Editor's Note: This article has been updated to reflect the accurate number of shares Saundra Pelletier sold and when they were sold.

What happened?

Shares of Evofem Biosciences (NASDAQ: EVFM) are down by 20.6% as of 11:43 a.m. EDT on Friday, after dropping by as much as 25.4% earlier today. These massive losses came after it was made public that the company's CEO, Saundra Pelletier, sold 122,500 shares of the company on Sept. 8, for $3.26 per share.

So what

Officers and directors of a publicly traded company are required by law to disclose information regarding when they buy or sell shares of the business. This information can be invaluable to investors, as these high-level executives possess some information regarding the direction of the company that no one else has. When the CEO of a company dumps stock, it can be taken as a sign of bad news to come, which often leads to the company's shares falling. That's what's happening today with Evofem Biosciences. 

Man holding his head in panic.

Image source: Getty Images.

Now what

While Pelletier deciding to offload shares of the company is noteworthy, it isn't the endgame; it's important to focus on the fundamentals of the business as well. How does Evofem Biosciences fare in that regard? Note that the company currently has just one product on the market, which is an on-demand birth-control gel called Phexxi. This product was approved by the U.S. Food and Drug Administration in late May, and it has become commercially available as of this month. Evofem Biosciences estimates Phexxi's market opportunity to be north of $1 billion.

The company has less than a handful of other products in its pipeline, and none of them are close to earning regulatory approval. Furthermore, Evofem Biosciences had $123.6 million in unrestricted cash and short-term investments as of June 30, and the company estimates that it has enough funds to run its operations until the second quarter of 2021. Even if Phexxi manages to have a relatively successful launch, it seems plausible that the company will have to resort to dilutive forms of financing within the next six to nine months. Given all these factors, Evofem Biosciences looks like a risky biotech stock to invest in today.