The Female Health's (FHCO) CEO OB Parrish on Q2 2016 Results - Earnings Call Transcript

| About: The Female (FHCO)

The Female Health Company (NASDAQ:FHCO)

Q2 2016 Earnings Conference Call

July 28, 2016 11:15 AM ET

Executives

OB Parrish – Chief Executive Officer

Michele Greco – Executive Vice President and Chief Financial Officer

Mitch Steiner – President-Aspen Park Pharmaceuticals

Analysts

Peter Baker – Baker Investor

Peter McMullin – IPC Global

Stephen Dearholt – The Health Company

Joshua Horowitz – Palm Global

Eric Weinstein – Chancellor

Operator

Good day, ladies and gentlemen, and welcome to The Female Health Company's Second Quarter Fiscal Year 2016 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

The statements made on this conference call that are not historical in nature are forward-looking statements including those regarding the outlook for the company's business and those regarding proposed merger transactions between FHC and Aspen Park and the integration of our two businesses. Such forward-looking statements reflect the company's current assessment of the risks and uncertainties related to its business. The company's actual results and future developments could differ materially from the results or developments in such forward-looking statements.

Factors that may cause actual results or developments to differ materially includes such things as product demand and market acceptance; the timing of receipt and shipment of large orders, competition, the ability to execute on new business strategies, the risk that the proposed transaction with Aspen Park Pharmaceuticals may not be completed in a timely manner or at all, risk that the proposed transaction could disrupt current plans and operations, risks related to the development of Aspen Park's product portfolio and its business and other risk detail in the company's press releases, shareholder communications and securities and exchange commission filings. For additional information regarding such risks, the company urges you to review its 10-Q and 10-K SEC filings.

I would now like to turn the conference over to Mr. Parrish, please go ahead.

OB Parrish

Thank you, Dino [ph]. Welcome to The Female Health Company's second quarter 2016 conference call. Michele Greco, our Executive Vice President and CFO, is here with me in our Chicago office.

This morning I'll make two brief comments regarding the company's strategic objectives, then I will cover the financial results key factors that may impact future results, finally I will address the future outlook including the proposed merger with Aspen Park Pharmaceuticals. Mitch Steiner, President of Aspen Park Pharmaceuticals is participating today to assist in answering questions regarding the merger. As usual, when I refer to years, I am referring to the company's fiscal year, which ends September 30, unless otherwise noted.

In July 2014, the company established two strategic objectives. First, diversifying its product line, and second increasing the marketing of FC2. The rationale for diversification was based on the significant risks of continuing as the single product company with increasing competition [indiscernible] on public funding. The proposed merger with Aspen Park Pharmaceuticals would fulfill our diversification objective, and provide a remarkable opportunity for current and future investors. I will address this in detail when discussing the outlook.

Second, the Board has approved an FC2 commercial consumer marketing program in the U.S. based on review of changes in the U.S. market, contingent and submission of a detailed creative program and budget. We believe the proposed merger will enhance the FC2 consumer marketing opportunity.

Turning to financial results, we believe the results for the quarter and first half reflect the volatility of the public sector market in reference to the timing of tenders, awards and shipments of major orders rather than any change in basic demand. In late 2014, the company was awarded a record tender by Brazil for up to 50 million FC2 units. This resulted in orders of 40 million units, a significant portion we shipped in the second quarter of 2015, creating a record second quarter and first half. The primary differences and remittance [ph] on results between 2016 and 2015 were due to the comparison of shipments to Brazil.

Specifically in the second quarter, unit sales totaled 9.29, down 56% from the second quarter of 2015. Debt revenues for the quarter total 4.8 million, a decrease of 57% from 11.9 in the prior year quarter. Gross profit decreased to $0.55 to $2.8 million for a margin of 60% compared with $6.4 million or a margin of 58% the prior year quarter.

Operating expenses decreased $670,000 or 19% to $2.8 million from the prior year quarter. It's important to note that during the quarter the company incurred investment expense with no current return related to the evaluation of the FC2 consumer program and diversification program, totaling $648,683.

Operating income for the quarter totaled $70,425, compared to $2.9 million in the prior year quarter. Net income totaled $35,045 down from $1.7 million in the second quarter of 2015. Earnings per share were breakeven, a decrease from the $0.6 per share in the prior year quarter. It is important to note the company remained profitable despite a 56% decrease in revenues and funded investment expenses of $648,683 with no current return. Excluding these investment expenses, operating income totaled $719,108 or an operating margin of 14%.

Operating income excluding investment expenses is a non-GAAP financial measure. We believe that this non-GAAP financial measure is useful for investors as a supplemental measure to evaluate our overall performance. A reconciliation of this appears along with our press release.

For 6 months unit sales totaled $24.5 million, down 25% from the first 6 months of 2015. Net revenues totaled $13 million, a decrease of 26% from $17.6 million in the prior year period. Gross profit decreased 19%, 8.2 million for a margin of 63% compared to a 10.2 million for a margin of 58% in the prior year period. Operating expenses for the first 6 months were $5.8 million which was flat compared to the prior year. The investment expenses related to the evaluation of an FC2 consumer program and diversification totaled approximately $309,000 and $807,000 respectively for a total of $1,116,000.

Operating income totaled $2.5 million, a decrease of 44% from $4.4 million in the prior year period. The operating margin was 19% versus 25% in the first 6 months of 2015. Excluding the investment expenses of $1,116,000 operating income, was $3.6 million from operating margin of 28%. Net income decreased 38% to $1,525,408 or a margin of 12% from $2,472,491 or a margin of 14% in the first six months of 2015.

Earnings per diluted share were $0.05 per share, a decrease of 44% from $0.9 per share in the prior year period. Turning to cash flow, cash flow from operations for the first half was a negative $1,311,679 which included the investment expense of $1.1 million and a negative change in operating assets of $4 million.

Our Brazil receivable, net of what we owe our distributor totals $13.4 million. The company has received significant orders from Brazil over a ten year period. During this period we have experienced delays in payments but never a default. To date no defaults have been reported in reference to the current situation in Brazil. Companies in Brazil and outside of Brazil are continuing to do business with the government. And important reason for this is that Brazil has strong liquidity position due to significant foreign currency reserves. To date in 2016 the resilient economy and currency has actually strengthened. Based on advice we have had from consultants, in our opinion we believe that we will be paid the outstanding receivable.

Turning to tax loss carry-forwards, due to the fact that as of December 31, 2013, the valuation allowance on the company's deferred tax assets was fully reversed the company no longer recognizes tax benefits on its P&L statements. However, it is important to note that the net operating loss carry-forwards will continue to be utilized to reduce cash payments for taxes charged.

For the first six months of 2016, the company recorded tax expense of $801,629. However, we paid only $168,220 of taxes or just 21% of the total charge recorded. This resulted in cash savings of $633,409 for the period. As of March 31, the company had tax loss carry-forwards of $12.6 million in state and $13 million on federals in the U.S., and $61.9 million in the U.K., which may be used to significantly reduce future cash payments for taxes. The UK tax loss carry-forwards do not expire.

There are four key factors that may impact the company's future results. First is diversification, the proposed merger with Aspen Park Pharmaceuticals is a cardinal element that will impact the future of the company. I will cover this in more detail when we get to the outlook section.

The second factor is that while it will continue to be evolved, we expect the female condom market to grow in the long-term for two reasons; first, for the prevention of HIV-AIDS and other sexually-transmitted infections, and unintended pregnancies. HIV-AIDS remains a leading cause of death among women 15 to 44 years of age worldwide, 50% of all people living with and new cases of AIDS are women. In the U.S., one in four 18 to 24-year-olds will contract a sexually transmitted infection annually. Unintended pregnancies caused American tax-payers $21 billion a year.

The second reason the market will continue to grow is the Zika virus epidemic. The World Health Organization declared a global emergency regarding the Zika virus. It is transmitted by mosquitoes and through sex. The current Zika outbreak was first detected in Brazil and has now been reported in more than 40 countries. Women who are or become pregnant and are infected with the virus may give birth to babies with microcephaly resulting in small head size. It is also then linked to Guillain-Barré syndrome and potentially may cause other neurological disorders. Male and female condoms are the only products that can concurrently prevent pregnancy and sexual transmission of the Zika virus. Female condoms are an ideal choice for prevention due to the unique impact of the virus on women.

I would like to note that in Brazil, the Ministry of Health recently issued a statement indicating pregnant women should use condoms specifically mentioning the female condom to prevent the transmission of Zika.

Due to the accelerated use of the female condom FC2 in Brazil as a result of Zika, a new tender for female condom is under consideration. If they should issue such a tender, they would have to pay the receivables outstanding and in addition the World Bank has considered funding such a tender.

The third factor that will impact the future is the U.S. consumer marketing of FC2. As noted, the Board approved the U.S. consumer promotion based on evaluation of recent changes in the market. These changes include the fact that female condoms are now reimbursable under ObamaCare. The increased focus on preventing unintended pregnancies and sexually transmitted disease among young women and increased interest in non-hormonal birth control, the increased role of social media in marketing, increased U.S. drug retailer interest in contributing to healthcare, the increased online purchasing of such products, it is estimated 33% of male condoms are purchased online. We believe the consumer promotion will compliment public sector promotion and increase overall awareness and revenue in the U.S.

The fourth factor that will impact the future is competition and education and training. The company has had competition in the global public sector for more than three years. The first competitive product was cleared by WHO in 2012. This year too additional competitive products were cleared by WHO, Velvet marketed by HLL and the women's condom marketed by PATH. FHC's FC2 remains the only female condom with FDA approval.

I should mention that Velvet is made of latex and unlike FC2 is allergenic and more likely to rip and tear. PATH product is made of polyurethane and is significantly more expensive than FC2. To date, the competition hasn't been able to obtain a significant market share. The role of education and training is a key factor here. Product specific education and training increases the number of available products actually used reducing the cost for protected sex act. The public sector is beginning to focus on the cost for protected sex act. The company is the only company currently providing significant education and training for its product. I believe the four factors that I just reviewed will net a positive for the future of the company.

Now I'd like to turn to the outlook. I believe the long-term outlook for FHC is excellent for three reasons. First, changes in the U.S. market that provided excellent opportunity for FC2 consumer promotion, second the fact that the female condom market will continue to grow. The United Nations joint program on AIDS estimates that since the beginning of the epidemic condoms have averted 50 million new cases of HIV/AIDS and have called for the availability of 20 billion male and female condoms per year by the year 2020. There is a impact of the Zika virus on the market and reflecting this the company has shipped over 500 million female condoms and has an average annual compound unit sales growth rate for 10 years of 16%.

Third and most important, there is a proposed merger with Aspen Park pharmaceuticals. The merger is transformative, if completed it would provide the potential for long-term growth and enhanced share holder value for five reasons. First, it results in a high potential multiple product portfolio. Second it provides proprietary product positions three of which are subject to the potentially less risky, less costly, and expedited 505(b) (2) FDA regulatory approval process. As a result this provides potential near term revenue and cash flow.

Third, the merger will complement and enhance FC2's consumer market opportunities. Fourth a multiple product portfolio may capitalize on the company's public health care status and provide the potential for an increase on investor opportunity. And fifth, that bring an experienced and excellent management team for the new company. The FHC Board approved the merger after the company had evaluated more than one hundred nutritional opportunities, and had completed a scientific intellectual property legal and financial due diligence process.

My personal support of the merger is based on two things, first my own experience in the pharmaceutical industry which is extensive. For those who may not know, at Pfizer I was divisional VP for pharmaceutical marketing in the U.S. at one time, literally managed two U.S. pharmaceutical divisions and then I was EVP of the international division where I was responsible for multiple businesses in certain countries and pharmaceutical marketing outside of the U.S.

Later at G.D. Searle, I was President of the global pharmaceutical group involving more than 7,000 people in 44 countries and 25 manufacturing facilities in 15 countries. My second personal reason that's based on my perspective of the opportunity is the significant shareholder.

In summary, I support the proposed merger for three reasons that provide a remarkable opportunity to mitigate the risk associated with being a single product company. Second, the considerable upside potential of products and development including product subjected to the potentially lower risk, 505(b) (2) FDA regulatory approval process and third it comes with an experienced management team specifically Mitch Steiner who can help lead the company for the long-term. If the proposed merger with Aspen Park Pharmaceuticals is completed, we believe FHC will become a high growth company with multiple high potential products and continue to be the female condom market leader and I am enthusiastic and fully support the merger and recommend the support of all FHC shareholders.

Now we will take some questions, Dino.

Question-and-Answer Session

Operator

Okay. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions]

The first question comes from Peter Baker from Baker Investor. Please go ahead.

Peter Baker

Thank you, and thank you for taking my questions. As you know, the Zika virus epidemic has been around for about eight months now, and it appears that based on today's earnings call that new orders are not really materializing even for the public sector. The revenues reported for this past quarter would suggest that some of the pricing and competition and global issues facing the FC2 are beginning to materialize.

HLL, an Indian company has the capacity and they are making basically latex version of FC2 at a cheaper prices, not to mention the other two global competitors out there. It appears that they must be taking some of the orders that otherwise Female Health Company should be getting. Giving these earnings results, frankly, I am very worried that if this merger with Aspen Park does not go through, there will be very little left if anything of the Female Health Company. So I just have two questions, where are the new orders for FC2 that are a response to the Zika virus? And the other is how many orders were awarded to HLL and your other comps instead of the Female Health Company?

OB Parrish

In reference to your first question, in the public sector it takes a while for them to react in reference to funding for those. For example, Obama proposed that $1.9 billion being allocated to the Zika virus. Congress has been looking at it. And just recently after spending some time looking at it, agreed to provide an expedited clearance through the Congress. Out of that 1.9 million, 335 million is to be allocated to USID, which purchases products including female condoms and male condoms. Other groups have also volunteered to provide funds, the World Bank $150 million and the World Bank is considering funding a new tender for Brazil. So while it takes time, I think, that there will be substantial orders from the Zika virus.

Secondly, in reference to competition, well, it's there, what other competitors has been available for three years and they have nominal orders in terms of any total orders on female condoms, certainly less than 10% of the total. To-date, we haven't seen any HLL orders that doesn't mean they won't receive them but there are a number of issues including the education and training that are factors on this. I think that certainly we have to take into consideration the aspect of competitors but I think that the female condom will continue to be the leading female condom.

Peter Baker

All right, thank you OB for that and while I understand where you are coming from, it's just very clear to me that I truly believe that the Female Health Company needs to complete this deal with Aspen Park, really in order to survive I mean it just shows how vulnerable the company is with just a single product, but that's just my opinion.

OB Parrish

I don't disagree with a single product question.

Peter Baker

Thank you very much.

Operator

The next question comes from Peter McMullin with IPC Global. Please go ahead.

Peter McMullin

Hey, OB, I've got two questions for you today. It seems like most of your sales are being financed into accounts receivable, is there any chance that trend will change and second question would be what's happening with South Africa where you got a portion of the order? Are you able to increase your market share on that order?

OB Parrish

Well, in reference to the first question, as I mentioned, we believe the Brazil receivable will be paid, and two aspects to it are the facts that the Brazilians are considering issuing a new tender because of the Zika virus issue in Brazil. If they do that, according to their own rules they would have to pay us and maybe that these Zika virus issue and the need for additional condoms will actually help us to get paid. In addition the World Bank has considered funding a condom program in Brazil, if they did that we wouldn't necessarily mean we get paid the receivable but we surely will get paid from World Bank. We have had no other problems with other receivables whatsoever. We have less than 1% bad debts over the last five years.

Peter McMullin

Does that mean that most of the sales in the quarter went to Brazil again?

OB Parrish

In this quarter or last quarter?

Peter McMullin

Yes, this quarter.

OB Parrish

Some went to Brazil, but significantly less than before.

Peter McMullin

Okay, thanks; and South Africa?

OB Parrish

That's a very good question because one of the issues there relates to education and training. Actually one competitor product was distributed there and it wasn't highly used. And so we were contacted by the officials there asking if we could help to provide education and training in the use of the competitor product which we wouldn't do, we would do it for our product but it goes to the point I was making Peter that if you don't have education and training you may get low use rate for the product available. Now there was, if you distributed a thousand of the and only 200 were used, the cost of protected sex act is significant. If you distribute a thousand and 800 were used it is much less and we have just seen an example of that in South Africa.

Peter McMullin

So does that mean your market share for that order is perhaps eking up?

OB Parrish

We have received more than what our original allocation was.

