EVOFEM BIOSCIENCES, INC. Discussion and analysis by management of the financial position and results of operations (Form 10-Q)

The terms "we," "us," "our," "Evofem" or the "Company" refer collectively to
Evofem Biosciences, Inc. and its wholly-owned subsidiaries, unless otherwise
stated. All information presented in this quarterly report on Form 10-Q
(Quarterly Report) is based on our fiscal year. Unless otherwise stated,
references to particular years, quarters, months or periods refer to our fiscal
years ending December 31 and the associated quarters, months and periods of
those fiscal years.

You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report. For
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additional context with which to understand our financial condition and results
of operations, see the audited consolidated financial statements and
accompanying notes contained therein as of December 31, 2020 and 2019 and
related notes in the Company's Annual Report on Form 10-K as filed with the SEC
on March 4, 2021 (2020 Audited Financial Statements). This discussion and
analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. The actual results may differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including,
but not limited to, those set forth under Item 1A of Part I of the 2020 Audited
Financial Statements. Unless otherwise defined in this section, the defined
terms in this section have the meanings set forth in the 2020 Audited Financial
Statements.

Overview

We are a San Diego-based commercial-stage biopharmaceutical company committed to
developing and commercializing innovative products to address unmet needs in
women's sexual and reproductive health.

Our first commercial product, Phexxi® (lactic acid, citric acid, and potassium
bitartrate) vaginal gel (Phexxi), was approved by the United States (U.S.) Food
and Drug Administration (FDA) on May 22, 2020 and commercially launched in the
United States in September 2020. Phexxi is the first and only FDA approved
hormone-free, woman-controlled, on-demand prescription contraceptive gel for
women. We are conducting a pivotal Phase 3 clinical trial to evaluate our lead
product candidate, EVO100 (L-lactic acid, citric acid, and potassium bitartrate)
vaginal gel (EVO100), for the prevention of urogenital transmission of both
Chlamydia trachomatis infection (chlamydia) and Neisseria gonorrhoeae infection
(gonorrhea) in women. We refer to this trial as "EVOGUARD".

Phexxi: our non-hormonal contraception on demand

We commercially launched Phexxi in September 2020 with a sales force promoting
Phexxi directly to obstetrician/gynecologists and their affiliated health
professionals, who collectively write the majority of prescriptions for
contraceptive products. Our sales force comprises approximately 69 regional
sales representatives and business managers, supported by a self-guided virtual
health care provider (HCP) learning platform. Additionally, we offer women
direct access to Phexxi via our telehealth platform where women can directly
meet with an HCP to determine their eligibility for a Phexxi prescription and
potentially have it written by the HCP, filled, and mailed directly to them by a
third party pharmacy.

Our comprehensive commercial strategy for Phexxi includes marketing and product
awareness campaigns targeting women in the United States of reproductive
potential, including the approximately 23 million women who are not using
hormonal contraception and the approximately 18.8 million women who are using a
prescription contraceptive, some of whom, particularly pill users, may be ready
to move to an FDA-approved, non-invasive hormone-free contraceptive, as well as
certain identified target HCP segments; payer outreach; and execution of our
consumer digital and media strategy.

According to our post-commercial launch market research, HCPs indicated they
would recommend Phexxi to approximately 60% of patients who are currently using
natural contraceptive methods, approximately 58% of patients who are currently
using over-the-counter contraceptive products and approximately 26% of patients
who are currently using prescription contraception or methods requiring an HCP
to perform a procedure. Additional research into the demographics of more than
1,300 women who are using Phexxi reveals that 60% of Phexxi users are between
the ages of 18 to 34 years of age. Among the subset of Phexxi users for whom
prior contraceptive data is available (n=413), 39% of women who had recently
started Phexxi switched over from either an oral contraceptive, hormone
patch/ring, or long-acting reversible contraception.

