Biotech
Top 5 Women’s Health Stock (May 2024)
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The Neglected Half Of The Population
Medicine has for very long been a male-dominated science and profession. This has led to women's health issues being somewhat neglected. Even today, “Approximately 1% of healthcare research is invested in female-specific conditions beyond oncology”, and “Women’s Health conditions outside of oncology comprise less than 2% of the current healthcare pipeline”.
In addition, women's bodies are somewhat more complex than men's, with different hormonal patterns, organs, etc. So, what works for men might not always work for women.
And there is plenty of need for specialized tools, drugs, and equipment, like mammograms, fertility drugs, menopause treatments, etc. And companies specializing in answering that demand.
The sector of women's health was worth $38B in 2021 and is growing again after a slight decline during the pandemic. It is expected to grow at a healthy 4.9% CAGR until 2030.
Source: Polaris Market Research
The sector has also come to the attention of “big pharma” corporations (Bayer, Pfizer, etc.) with a series of acquisitions or licensing deals in the last few years.
Top 5 Women’s Health Stock
1. Hologic, Inc.
By far the largest women's health company by market capitalization, partially because it is also active in the diagnostic sector in general. Still, the core of the company market is women's diagnostics, including skeletal health and scanner systems, and a lot of the diagnostic products are related to STIs (Sexually Transmitted Infections).
Source: Hologic
In equipment, breast health is an important segment, covering all possible medical needs like screening & radiology, surgery, tissue evaluation (for cancer), and recovery.
The company's core products are growing after a slump during the pandemic, while it also benefited from extra revenues from Covid testing during the pandemic, which is now decreasing.
Source: Hologic
Most of the revenues come from diagnostics and are consumable, making them repeat purchases from analysis labs and hospitals. The equipment bought during the pandemic, like the molecular analysis platform Panther, is now used for other analyses, with 85% of new customers running at least one other assay than Covid testing.
Hologic is profitable and generated $5B in free cash flow in the last 3 years (1/4 of its market cap). Of this free cash flow, $1.4B was spent on acquisitions (6 deals) and $1.7B on share repurchases. The company also paid off its debt to reach only $0.3B net debt, from a high of $4B in 2013.
Hologic is a good women's health stock pick for investors looking for a financially solid, growing, profitable, and well-established company. Its healthy cash flows also allow it to be a serial acquirer and gather a growing portfolio of women-focused medical treatment and testing technology.
2. Evofem Biosciences, Inc.
As a side note, Evofem did a 1-125 reverse stock split, which explains the somewhat strange stock price chart.
Evofem is the seller of Phexxi, a revolutionary hormone-free contraception method approved in the summer of 2020. It was developed with the support of the University of Illinois Chicago. This makes it adopted mostly by women who previously did not want or could not use other forms of contraception (often for medical reasons).
The method uses a combination of lactic acid, citric acid, and potassium bitartrate and provides protection against chlamydia and gonorrhea. It is also a rather simple and cheap product to manufacture.
Because Phexxi acts on vagina pH, it could also have other applications, notably in Bacterial Vaginosis (BV). Phase 2 of clinical trials for this application is now ready. It could also be combined with other drugs to create a Multipurpose Prevention Technology (MPT), a strategy explored together with Orion Biotechnology.
The total US contraceptive market is $8.3B, and Phexxi falls in the category of contraceptives covered by most health plans, so it is at no cost to the women, according to a clarification of US contraceptive access rights from January 2023.
Phexxi sales have increased rapidly since approval, reflecting women's growing awareness and adoption of this solution. The growth continued in 2023, with February 2023 seeing 15% more units sold than February 2022.
Source: Evofem
In addition to increasing revenue, Evofem is working on decreasing costs, at only $25M in Q3 2022 compared to $45M in Q3 2021.
The company is targeting to reach cash flow break-even in 2023 and to relaunch on major stock exchanges (the stock is currently trading through Over-the-Counter (OTC) exchanges).
With the Phexxi patent running at least until 2033, this is an interesting niche single-product company with a long runway for its IP. Future growth could come from additional applications (BV, MPT) and international licensing.
Investors will want to keep an eye on the cash flow improvement and the future cash redistribution policy. A potential acquisition by a larger company could be possible as well. The potential for entry of imitators or new competitors should also be factored in.
3. Daré Bioscience, Inc.
The company is focusing its research efforts along a few axes, with some of the key R&D efforts being:
- Contraception.