Peter McMullin

Thank you.

Operator

The next question comes from Stephen Dearholt from the Health Company. Please go ahead.

Stephen Dearholt

Hi, OB, how are you today?

OB Parrish

Great.

Stephen Dearholt

As you know I was not entirely thrilled when we cut the dividend several years ago. But that's water under the bridge. So I understand your decision to diversify because it makes sense for a public company to have more than just one product. So I'm calling in just to let you know there's a large shareholder with over almost 2.3 million shares that I am very much behind this merger with Aspen Park Pharma. And frankly, I'm very impressed with the fact that you are able to come up with a partner here that can bring four or five new products instead of just one. I was afraid it was just going to be one. This gives you a lot more, many more shots and into of especially large potential markets. So congratulations on that front.

On the question that I have and I'm not sure that you're legally even able to say anything about this but assuming the merger goes through, can you give us a guess of when you think the first product might make it to market? That's one question. The other is, the tax loss carried forward in the U.K., do you have a strategy to be able to set up a company over there and maybe even get approvals faster to be able to run it through the UK and use up that tax loss carry forward?

OB Parrish

Well I'll answer the second question. Certainly the tax loss carry forward will continue to - will not be lost as a result of the merger if it is successful. And there maybe a number of opportunities that could be developed to use that tax loss carry forwards Steve. Mitch maybe you could answer the question on the timing for our first product.

Mitch Steiner

I'd be happy to. And Mr. Dearholt thank you for calling in and the good news is we've been out on the road talking to folks and they share the same sentiment you do about the Female Health Company and the Aspen Park merger and so we're very, very excited about the potential. You raised a good point, although we have five products, the one that's most closest to potential approval is the BPH product because essentially it's a 505 extreme 505(b) (2) meaning that the expectation is to do one bio-equivalency study comparing the proprietary new formulation which is a powder to the tablet or capsule. And so the expectation is that we'll do the bio-equivalency study starting the end of this year beginning of 2017 and then at that point it's just quickly as we can meet with the FDA and file the NDA.

So the expectations to file the NDA in 2017 which is, you know, next year. And then we wait for the FDA which you know 10 months later you're launching a product it doesn't require a sales team. So, you know, that shows you how near term that is and the cost for that BE study is and everything leading to the BE study is about 2.8 million. So it's not a lot of dollars as people like to associate with biotech. So this is not biotech, this is measured products that have a history of efficacy and safety that we can leverage that somebody else paid the money and time for. And how do we turn that into a big opportunity that we can take advantage of in our focus which is men's Health and women's health?

Stephen Dearholt

Did you say you did not need a sales force for this?

Mitch Steiner

That's correct because it's a different formulation, you can focus on patients that are unable to swallow and this can become what we call as pharmacy switch strategy meaning that the pharmacists can ask the patient, can you swallow tablets or not? And also it turns out there are about three GPOs Group Purchasing Organizations that control, oh about 90% of nursing homes. And so we focus on long-term care first then this can be done contracted with these folks and that the position in the nursing homes and the pharmacies can make a decision which patients with stroke, Parkinson's, etcetera would benefit from getting their medicine as a powder so they get an efficacious dose versus not. So that would be the first spot. And as you know the market is big. I mean the market for alpha-blockers is in the order of $3 billion plus and we're not asking to go out there and get 50% market share or 70% market share. If we can get 3%-5% market share it will dwarf what we're getting revenue wise with the female condom.

OB Parrish

Okay, that also agrees Mitch which I think is interesting is not only do you have a low cost, very soon development of the product which you also have a low marketing cost when you go in.

Stephen Dearholt

Yes, all of that is good stuff. Okay, thank you.

Mitch Steiner

Thank you.

Operator

The next question comes from Joshua Horowitz from Palm Global. Please go ahead.

Joshua Horowitz

Thank you. Mitch, could you review again the math on how you get to the $300 million opportunity for the BPH product?

