The vast majority of people are either physically male or physically female. I think your friend might have been referring to transgender people- as in a girl but physically male, or a boy but physically female, perhaps.

I think the stereotype here is that a lot of bisexual people would not be so attracted if they found out the female they were attracted to was born male, or a person had a gender identity outside of the binary and displayed it openly, or... well, people who don't fit into the neat binary categories. I think pansexual people describe bisexuality like that- as a person who is attracted to male men and female women, if you see what I mean, whereas being pansexual they are "gender blind" and don't see any issue with whatever gender presentation or variation they come across.