In December 2020 two U.S. patents that cover Phexxi and its labeled indication
were listed in the U.S. FDA publication Approved Drug Products with Therapeutic
Equivalence Evaluations, commonly known as the Orange Book. The Orange Book
listing of these two patents covering Phexxi's composition of matter and its
method of use in prevention of pregnancy is an important step in the ongoing
development of our patent portfolio, which currently covers Phexxi into 2033.
The newly listed method of use patent, number 10,568,855 (the '855 patent),
covers contraception using the L-lactic acid Phexxi formulation. The '855 patent
was issued by the U.S. Patent and Trademark Office (USPTO) on February 25, 2020
and is expected to expire in March 2033. The newly listed patent number
6,706,276 (the '276 patent) is a composition of matter patent covering Phexxi.
Evofem has an exclusive license to this patent, which is held by Rush University
Medical Center (Rush University). The '276 patent was issued by the USPTO on
March 16, 2004 and is expected to expire in March 2026 if the five-year patent
term extension (PTE) application that was timely filed by the patent owner is
granted. The patents we licensed from Rush University expired in March 2021
outside the United States and are currently set to expire in March 2022 inside
the United States pursuant to an Order Granting Interim Extension that extended
the expiration of the U.S. patent. In 2020, Rush University submitted a PTE
application for the U.S. patent requesting a five-year PTE to 2026. We have not
yet been granted the PTE, and there is no assurance that it will be granted for
the full five-year term, if at all.

On February 14, 2021, we launched a direct-to-consumer advertising campaign,
known as "Get Phexxi," designed to increase awareness and educate women on the
benefits of Phexxi. The campaign highlights some of the struggles women face
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when choosing among the many available methods of contraception, including the
lack of control with condoms, constant daily use of the pill, and abstinence
required for cycle tracking.

On September 9, 2021, we launched a national brand ambassador campaign featuring
Emmy® Award-winning celebrity Annie Murphy designed to broaden awareness and
drive uptake of Phexxi. We believe early metrics demonstrate that this campaign,
called "House Rules," is effectively reaching our target audience, especially
women who are beyond hormones. Through September 30, 2021, the "House Rules" DTC
campaign has resulted in a 263% increase in visitors to Phexxi.com, and impacted
key metrics including:
•A 71% increase in ex-factory sales of Phexxi (unit shipments to wholesalers) in
September versus August 2021.
•More than 5,100 women have begun using Phexxi since the launch of the "House
Rules" campaign, driving a 56% increase in new patient starts in September
versus August 2021.
•More than 2,800 women booked telehealth visits in the first three weeks of the
campaign, a 4x increase over the three-week period pre-launch.
•More than 8,900 Phexxi units were dispensed in September 2021, a 41% increase
over the prior month, and total monthly prescriptions grew 45% to 7,839.
•34% increase in new healthcare providers prescribing Phexxi in September versus
August 2021. Over 9,400 healthcare providers have written Phexxi since the
product launched in September 2020.

We are also collaborating with the National Community Oncology Dispensing
Association, Inc. (NCODA), an educational platform for community and academic
oncology practices nationwide, to positively impact the quality of life for
female patients living with, fighting and recovering from cancer by raising
awareness about the importance and availability of Phexxi as a birth control
option. Every year in the United States, more than 800,000 new cases of cancer
are reported among women, and many cancer treatment protocols require female
patients of reproductive potential to use birth control while undergoing
treatment. Until the introduction of Phexxi, non-hormonal prescription
contraception options were starkly limited; previously, women were generally
steered toward condoms or the copper IUD, a prescription medical device that is
implanted in the uterus where it releases copper ions and can cause
inflammation.

We are working together with NCODA to develop and share resources and
educational information for the medically-integrated oncology pharmacy team to
help support female cancer patients in deciding which contraceptive option best
meets each woman's unique, individual needs. In May 2021, the NCODA published a
Positive Quality Intervention (PQI) in connection with Phexxi, and in July 2021,
our Chief Executive Officer and Phexxi were featured on NCODA's PQI Podcast.
PQIs are part of the NCODA Quality Standards. These resources are designed to
operationalize and standardize practices to achieve positive outcomes for
patients. Additionally, our Chief Executive Officer delivered the keynote
address at the NCODA 2021 National Spring Forum, and two posters on data sets
presenting relevant aspects of the Phase 3 AMPOWER trial evaluating Phexxi were
presented at the conference.