Mitch Steiner

Yes, I'd be happy to. And that's based on IMS data and so the IMS dated that I'm referring to is from March of 2014 to March 2015 looking at the entire class for BPH. And if you look at the entire class the market is about $4.1 billion and if you look at tamsulosin, which is the version that we're making. The new formulation is of the active which is tamsulosin or the generic product. And that market according to IMS data is about 3.475 billion. Long-term care if you've got all of it which is 13.43% total market share it's about $336 million. And so what we're assuming is that we're not going to be a generic price, we'll be slightly higher than we basically close it to the branded price and that we think that we'll get significant portion of long-term care but the upside would be in the 15% of men over the age of 60. They're unable to swallow and so that's another market. And so if you look at just, you know, 10% of the market, the total market that would get you a genericized market, it'll get you close to $300 million but we're not going to be a generic price. And so we think we can be less than that and still get close to that at peak.

Joshua Horowitz

So just so I understand, so if your price -- what would your price be -- what percentage of Flomax?

Mitch Steiner

Again -- yes, so Flomax and again this is all subject to change based on where we are year and a half from now but the assumption is that the market, the generic product -- backup -- the branded price for tamsulosin is closer to $5 and we would take a percentage of that, let's say 70% and these are individual packs that will have their own and DC code and we'll be on the compendium which means that they're not considered AB rated generic, this would be a solution to a problem. And so rather than be quoted generic it will be 70% of a branded priced because it is a new formulation and is a 505(b) (2) as opposed to an ANDA.

Joshua Horowitz

Thank you. I guess I'm just having a hard time reconciling if this opportunity is so massive and takes such little capital to get over the goal posts why give away half of your company to get it done?

Mitch Steiner

Why give half? Because the view is not giving away half of our company. If you look at just today versus where we want to be, we want to be a big company and a big company means you need to have early revenue generating products that will fuel the rest of the pipeline. So this is a one off which is not what we're interested in, we're interested in building a real company. This would be a perfect product to jumpstart all the other products that we have so we can move towards self-funding which is a different concept and biotech it's not self-funding. Biotech you're out there just raising money every time you can raise money and dilutes the shareholder. This is a different model. And so you hit exactly the nail on the head and that is that we want to have a serious revenue product. If it turns out that we're half wrong we'd sow a big market. And so I'm not looking at where we are today, I'm looking at where we want to go.

Joshua Horowitz

Okay. Thank you.

Mitch Steiner

Thank you.

Operator

The next question comes from Eric Weinstein from Chancellor. Please go ahead.

Eric Weinstein

Thanks. It sounds like there's this disconnect, at least to me, between this perceived viability of the Female Health Company as a standalone versus its ability to fund diversification and there are many ways to go about diversification. One way to do it, I suppose, is to trade some product diversification risk for product development risk and it seems like we did a lot of that. Yes, there are other ways where you could look beyond life sciences and use the assets to leverage something else that would be more comparable when in the wheel house I think of existing companies. But I'm trying to understand the disconnect between the perceived availability of the company to succeed on a standalone basis right now with the perceived value of it and its ability to fund the development of these new drugs, the new drug portfolio some may work, some may not. It maybe 505(b) (2) that's less riskier than a biotech in a traditional sense but in the scheme of risky assets this is still very operational ones. So I guess I just can't really put the pieces together between a declining company and a declining company that actually has the ability to fund a large drug portfolio that will still take many years to come to market. Some may or may not succeed. I just can't put the two together. If you can help with that I'd appreciate it.

OB Parrish

I'll make one comment and I'll let Mitch make one. I think that the Female Health Company as a standalone business would continue but if we still have a single product company and there is an inherent risk in that we also have the volatility and competition and we have dependents upon a government funding which is volatile. Whether the company is profitable and it does provide some cash flow and with that I think Mitch you might be able to talk behind the use of cash and the funding of the development.

Mitch Steiner

Yes, and you know I have spoken directly with Eric before and I appreciate him taking the time to listen and so to answer that you're absolutely right. Having a female condom that is able to generate cash on a regular basis would be wonderful. Truth of the matter is it's a single product company. You're seeing a quarter, this quarter, that's worrisome, you don't know what next quarter is going to look like, and you can look at the past and there are competitors out there so can have there's inherent risk here in the U.S. we still don't know what's going to happen. But with that said we've got to believe that if it stays where it is then and given the cash resources, which is the account receivables, plus cash, plus potentially a credit facility and we're smart about how we spend the money and add people. So in other words if we add a head count of six to seven not 67 but six or seven individuals that are basically incredibly smart project managers, you know, is drug development risky? Absolutely. Is it less risky in a 505(b) (2)? Yes. Why? Because you're leveraging which already seen with this drug for efficacy and safety from the literature or what a partner has done and spent their money.

