Investor Presentation
Q2 2015
The Female Health Company Mission
Improving Women’s Health Around the World
Yellow shading shows distribution of FC2
2
Current Product Portfolio
FC2 is the only product currently available:
 Approved by the FDA and cleared by the WHO
 Under a women’s control
Which provides dual protection against:



Unintended pregnancy
Sexually transmitted infections
(STIs), including HIV/AIDS
3
At a Glance
NASDAQ
FHCO
Core product
FC2 Female Condom
Gross margin
~58%
Operating margin
~25%
Total current assets
$19 million
no L/T debt at 3/31/15
Public Since
1984
Profitable Since
2006
4
Serving Women’s Health Issues Globally
HIV
•
Leading cause of death globally for women
age 15-44
•
80% of female cases contracted via
heterosexual transmission
•
Male and female condoms are the only prevention
products available
•
No near-term alternative prevention products on
the horizon
STIs
42%
Male
58%
Female
• In Sub-Saharan Africa, women
•
Explosive incidence numbers around the world
represent >58% of adults
•
In U.S. 20 million new cases annually of the 3 STIs
the CDC tracks – half occurring in young people
aged 15-24
with HIV/AIDS infections (1 )
• Worldwide, women living with
HIV/AIDS is 50% of the global total (1 )
(1) Source: World Health Organization
5
FC2 Female Condom vs. Male Condom
FC2 is simply an
alternative to the
male condom
Found to be preferred by
women and partners in many countries
Material, nitrile polymer, is stronger than
latex, reducing the probability of tearing,
and is non-allergenic
Allows the woman to take control of
protection
Transfers heat, warming to body
temperature for natural feeling sex
Non-interruptive, can be inserted in
advance of sexual activity
Reduces health costs by increasing
HIV/AIDS prevention *
* Every $1 spent on Female Condoms represents $20 in healthcare savings per the Johns Hopkins
Study published in AIDS and Behavior, 2012.
6
FHC Growth Strategy
Invest in strategic growth initiatives to create long term
shareholder value and:
• Grow FC Demand
– Develop potential in high value consumer market
– Further develop existing global public sector
presence through sales and marketing activity
• Diversify the Portfolio through Product Additions
– Drive Company growth and improve the consistency
of revenues and earnings
7
Progress on Growth Strategy
• FC2 Growth Initiatives
– New tender activities in focus countries
– Consumer research completed, branding underway
– Online store and other infrastructure put in place for
consumer launch
• Diversification/Product Addition
– Over 75 products/companies evaluated
– Ongoing discussions with top targets
– Expected first deal announcement in calendar 2015
8
The Condoms Markets
Consumer
Global Market
$4-6 Billion
Units ~10-12 Billion
Global Public Sector
Family Planning
HIV/AIDS
Global Condom Public Health
$ 400 – 500 Million
Units ~10 Billion
9
Why Female Condoms for the Consumer Market?
• US Women generally unhappy with
hormonal birth control side effects
• Major side effects are weight gain and
moodiness but some are very serious
• Traditional alternative is male condom
which reportedly lessens pleasure
• Female condom is non-interruptive, and
couples report a more natural and
enjoyable feel
Women in the US want an alternative to
hormones that is pleasurable!
10
Online Store
11
Consumer: What’s Next
• Coming Soon:
– New Brand
– New Package
– New Condom Colors – requires FDA pre-approval
– Social marketing campaign to target users
12
Why FC2 Demand Will Continue To Grow
•
Continued Global Focus on HIV
– Feminization of AIDS – leading cause of death women age 15-44
– 35 million persons living with AIDS, 2.3 million newly infected in
2012
•
Exploding incidence of STIs around the world
– 20M new cases every year in the US alone, half occurring in
young people aged 15-24
•
Tapping into Consumer Market - Non-hormonal birth control
alternative
– Many US women report dissatisfaction with the side effects of
hormonal birth control
•
Female Controlled Protection
– Basic rights, education, opportunity
13
Talented New Management Team
•
Karen King – CEO and President
–
Effective January 20, 2014
–
Previous Experience
•
-- Effective July 10, 2014
–
• Royal DSM – President Biologics
and
BioSolutions
•
Executive Vice President
• Baxter International
Michele Greco – Executive Vice President
and Chief Financial Officer
–
Effective January 1, 2013
–
Previous Experience
• Ernst & Young LLP Audit Partner
Previous Experience
• DuPont, BASF, DSM, and Cambrex
• The Female Health Company –
•
Susan Ostrowski – Executive Vice President of Sales and
Marketing
Martin Tayler – Executive Vice President of Global Operations
–
Effective September 15, 2014
–
Previous Experience
• SSL International PLC (under Durex and Dr Scholl’s
brands),Reckitt Benckiser Group plc
•
OB Parrish - Chairman
–
A FHCO founder
–
Previous Experience
• Pfizer – Executive V.P. of International Division
• G.D. Searle – President of Global Pharmaceuticals
14
Adding New Team Capabilities
Sales and Marketing Capabilities Being Added without
Incremental Headcount
•
•
•
•
VP Sales and Marketing
US Sales and Marketing Director
Global Commercial Director
Consumer Marketing Manager
Operations Leader with Significant Global Male Condom
Experience
15
State-of-the-Art Manufacturing
100 million unit capacity, with ability to add
up to an additional 100 million units.