We continue working to increase the number of lives covered and to gain
preferred formulary position for Phexxi. As of October 2021, 70% of Phexxi
prescriptions are being approved either by payers or through Evofem patient
support programs. We have coverage for approximately 55% of U.S. commercial
lives, including approximately 9 million lives covered at no out-of-pocket cost
and approximately 13.7 million lives covered under our December 2020 contract
award from the U.S. Department of Veterans Affairs. On January 1, 2021, the U.S.
Medicaid population gained access to Phexxi through our participation in the
Medicaid National Drug Rebate Program. Medicaid provides health coverage to
approximately 68 million members, including approximately 16.8 million women
19-49 years of age.

Phexxi is classified in the databases and pricing compendia of Medi-Span and
First Databank, two major drug information databases that payers consult for
pricing and product information, as the first and only "Vaginal pH Modulator."

We continue to work with the FDA's Office of Women's Health to update its Birth
Control Guide to include a new category for vaginal pH modulators, as the
current guide does not have a place for Phexxi due to its unique mechanism of
action. We believe this update would require payers (including pharmacy benefit
managers) to cover the Phexxi at no cost to patients. We are also working with
elected officials in Washington D.C. to encourage updating the guidance
regarding contraception coverage, as the guidance has not kept up with
innovations like Phexxi. To support those initiatives, we have launched a
grassroots coalition that shows the public's support of the need for updating
the chart and guidance.

EVO100: our product candidate for the prevention of STIs

Our lead product candidate, EVO100, is a vaginal gel under evaluation for the
prevention of chlamydia and gonorrhea in women - two of the most pervasive
sexually transmitted infections (STIs) in the United States. Currently, there
are no FDA­approved prescription products for the prevention of either of these
common STIs.

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According to the Centers for Disease Control and Prevention (CDC), any sexually
active person can be infected with chlamydia or gonorrhea. Despite the CDC
recommendation for condom use to prevent STIs, U.S. rates of infection with
chlamydia and gonorrhea climbed in 2019 for the sixth consecutive year. Based on
these reports, an estimated 78 million women 18-65 years of age who are sexually
active in the United States could be at risk to contract these STIs.

Based on the positive and statistically significant top-line results of our
Phase 2B/3 AMPREVENCE trial, we initiated our Phase 3 EVOGUARD clinical trial in
October 2020. This randomized, placebo-controlled pivotal trial is designed to
enroll 1,730 women with a prior chlamydia or gonorrhea infection and who are at
risk for future infection. Participants are enrolled for a 16-week
interventional phase followed by a one-month follow-up period. We expect to
complete enrollment in the first quarter of 2022 and to report top-line EVOGUARD
results in the third quarter of 2022. Assuming positive results from the trial,
we expect to submit a supplemental New Drug Application for EVO100 in the first
quarter of 2023.

The FDA has granted Fast Track designations to EVO100 for the prevention of chlamydia and gonorrhea in women. The FDA has designated EVO100 as a qualified infectious disease product for the prevention of gonorrhea in women, which offers several significant potential benefits, including longer market exclusivity.

Financial Operations Overview

Net Product Sales

Our revenue recognition is based on unit shipments from our third-party
logistics warehouse to our customers, which consist of wholesale distributors,
retail pharmacies, and a mail-order specialty pharmacy. We have recognized net
product sales in the United States since the commercial launch of Phexxi in
September 2020; the quarter ended September 30, 2021 was our fourth full quarter
of product sales.

For the quarter ended September 30, 2021, shipments to wholesale distributors
and pharmacies grew significantly compared to the quarter ended June 30, 2021,
driving an approximate 29% increase in gross revenues. Phexxi outperformed the
newer branded contraceptive market over the summer months and the launch of our
"House Rules" campaign on September 9, 2021 has increased Phexxi awareness,
consideration, and prescriptions. Gross revenues, as discussed in   Note 3-
Revenue  , were adjusted for variable consideration, including our patient
support programs.