And does it take more years? Yes. Some of them will take, you know, three to five years and some will take 18 months. And then we have in our pipeline a product will take maybe longer than that. But the idea is not to start spending all of the money at first. The idea is to focus on two things. Focus on the BPH product which if you can file an NDA next year means you'll have patient data which will hopefully bring the enterprise value and the prostate cancer product which once you're in phase one which the goal is to be in phase one next year with end points that you can see the drug is working with PSA you'll increase value. I mean today it's a no fees putting a, almost a $9-10 bid $10 billion bid for a company called Medivation who did a deal with Astellas in an early phase two asset in prostate cancer. And if you go back and look it wasn't many years ago maybe its five years, something like that, four years.

So if you want significant growth I don't think there's a disconnect. If you want a single product company and follow that along and think that $40 million-$50 million valuation you're going to be able to get what kind of product today versus a product we've invested some money. You know you have an opportunity for some big upside. So from our standpoint Aspen Park we see, we look at this as a combined deal where having some resources come in can help us to self-fund and also and the public markets have the ability as the products do well to be opportunistic if the stock price reflects that.

Eric Weinstein

Yes, I mean, there are many ways to approach de-risking. A similar product company this one just seems a bit off the deep end for a number of reasons but my, I guess just to follow-up assuming that all goes well with product development when would you hit break even assuming no incremental financing?

Mitch Steiner

So breakeven, so the idea would be that we would file the NDA in 2017 and then in 2018 we're thinking we're making revenue and so hoping we're going to be pretty close to a flat or a cash positive with the existing product as long as we're careful with the resources. So I think initially we want to be careful and try to show a win before we start spending money on other opportunities that are going to take more money. So I think its part of its strategy. The good news is we have assets because you have to go buy those assets and you have to collect those assets, each asset has value. And so, we have a collection of assets and now the question has moved the one that's closest to the finish line first and uses that to self-fund the rest. So if it's just the Female Health Company product you won't be able to do it. If it's a Female Health Company product plus the BPH product we're going to be in good shape in short time. Now that's the difference between a pharmaceutical revenue versus a device or in this case the female condom which is basically a device revenue, just different.

Eric Weinstein

Okay.

Mitch Steiner

Thank you, appreciate the question.

Operator

The next question comes from Buss Ike from Ike [ph]. Please go ahead.

Unidentified Analyst

Yes, I own about a quarter million shares of the stock. I've owned it off and on over the years and I've been in the brokerage business 48 years and ran a microcap hedge fund for 22 years. You all had a valuation of 80 million and then deal was announced. Now we've got a valuation of 40 million and of course I'm going to be voting for this deal. And then you're going to be merging with a company that's what was a -- you get 55% of the company, what were their valuation on their last raise?

OB Parrish

Mitch, you want to mention about that?

Mitch Steiner

Yes, and so make sure we have the same numbers. I think at the time we announced the deal the price of the stock was $1.74 and as of yesterday the stock was about $1.50. So just to put that…

Unidentified Analyst

It was $2.70.

Mitch Steiner

No, it was $1.70. I know that day well, sorry.

Unidentified Analyst

In March, it had a high of $2.75, I'm sure.

Mitch Steiner

Yes, I agree with that.

Unidentified Analyst

Some people maybe knew about the deal and may have sold…

Mitch Steiner

No, no I hope not, I hope not. That would not be the case. So, no. But with that said the real question asking is what is the valuation of Aspen Park? What we've said publicly in our call last time in the last round of financing, we had $100 million valuation. We've also the company, the Female Health Company also did a fairness opinion independent of Aspen Park and independent of the Female Health Company and came up with a valuation close to that. We're taking a percent of a company as opposed to money or cash.