- Phase 3 of clinical trials initiated in mid-2023 for the 1st Hormone-free, Monthly Contraceptive in joint development with Bayer.
- Vaginal health.
- First commercial in Q2 2023 for a bacterial vaginosis treatment: XACIATO.
- Reproductive & sexual health + Menopause.
- Phase 2b of the trial for a topical cream with the same active ingredient as Viagra®
- Fertility.
Source: Dare BiosciencesThe company-approved product, XACIATO, allowed Daré to collect a first $10M payment from Organon (OGN), the spin-off from Merck with a partial focus on women's health (around 1/3 of its sales). Organon will license the global rights for XACIATO since June 2022, with up to $182.5M in further milestone payments and double-digit royalties based on net sales.
The most advanced clinical trial, the monthly contraceptive Ovaprene with Bayer, could bring up to $310M to Daré.
It is a little soon to know XACIATO's future cash flow to Daré Bioscience, and Ovaprene still needs to pass the phase 3 trials. So, this is more of a stock for investors willing to take the risk of an early-stage startup, with the lower risk of at least one product already approved by the FDA and some solid partnership for the products in development.
4. Aspira Women's Health Inc.
Aspira is focused on ovarian cancer. The company developed OvaSuite, a blood test for ovarian cancer, to use in combination with ultrasound checkups (OvaWATCH). It tests the risk of ovarian cancer and can help determine the risks and profile of the cancer as well (Ova1Plus).
Source: Aspira
OvaWatch was launched in November 2022 and in 2023 got integrated into the coverage of a large national payer with 80 million people now covered for OvaWatch.
The company market is the 1+ million women diagnosed with adnexal masses (masses on the ovaries) yearly. Only 10% of the 200,000 surgeries in the US following this diagnosis are actual cancer, leading to unnecessary costs ($20,000/surgery), suffering, and serious consequences like infertility, early menopause, etc…
Source: Aspira
The problem of actually identifying the cancer is compounded by the risk of biopsies spreading the cancer. So, liquid biopsies, using blood tests, are a much superior diagnostic option. (You can read more about other liquid biopsy companies in our article “Best Early Cancer Detection And Liquid Biopsy Stocks (May 2023)”).
If they reach 50% of the potential market, OvaWatch would be $225M to $281M in revenues, and Ova1Plus $38M-$56M. Expansion of the technology for monitoring could bring the revenue potential to $500M. Since 2021, revenues, margins, and sales volume have all grown by 18-23%.
Source: Aspira
Aspira is at an interesting point for investors looking for an approved product that markets might not have fully priced in, as it is a very under-covered niche. Not only women's health but a very technical diagnostic for a specific cancer, which mostly brings an improved diagnosis. It's not the most straightforward topic for most investors. It is nevertheless a considerable medical advancement and might translate into growing revenues and cash flow in the next few years.
5. Minerva Surgical, Inc.
Minerva Surgical describes itself as “The Uterine Health Company.” The company was founded to improve the treatment of Abnormal uterine bleeding (AUB). This can affect 1 out of 3 women over their life and can cause complications.
Poor care of AUB leads to unnecessary hysterectomies (ablation of the uterus), with 68% of the 400,000 hysterectomies done for benign conditions like AUB, fibroids, or endometriosis.
These unneeded hysterectomies significantly increase the risk of serious health problems, including heart failure and coronary artery disease.
Source: Minerva Surgical
In 2020, they acquired three additional devices for the treatment of AUB to create a full intra-uterine care kit.
The kit provides better care, direct visualization, and fewer doctor visits.
In Q1 2023, the company brought $12.5M in revenues, an increase of 15% from the $10.9M in Q1 2022. Operating expenses were $17.3M in Q1 2023, R&D costs $5.3M, and net loss $11.3M.
The company also did a private placement of $30M in February 2023., led by Accelmed, a $630M private equity firm specializing in investing in medical devices and technology.
Minerva is a company delivering a valuable product, still at an early stage of its commercial adoption. Changing the medical practices in women's health is a rather difficult task. At the same time, the recent private placement put the company out of any short-term risk regarding liquidity and solubility.
So, this is a stock ideal for investors willing to bet that the current market capitalization does not reflect the long-term prospect of the company to change the treatment of AUB from routine use of hysterectomies to “softer” surgeries using Minerva devices.