We intend to out-license commercialization rights for Phexxi to one or more
pharmaceutical companies or other qualified potential partners for countries or
regions outside of the United States. We are currently in discussion with
potential partners for various geographies. We cannot forecast when or if these
arrangements will be secured, the structure or potential amount of revenues from
these arrangements, whether upfront, milestone-related or related to future
Phexxi sales (assuming approval of Phexxi for commercial sale outside of the
United States) or to what degree these arrangements would affect our development
plans, future revenues and overall capital requirements.

Cost of goods sold

The Company began to capitalize the inventory costs associated with Phexxi in
April 2020 when it was determined that this inventory had a probable future
economic benefit. These inventory costs include all purchased materials, direct
labor and manufacturing overhead. Prior to April 2020, costs incurred for the
manufacture of Phexxi were recorded as research and development expenses.

In addition, we are obligated to pay quarterly royalty payments pursuant to our
license agreement with Rush University, in amounts equal to a single-digit
percentage of the gross amounts we receive on a quarterly basis less certain
deductions incurred in the quarter based on a sliding scale. We are also
obligated to pay a minimum annual royalty amount of $100,000 to the extent these
earned royalties do not equal or exceed $100,000 in a given year. A minimum
annual royalty amount of $100,000 was first required for the annual period
commencing on January 1, 2021. This royalty was approximately $0.1 million and
$0.2 million for the three and nine months ended September 30, 2021,
respectively, and was included in the costs of goods sold in the condensed
consolidated financial statements.

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Operating Expenses

Research and development costs

Our research and development expenses primarily consist of costs associated with
the clinical development of EVO100 and costs associated with the continuous
improvements related to Phexxi commercialization efforts. These expenses
include:
•external development expenses incurred under arrangements with third parties,
such as fees paid to clinical research organizations (CROs) relating to our
clinical trials, costs of acquiring and evaluating clinical trial data such as
investigator grants, patient screening fees, laboratory work and statistical
compilation and analysis, and fees paid to consultants;
•costs to acquire, develop and manufacture clinical trial materials, including
fees paid to contract manufacturers;
•costs related to compliance with drug development regulatory requirements;
•continuous improvements of manufacturing and analytical efficiency;
•on-going product characterization and process optimization;
•back-up contract manufacturing organization's evaluation to support future
commercial forecast and reduce cost of goods sold;
•alternative raw material evaluation to secure an uninterrupted supply chain and
reduce cost of goods sold;
•employee-related expenses, including salaries, benefits, travel and noncash
stock-based compensation expense; and
•facilities, depreciation and other allocated expenses, which include direct and
allocated expenses for rent and maintenance of facilities, depreciation of
leasehold improvements and equipment, and research and other supplies.

We charge internal and third party research and development costs as they are incurred. The following table summarizes the research and development expenses by candidate product (in thousands):

                                                        Three Months Ended September 30,               Nine Months Ended September 30,
                                                            2021                   2020                   2021                   2020

Third-party development costs allocated: EVO100 for the prevention of chlamydia / gonorrhea – Phase 3 (EVOGUARD)

                                        $           6,890       

$ 1,386 $ 17,078 $ 1,529
EVO100 for the prevention of chlamydia / gonorrhea – Phase 2B / 3 (AMPREVENCE)

                                                   -                  17                         -                 (10)
Phexxi for the prevention of pregnancy (AMPOWER)                    -                   2                         -                 (14)
Total allocated third-party development expenses                6,890               1,405                    17,078               1,505
Unallocated internal research and development
expenses:
Noncash stock-based compensation expenses                         160                 291                     1,122               1,689
Payroll and related expenses                                    1,048               1,438                     3,988               3,539
Outside services costs                                            275                 705                     1,291               3,343
Other                                                             328                 378                       991               1,028

Total unallocated internal research and development expenditure

                                                        1,811               2,812                     7,392               9,599
Total research and development expenses             $           8,701       

$ 4,217 $ 24,470 $ 11,104



Completion dates and costs for our clinical development programs may vary
significantly for EVO100 and any future product candidate we may seek to develop
and are difficult to predict. We anticipate that we will determine which
programs and product candidates to pursue as well as the most appropriate
funding allocations for each program and product candidate on an ongoing basis
in response to the results of ongoing and future clinical trials, regulatory
developments, and our ongoing assessments of the commercial potential of each
current or future product candidate. We expect research and development expenses
to increase significantly in 2021 compared to 2020 primarily due to EVOGUARD,
which was initiated in October 2020. We will need to raise significant
additional capital in the future to complete clinical development for EVO100 and
any future product candidates.