And the reason we're doing that is because we believe in the future growth of the company and not looking at what the company looks like today. If the company is what it looks like today I don't think any of us are going to be excited about the stock. I mean, you really have to believe by having this engine called the female condom and being able to come into the U.S. and taking our products including Preboost, which is over-the-counter FDA approved ready to go now. And they bring some incremental sales so we can see money sooner rather than later and then all of a sudden have a pipeline of pharmaceutical products with pharmaceutical multiples so multiple shops on go so that you can really have some upside for a stock that's been flat. And so that's the thinking at least from the Aspen Park standpoint and I know having spoken with OB that he feels the same. OB, do you want to comment?

OB Parrish

Yes, I think that's exactly right. The bib question is its successful and I believe that it's wealthy [ph] and I believe the BPH product will come out and perhaps in 2018 that very simply the multiple in that type of a product in terms of impact on their market will be significant on itself. And if you're a couple that would be additional potential of the other products. I think it's remarkable and that's I'm a major shareholder that's one of the reasons I'm for it.

Mitch Steiner

And we appreciate you, we appreciate…

Unidentified Analyst

One other thing, I'm going to be voting for but it seems like it's a two plus two is a five situation that you've got one, you've got some assets and the little conservative ones got a little pizazz and Aspen Park is an area where you can have pretty high multiples with no earnings at all and the assets go up and down the elevator. One last question, were the ones, were there ever any valuation done on Female Health as a -- say if somebody were acquiring the company?

OB Parrish

Well, we certainly have and we in looking for this we went through a hundred possibilities. We didn't take that off the table but we have had valuations done of Female Health and of course it's a public company so the valuation is in the market.

Unidentified Analyst

Okay then, thank you very much.

Mitch Steiner

Thank you.

Operator

The next question comes from Joshua Horowitz from Palm Global. Please go ahead.

Joshua Horowitz

Actually I have a similar question to the last caller but on the other side of the coin Mitch, do you look to do anything with Aspen other than merge with Female Health? And given that I believe less than $4 million of total capital even went into Aspen and you've turned that into a 10X multiple here, would you have been able to get even higher offers or bid from anybody else?

Mitch Steiner

Yes, so great question. And so in all, you know, you're saying we put $4 million into and therefore its worked $4 million and that's an unfair statement. We collected four assets of which can go into five indications including an over the counter product. Any one of those can dwarf a $4 million valuation. What we brought to the table is creativity, going out and sniffing out after 20 years of experience, opportunities that can be patented and protected, and that's what we used our money for. So we created assets and if you find an oil well does that mean that you spent $2 million you shouldn't have the value what's in the ground? That's you know, no. And so yes, we spent $4 million.

Now what were our options? Six months ago we were considering going out and doing a fundraise, instead we got a phone call from Torreya Partners which is the bank that's representing the Female Health Company. And after six months of going back and forth I as a CEO and President and with our board we had a discussion that said, look what if you were able to get a similar cash raise and a product and go public and be able to make one plus one equals 10 or 15, you know how many steps you stop?

So I would argue it's not just a valuation benefit. It's also a benefit of accessing the public markets from a standpoint of valuing your stock with these opportunities. If we're able to take these opportunities and these assets and get out there and explain these assets to institutions that will buy stock in the combined company. There's going to be a lot of valuation created. At this point now the Female Health Company by itself has about 6% institutional coverage. That's small. And so we've -- I just felt that this whole thing is undervalued and whole thing being Female Health Company's undervalued, we're undervalued by putting it together but if you look at it today then that doesn't really reflect where we think we're going to be. And if we thought it was today and we just wanted to do a cash grab we would have taken money. And if we're trying to do a grab for the future we take a percentage and we grow it together. And that's really how we thought about the deal Josh.

Joshua Horowitz

Thank you for that.

Operator

[Operator Instructions] Ladies and gentlemen this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

OB Parrish

Thank you, Dino. I would like to thank everybody for their participation and all the questions that were asked. They were good questions and I would like to reiterate my support for the merger. I think it will be an outstanding opportunity for current investors and for future investors. I'm enthusiastic and I fully support it. Thanks much for your participation.

Mitch Steiner

Thank you.

OB Parrish

Bye

Operator

To access the digital replay of this conference you may dial 1877-344-7529 or area code 412-317-0088, beginning on Monday May 2nd at 9 am Eastern Standard Time. You will be prompted to enter a conference number which will be 100-84977. Please record your name and company when joining. The conference has now concluded. Thank you for coming to today's presentation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!