arena for every investor, particularly when you’re dealing with speculative names. Still, very few sectors offer the astounding profitability potential of biotech penny stocks, which is why — though it’s terribly risky — people continue to flock to this market.
While investors take the hit today, Evofem now has a bigger cash pile to work from in its pursuit of women’s health treatments. Earlier, the company said it will use the proceeds from the offering for the continuation of full commercialization activities related to Phexxi, a hormone-free prescription vaginal gel that is FDA approved to prevent pregnancy.
It will also use some of the money to continue its ongoing Evoguard Phase 3 clinical trial evaluating EVO100 for the prevention of chlamydia and gonorrhea in women.
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On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor.