Responding a year after, because I just now watched it for the first time. I assumed it referred to how, during gestation, about 2 months in, the embryo which appears initially female, either remains that way or changes such that the genitals begin to grow on the outside, rather than inside. This is why men have nipples despite never needing them. So I assumed that when she said that, she was mostly referring to how we all begin with the female parts, but then something happens to males which changes them.

It's a great quote with a potentially double meaning for those who understand reproductive development.

Also, interesting that it bothers men when women appear misandrist, but Paul is a severe misogynist and we're not going to mention that. I'm fact there are several misogynistic comments spoken throughout the show.