The costs of clinical trials can vary widely over the life of a program due to the following:

•per patient trial costs;
•the number of sites included in the trials;
•the length of time and level of marketing required to enroll eligible patients;
•the number of patients participating in the trials;
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•the number of doses patients receive;
•potential additional safety monitoring or other trials requested by regulatory
agencies;
•the phase of development of the product candidate; and
•the efficacy and safety profile of the product candidate.

Sales and marketing costs

Our selling and marketing expenses consist primarily of Phexxi commercialization
costs, including direct-to-consumer (DTC) and HCP advertising, the Phexxi
telehealth platform, our sample program, training, salaries, benefits, travel,
noncash stock-based compensation expense, and other related costs for our
employees and consultants.

We expect our selling and marketing expenses to be significantly higher in 2021
compared to 2020 due to the cost of our sales force, which was established in
the third quarter of 2020, and as we continue Phexxi promotional strategies,
including all DTC marketing initiatives.

General and administrative expenses

Our general and administrative expenses consist primarily of salaries, benefits,
travel, business development expense, investor and public relations expenses,
noncash stock-based compensation, and other related costs for our employees and
consultants performing executive, administrative, finance, legal and human
resource functions. Other general and administrative expenses include
facility-related costs not otherwise included in research and development or
selling and marketing, and professional fees for accounting, auditing, tax and
legal fees, and other costs associated with obtaining and maintaining our patent
portfolio.

We expect our general and administrative expenses to decrease slightly in 2021 compared to 2020 due to lower recruitment costs, financial advisory costs, and salary and related costs.

Other income (expenses)

Other income (expense) consists primarily of interest expense and the change in
fair value of financial instruments issued in various capital raise
transactions. The change in fair value of financial instruments was recognized
as a result of mark-to-market adjustments for those financial instruments.

Results of operations

Three Months Ended September 30, 2021 Compared to Three Months Ended September
30, 2020 (in thousands):

Net Product Sales

                                             Three Months Ended September 30,                   2021 vs. 2020
                                                 2021                 2020               $ Change         % Change
Product sales, net                          $      1,712          $      278          $      1,434               516  %


Phexxi was launched commercially in September 2020. The increase in net product sales is mainly due to a full quarter of sales in the current period versus a month of sales in the previous year period, as well as continued growth in unit sales ex works since commercial launch.

Cost of Goods Sold

                                              Three Months Ended September 30,                     2021 vs. 2020
                                                  2021                   2020               $ Change         % Change
Cost of goods sold                        $             955          $      317          $        638               201  %


The increase in cost of goods sold is mainly due to a full quarter of sales during the current period compared to a month of sales during the previous year period.

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Research and development expenses
                                                    Three Months Ended September 30,                     2021 vs. 2020
                                                        2021                   2020               $ Change         % Change
Research and development                        $           8,701          $    4,217          $      4,484               106  %



The increase in research and development expenses was primarily due to a $5.5
million increase in clinical trial costs associated with EVOGUARD. This increase
was partially offset by a $0.4 million decrease in payroll and related expenses
due to lower headcount, a $0.4 million decrease in outside services associated
with manufacturing related activities, and a $0.1 million decrease in noncash
stock-based compensation.

Sales and marketing costs

                                                Three Months Ended September 30,                     2021 vs. 2020
                                                    2021                   2020                $ Change         % Change
Selling and marketing                        $         30,468          $   14,700          $      15,768               107  %



The increase in selling and marketing expenses was primarily due to a $13.8
million increase in media and marketing costs related to ongoing promotional
strategies, especially those focused on DTC campaigns that commenced in 2021, a
$1.7 million increase in payroll and related expenses due to increased headcount
and sales activities in the field, $0.5 million in the Phexxi sample program,
and a $0.3 million increase in facilities costs. These aggregated increases were
partially offset by a $0.5 million decrease in costs for outside services
associated with marketing and medical affairs activities.