16
Low Risk, Unique Business Model
• Modest inventory level, production primarily against orders
• Low foreign currency exchange risk, FHCO & Subs Report in
$USD
• Minimal credit risk, less than 1% bad debt in past five years
• Shifting training/education spending to sales/marketing
• $2 M unused credit facility
• NOL carryforward:
– UK:
– US:
– State:
~$63 M – No expiration date
~$17 M – Expiring in years 2018 to 2027
~$17 M – Expiring in years 2018 to 2027
17
FY 2015 – 2013 Results
Q2 YTD 2015
(millions)
2014
(millions)
2013
(millions)
Units
32.9
42.5
54.8
Revenue
$17.6
$ 24.5
$31.5
Gross Margin
$10.2
$ 13.1
$17.5
Operating
Income
$4.4
$ 3.9
9.8
Tax Expense
(Benefit)
$2.0
$ 1.5
($4.4)
Net Income
$2.5
$ 2.4
$14.3
EPS - Diluted
$0.09
$ 0.08
$0.50
Tax-cash
payments
$0.16
$0.77
$0.35
Adjusted
EBITDA
$3.3
$4.5
$10.5
EPS – Diluted,
as adjusted
$0.11
$0.16
$0.36
• 9 years profitable
• No debt
• Accumulate cash for
acquisitions
• Brazil tender for up to 50
million units / 25 million
units ordered
• Strategy to accelerate
growth in current
markets and expand into
new markets
• NOL’s utilized to reduce
cash payments for
income taxes
18
Unit Sales
100% sales of lower
price, higher margin,
next generation FC2
Millions
70
61.6
60
54.8
50
40
34.7
30
20
CAGR
13.2 %
40.2
42.5
38.9
32.9
25.9
19.6
10
0
2006
FC1
2007
2008
2009 2010
FC1 & FC2
2011
2012
2013
FC2
2014
19
Net Revenues
100% sales of lower price,
higher margin,
next generation FC2
$ in millions
40
$35.0
35
$31.5
30
$25.6
25
20
15
$27.5
$24.5
$22.2
$19.3
$18.6
$14.8
10
5
0
2006
FC1
2007
2008
2009
FC1 & FC2
2010
2011
2012
2013
2014
FC2
20
Gross Margin
100% sales of lower price,
higher margin,
next generation FC2
% of net revenue
53.1
49.1
50
40
58.9
58.2
60
55.6
53.6
2013
2014
41.9
37.0
37.0
2006
2007
30
20
10
0
FC1
2008
2009
FC1 & FC2
2010
2011
2012
FC2
21
Competition
FC2
Marketed Globally
Cupid
Marketed Outside U.S.
PATH – Women’s
Condom
Not Marketed
Only one other female condom approved by WHO – Cupid – not approved by FDA
22
Competition
FC2
Cupid
PATH – Women’s Condom
Nitrile Polymer
Natural rubber latex
Polyurethane
2 retention rings:
-External ring covers the lips of the
vagina
- Internal ring lies against the cervix
and anchors the device
Octagonal outer ring. Sponge to
anchor the device internally.
Large external ring:
-Tabs on the exterior of the device that
reportedly adhere to the vaginal wall
- Inserter made from a water soluble polymer
that melts in the body and may help keep the
product in place
Non-allergenic
Allergenic
Pre-lubricated
Pre-lubricated
Not Pre-lubricated
-Must be lubricated at time of use
-Only internal side of product may be
lubricated. External lubrication may prevent
tabs from working
May use water and oil based
lubricants
May only use water based
lubricants
May use water and oil based lubricants
May be inserted in advance
FHC capacity 100MM, with ability
to double
Website indicates approx 10MM
capacity
23
FC2 Barriers To Entry
• Patents principally on use of nitrile and nitrile/design
elements:
— 38 patents in 50 countries
• FC2 proprietary material formulation
• Worldwide product specific training and education
• Country registration process
• FDA approval/WHO clearance
24
FHC Summary
• Stable, profitable company
• New strategy focused on driving Company growth
• Small percentage of total potential market reached
to date = opportunity for growth
• Experienced leadership
25