WOMEN FIRST HEALTHCARE INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-26487

WOMEN FIRST HEALTHCARE, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 13-3919601
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

12220 EL CAMINO REAL, SUITE 400, SAN DIEGO, 92130
CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(858) 509-1171
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $ .001 PAR VALUE
(TITLE OF CLASS)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of February 29, 2000, the aggregate market value of the registrant's
voting stock held by non-affiliates of the registrant was approximately
$44,283,941, based on the closing price of the Company's Common Stock on the
Nasdaq National Market on February 29, 2000 of $5.875 per share.

As of February 29, 2000, 17,270,552 shares of registrant's Common Stock,
$.001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's definitive Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after the close of the fiscal
year are incorporated by reference into Part III of this report.

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PART I

ITEM 1. BUSINESS

The discussion of Women First HealthCare, Inc.'s business contained in this
report may include certain projections, estimates and other forward-looking
statements that involve a number of risks and uncertainties. For a discussion of
factors which may affect the outcome projected in such statements, see "Risks
and Uncertainties" on pages 15 through 23 of this Report on Form 10-K. While
these statements represent our current judgment on the future direction of the
business, such risks and uncertainties could cause actual results to differ
materially from any future performance listed below. We undertake no obligation
to release publicly the results of any revisions to these forward-looking
statements to reflect the events and circumstances arising after the date of
this annual report.

OVERVIEW

Women First HealthCare, Inc. is a specialty health care company dedicated
to improving the health and well-being of midlife women. Our mission is to help
midlife women make informed choices about their physical and emotional health
and to provide pharmaceutical products, self-care products, educational programs
and support systems to help these women improve the quality of their lives. We
market these products in the United States through a number of channels
including our dedicated sales force, our direct-to-consumer marketing programs
through our Internet sites, womenfirst.com and aswechange.com, and through our
national As We Change(R) catalog.

The pharmaceutical products we offer include Ortho-Prefest(TM), an oral
combination hormonal replacement therapy (HRT) product which received approval
from the FDA in October 1999 and was introduced to the market in January 2000
under a co-promotion agreement with Ortho-McNeil Pharmaceutical, Inc., a related
party. We also offer the Esclim(TM) estradiol transdermal system, which we have
licensed from Laboratoires Fournier, S.A., Pravachol(R), a leading
cholesterol-lowering drug that we co-promote with Bristol-Myers Squibb U.S.
Pharmaceuticals Group, and Ortho-Est(R), an oral estrogen product used for HRT
that we distribute pursuant to an agreement with Ortho-McNeil Pharmaceutical.
During 1999, we offered Ortho Tri-Cyclen(R), a leading oral contraceptive, under
the co-promotion agreement with Ortho-McNeil Pharmaceutical. Through December
31, 1999, we did not meet the minimum performance levels required to receive
compensation under this co-promotion agreement in relation to Ortho
Tri-Cyclen(R). As a result, we have not recorded revenue under this agreement
through December 31, 1999. Effective as of March 31, 2000, Women First has
discontinued the co-promotion of Ortho Tri-Cyclen(R). Under an amendment, which
is being negotiated, Ortho Tri-Cyclen(R) will be eliminated from the
co-promotion agreement but Women First will continue to co-promote
Ortho-Prefest(TM).

Our self-care products include a broad array of nutritional, herbal,
exercise, fitness, beauty, wellness and other products which we sell through our
national mail-order catalog, As We Change(R), and our Internet retailers,
womenfirst.com and aswechange.com. We are also preparing to launch Women
First(TM) Daily Difference(TM), a line of nutritional products developed in
cooperation with the Tufts University School of Nutrition Science and Policy.

INDUSTRY TRENDS

We believe that the markets for pharmaceutical and self-care products for
midlife women are changing because of the following trends:

- a significant and expanding population of midlife women as the "baby
boom" generation ages,

- the expanding roles of OB/GYNs and the nurse practitioners and
physician's assistants focused on women's health,

- an increasing awareness of the conditions and diseases that affect
midlife women and the development of new products to address them,

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- recognition of the dissatisfaction among midlife women about their health
care,

- the importance of information and education in helping women make
informed decisions regarding their midlife health, and

- increasing opportunities for product licensing, acquisition, co-promotion
and development by specialty pharmaceutical companies.