General and administrative expenses

                                                       Three Months Ended September 30,                     2021 vs. 2020
                                                           2021                   2020                $ Change         % Change
General and administrative                         $           4,957          $    7,200          $      (2,243)              (31) %



The decrease in general and administrative expenses was primarily due to a $1.2
million decrease in financing advisory fees and legal fees, a $0.6 million
decrease in outside services primarily related to recruiting, a $0.5 million
decrease in payroll and related expenses due to lower headcount, and a $0.3
million decrease in noncash stock-based compensation. These aggregated decreases
were partially offset by a $0.3 million increase in facilities costs.

Total other income (expense), net

                                               Three Months Ended September 30,                  2021 vs. 2020
                                                   2021                2020                $ Change         % Change
Total other (expense) income, net             $   (30,692)         $   (3,741)         $     (26,951)              720  %



Total other expense, net, for the three months ended September 30, 2021,
primarily included $1.2 million in interest expense related to the convertible
senior secured promissory notes issued to Baker Bros. Advisors LP (the Baker
Notes) and the unsecured convertible promissory notes issued to each of Adjuvant
Global Health Technology Fund, L.P. and Adjuvant Global Health Technology Fund
DE, L.P. (the Adjuvant Notes) as described in   Note 5- Convertible Notes   and
a $29.5 million loss from the change in fair value of the Baker Notes as a
result of mark-to-market adjustments during the current quarter.

Total other charges, net, for the three months ended September 30, 2020, mainly consisted of a $ 3.1 million loss resulting from the change in fair value of the Baker Notes as a result of mark-to-market adjustments and $ 0.7 million in accrued interest on the Baker Notes.

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Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30,
2020 (in thousands):

Net Product Sales

                                              Nine Months Ended September 30,                   2021 vs. 2020
                                                 2021                 2020               $ Change         % Change
Product sales, net                          $      4,674          $      278          $      4,396             1,581  %



Phexxi was commercially launched in September 2020. The increase in product
sales, net was primarily due to a full nine months of sales in the current
period versus one month of sales in the prior year period, continued growth in
ex-factory unit sales since commercial launch, and an increase in both gross and
net sales from the impact of Phexxi promotional strategies and gross-to-net
initiatives implemented since commercial launch.

Cost of goods sold

                                            Nine Months Ended September 30,                   2021 vs. 2020
                                               2021                 2020               $ Change         % Change
Cost of goods sold                        $      2,300          $      317          $      1,983               626  %


The increase in cost of goods sold is primarily due to nine full months of sales in the current period versus one month of sales in the prior year period.

Research and development costs

                                                    Nine Months Ended September 30,                     2021 vs. 2020
                                                       2021                   2020                $ Change         % Change
Research and development                        $         24,470          $   11,104          $      13,366               120  %



The increase in research and development expenses was primarily due to a $15.4
million increase in clinical trial costs associated with EVOGUARD, and a $0.5
million increase in payroll and related expenses due to increased headcount to
support clinical and regulatory activities. These aggregated increases were
partially offset by a $1.9 million decrease in outside services associated with
manufacturing and regulatory related activities and a $0.6 million decrease in
noncash stock-based compensation.

Sales and marketing costs

                                                 Nine Months Ended September 30,                     2021 vs. 2020
                                                    2021                   2020                $ Change         % Change
Selling and marketing                        $         88,230          $   32,553          $      55,677               171  %



The increase in selling and marketing expenses was primarily due to a $45.3
million increase in media and marketing costs related to ongoing promotional
strategies especially those focused on DTC campaigns that commenced in 2021, a
$9.7 million increase in payroll and related expenses due to increased headcount
and sales activities in the field, $1.7 million in the Phexxi sample program,
and a $1.7 million increase in facilities costs. These aggregated increases were
partially offset by a $2.8 million decrease in costs for outside services
associated with marketing, market access and medical affairs activities, and a
$0.4 million decrease in noncash stock-based compensation.

