Editor Thomas Rice talks to the company’s leaders
On Friday, February 5, Editor Thomas Rice had the opportunity to speak with CEO O.B. Parrish and CFO Michele Greco of January 2016’s Company of the Month, The Female Health Company (FHCO):
Thomas Rice: Can you briefly describe what it is that The Female Health Company does?
O.B. Parrish: Our principal role at The Female Health Company is the development and marketing of the female condom, which has traditionally been used by public sector programs for disease prevention, particularly of HIV/AIDS, and the prevention of unintended pregnancy.
Rice: Despite competition for the past three years, how have you maintained a dominant market share?
Parrish: There is one other company that has achieved World Health Organization (WHO) clearance, but the company has had two problems: (1) the capacity to deliver in a timely manner and (2) some quality issues with the product they have delivered.
Another long-term aspect is that from a public sector standpoint, it’s not about how many units you buy, but the cost per protected sex act. For example, if someone buys 1,000 units at $0.35 a piece and there are 350 protected sex acts, the cost per protected sex act is $0.88. But, if there are 850 protected sex acts, the cost would be significantly reduced per act. The public sector looks at that product usage, which is tied directly to the education and traning that FHCO provides.
Rice: Is that training included with the purchase from a public sector customer?
Parrish: Generally speaking, there is no additional charge. We have a lot of people on the ground that set up training programs and work with them. We provide printed and audio and visual materials, along with multi-lingual websites for training.
Rice: As we’ve seen, working in the public sector subjects sales to fluctuations based on order timing. Can you discuss the sales cycle a bit and what actions you are taking to mitigate some of the larger fluctuations?
Parrish: There can be significant volatility quarter-to-quarter and year-to-year. There are ups and downs, but if you look at it over a period of 10 years since we’ve become profitable, the compound annual growth rate of units sold is 16%. If you look through the volatility, you’ll see a good projection on growth. We’ve also been able to maintain positive cash flow and no debt despite the ups and downs.
Rice: A more recent growth strategy is the strategic acquisition of a complimentary company or product. Can you describe your ideal candidate and where you are in identifying that candidate?
Parrish: We’ve been actively involved in that since last year and we’ve identified explicit possibilities. It could be the acquisition of a product or the licensing of a product, or a merger with a company.
The ideal candidate is something that is proprietary; something that differentiates from other products in its category; something that a company of our nature would be able to handle and execute; and, something that deals with female health. We’re not talking about a totally different business of some kind.
Rice: There are a number of growth opportunities for the current product. Can you describe those opportunities?
Parrish: There are several factors that make our product a good opportunity at this time:
- Reimbursement under the Affordable Care Act;
- Increased focus on prevention of pregnancy and spread of sexually transmitted diseases among young women; and
- Increased use of social marketing and the Internet to sell products of this nature, which reduces the cost of promotion. One third of male condoms are purchased online, and the FC2 is currently online through Amazon, Walgreens and Walmart with an increasing number of websites carrying the product.
All of that suggests there might be an opportunity for direct-to-consumer promotion that would be complimentary to the public sector. We’ve been doing a study over the past six months that looks at consumer trade names, packaging and promotion. We’re also looking at the rate of use after that initial purchase, as well as what type of revenues and profits that would support.
We would enter the direct-to-consumer market in a way that would be a risk we could afford to take. We wouldn’t just go out and put our product in 10,000 retail stores or run a big advertising campaign and hope it works.
Rice: Do you have an idea of the costs associated with the direct-to-consumer market versus the public sector?