General and administrative expenses

                                                       Nine Months Ended September 30,                     2021 vs. 2020
                                                          2021                   2020                $ Change         % Change
General and administrative                         $         19,057          $   24,077          $      (5,020)              (21) %



The decrease in general and administrative expenses was primarily due to a $2.6
million decrease in noncash stock-based compensation, a $1.9 million decrease in
financial and recruiting related outside services, a $1.4 million decrease in
financing advisory fees and legal fees, and a $0.3 million decrease in payroll
and related expenses due to lower headcount. These aggregated decreases were
partially offset by a $1.0 million increase in facilities costs.

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Total other income (expense), net
                                                  Nine Months Ended September 30,                     2021 vs. 2020
                                                     2021                   2020               $ Change         % Change
Total other (expense) income, net             $        (24,244)         $  (33,936)         $      9,692               (29) %



Total other expense, net, for the nine months ended September 30, 2021,
primarily included $3.5 million in interest expense related to the Baker Notes
and the Adjuvant Notes as described in   Note 5- Convertible Notes   and a $20.7
million loss from the change in fair value of the Baker Notes as a result of
mark-to-market adjustments in the first half of 2021.

Total other expense, net, for the nine months ended September 30, 2020, mainly
included a $64.0 million loss on issuance of convertible notes, warrants and
purchase rights issued in connection with the Baker Notes, and $1.0 million in
accrued interest expense related to the Baker Notes and the Adjuvant Notes. This
loss was partially offset by a $31.0 million gain from the change in fair value
of the Baker Notes as a result of mark-to-market adjustments.

Liquidity and capital resources

Overview

As of September 30, 2021, we had a working capital deficit of $39.8 million and
an accumulated deficit of $809.1 million. We have financed our operations to
date primarily through the issuance of common stock and warrants, cash received
from private placement transactions, the issuance of convertible notes and, to a
lesser extent, product sales. As of September 30, 2021, we had approximately
$14.9 million in cash and cash equivalents, and $9.0 million in restricted cash
from the Adjuvant Notes that is available for use. Our cash and cash equivalents
include amounts held in checking accounts, money market funds, and investments
in fixed income debt securities with original maturities of less than three
months. We invest cash in excess of immediate requirements in accordance with
our investment policy, which limits the amounts we may invest in any one type of
investment and requires all investments held by us to maintain minimum ratings
from Nationally Recognized Statistical Rating Organizations so as to primarily
achieve liquidity and capital preservation.

We have incurred losses and negative cash flows from operating activities since
inception. During the nine months ended September 30, 2021, we received net
proceeds of approximately $81.5 million upon the sale and issuance of common
stock and warrants to purchase common stock from two underwritten public
offerings that occurred in March and May of 2021. In October 2021, we received
net proceeds of approximately $9.7 million from a registered direct offering.

We anticipate that we will continue to incur net losses for the foreseeable
future. We expect research and development expenses to be significantly higher
in 2021 compared to 2020 due to our Phase 3 EVOGUARD study, which was initiated
in October 2020. We expect selling and marketing expenses to increase
significantly in 2021 compared to 2020 due to the deployment of our commercial
sales force that was established in the third quarter of 2020 and as we execute
associated promotional strategies and initiatives, including our DTC programs.
Lastly, we expect general and administrative expenses to decrease slightly in
2021 compared to 2020 due to lower recruiting fees and financing advisory fees.

We currently expect our liquidity resources as of September 30, 2021 together
with the net proceeds of the registered direct offering completed in October
2021, to be sufficient to fund our planned operations into the first quarter of
2022. The uncertainties associated with our ability to obtain additional equity
financing on terms that are favorable to us or at all, enter into collaborative
agreements with strategic partners, and succeed in our future operations raise
substantial doubt about our ability to continue as a going concern. In addition,
the COVID-19 pandemic caused us to delay the commercial launch of Phexxi until
September 2020. Also, due in part to the impact of the COVID-19 pandemic, the
completion of enrollment in the Phase 3 EVOGUARD study is now expected in the
first quarter of 2022 and we expect to report top-line EVOGUARD results in the
third quarter of 2022. Our ability to raise additional funds, and the terms on
which those funds may be raised, will be dependent, in part, on how successful
the commercialization of Phexxi is, whether we are able to gain revenue traction
prior to raising such additional funds, and the success of our research and
development efforts, including our ability to develop EVO100. If the COVID-19
pandemic continues to disrupt and negatively impact the commercialization of
Phexxi or our research and development efforts, our ability to raise additional
funds may be negatively impacted, or we may not be able to obtain funding on
terms favorable to us or at all.

If we are not able to obtain required additional funding when and as needed,
through equity financings or other means, or if we are unable to obtain funding
on terms favorable to us, the shortfall in funds raised, or such unfavorable
terms, will likely have a material adverse effect on our operations and
strategic plan for future growth. If we cannot successfully raise the funding
necessary to implement our current strategic plan, we may be forced to make
reductions in spending, suspend or terminate development programs, extend
payment terms with suppliers, liquidate assets where possible, suspend or
curtail planned programs, and/or cease operations. Any of these developments
would materially and adversely affect our financial
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condition and business prospects and could even cause us to be unable to
continue as a going concern. If we are unable to continue as a going concern, we
may have to liquidate our assets and, in doing so, we may receive less than the
value at which those assets are carried on our financial statements. Any of
these developments would materially and adversely affect the price of our stock
and the value of your investment.

The opinion of our independent registered public accounting firm on our audited
financial statements as of and for the years ended December 31, 2020 and 2019
contains an explanatory paragraph regarding substantial doubt about our ability
to continue as a going concern. Future reports on our financial statements may
include an explanatory paragraph with respect to our ability to continue as a
going concern. Our unaudited condensed consolidated financial statements as of
September 30, 2021 and for three and nine months ended September 30, 2021 and
2020 included in this Quarterly Report do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or amounts of
liabilities that might be necessary should we be unable to continue our
operations.

2021 equity financing

As described in   Note 10- Stockholders' Equity (Deficit)  , we received
proceeds of approximately $28.0 million, net of underwriting discounts, from a
public offering in March 2021, upon the issuance of 17,142,857 shares of our
common stock, and approximately $4.2 million, net of underwriting discounts,
from the issuance of 2,571,428 shares of common stock upon exercise of the
underwriters' overallotment option in April 2021.

As described in   Note 10- Stockholders' Equity (Deficit)  , we received
proceeds of approximately $46.8 million, net of underwriting discounts and fees,
from a public offering in May 2021, upon the issuance of 50,000,000 shares of
common stock and common warrants to purchase 50,000,000 shares of common stock.
We received approximately $2.4 million and $0.1 million, both net of
underwriting discounts, from the issuance of 2,547,794 shares of common stock
and 7,500,000 common warrants, respectively, upon exercise of the underwriter's
overallotment option in May 2021.

As described in Note 10 – Equity (Deficit), we received proceeds of approximately $ 9.7 million, net of offering costs, of a direct placement registered in October 2021, upon the issuance of 5,000 shares of Series B-1 Convertible Preference Shares and 5,000 shares of Series B-2 Convertible Preference Shares.

Debt financing and equity 2020

As described in   Note 5- Convertible Notes  , we received aggregate gross
proceeds of $25.0 million upon the first and second closings of convertible
senior secured promissory notes pursuant to the Securities Purchase and Security
Agreement with certain affiliates of Baker Bros. Advisors LP as purchasers
during the second quarter of 2020. We also received gross proceeds of $25.0
million from the closing of convertible unsecured promissory notes pursuant to
the Adjuvant Purchase Agreement during the fourth quarter of 2020.

As described in   Note 10- Stockholders' Equity (Deficit)  , we received net
aggregate proceeds of $103.7 million in June 2020 upon the issuance and sale of
31,700,000 shares of our common stock from our 2020 Public Offering and net
aggregate proceeds of $3.8 million during the first half of 2020 upon the
issuance and sale of 676,656 shares of our common stock pursuant to the "at the
market" (ATM) program. The ATM program was terminated in June 2020.

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