According to the U.S. Census Bureau, there are approximately 59 million
women in the United States between the ages of 35 and 69. That number is
expected to grow to 67 million women by the year 2010. Every day during this
period, approximately 4,000 to 5,000 women will enter menopause. IMS Health
reports that U.S. pharmaceutical sales were approximately $112.1 billion for
1999, and that approximately 58% of prescription drugs are used by women.

We have conducted market research through an independent research company
with 400 women between the ages of 45 and 55 to determine their satisfaction
with current treatment approaches and alternatives. We also have held
discussions with practicing physicians and other specialists in women's health
care. Our research indicates that these women want menopause to be treated as a
naturally occurring condition rather than a disease and are seeking a source of
credible and comprehensive information about midlife health. We also found that
midlife women want choice and individualized solutions that address their
changing physical and emotional requirements. Our research and the research of
third parties further suggests that:

- most women are not proactive in their health care needs in midlife,

- although most experts agree that the benefits of HRT outweigh the risks
for most women, approximately 15% of eligible women currently take HRT,

- approximately 20-30% of midlife women do not fill their prescriptions for
HRT,

- approximately 20% of women discontinue using HRT within nine months of
initiation, and

- most women feel that physicians do not spend sufficient time with them
and approximately 40% switch physicians because of a perceived lack of
time and sympathy on the part of the physician.

As women transition through menopause, their bodies begin to reduce the
production of the steroid hormones, estrogen and progesterone. Studies have
shown that with the significant loss of estrogen and progesterone production
after menopause, the long-term health care needs of women change significantly.
Among other things, women experience changes in their cardiovascular, skeletal,
neurologic, urologic and reproductive systems and may experience changes in
their sexual and emotional needs. Studies have shown that HRT alleviates the
symptoms commonly associated with menopause and may reduce the risk of
cardiovascular disease and osteoporosis. However, some women experience side
effects associated with HRT including bloating, weight gain, breast tenderness,
headaches, nausea and breakthrough bleeding. In addition, women may discontinue
using HRT due to a perceived risk of breast cancer. According to IMS Health,
retail pharmaceutical sales for HRT in the United States were approximately $1.8
billion in 1999.

According to the American Heart Association, coronary heart disease is the
single largest killer of American women. In 1996 in the United States, all
cardiovascular diseases combined claimed the lives of approximately 506,000
women compared to approximately 453,000 men. The American Heart Association also
estimated in 1996 that approximately 52 million women had cholesterol levels of
200 mg/dL or higher, which is a major risk factor for developing cardiovascular
disease. A survey conducted by Women First in 1999 revealed that nearly half of
women over age 45 who visit their OB/GYN as their primary care provider are not
being screened for cardiovascular disease. The survey, among 4,000 US women,
1,900 of whom were aged 45 or older, also found that 19% would be considered at
high risk for CVD and had not had their cholesterol screened within the last
five years.

In addition, the Association of Professors of Gynecology and Obstetrics
estimates that 25 million women have, or are at a high risk of developing,
osteoporosis. There are approximately 250,000 hip fractures each year in women,
and an estimated 15% of women in their mid-60s will fracture a vertebrae, rising
to 30 - 40% of women by their mid-80s. Notwithstanding the high rate of
incidence of these conditions among midlife

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women, researchers at the National Center on Women and Aging at Brandeis
University found that nearly 60% of the women they surveyed between the ages of
45 and 75 were unaware of significant health risks such as heart disease.

STRATEGY

Our objective is to become a premier marketer of health care products for
midlife women by responding to current industry trends and by establishing Women
First as a widely recognized source of pharmaceutical and self-care products
targeted at this group of women. We are implementing the following strategies in
order to achieve this goal:

- LEVERAGE THE EXPANDING ROLE OF OB/GYNS AS PRIMARY CARE PHYSICIANS. We
believe that the expanding roles of OB/GYNs and the nurse practitioners
and physician's assistants focused on women's health create a market
opportunity for us. We are leveraging this opportunity by providing an
educational platform to increase these clinicians' knowledge of the
diagnosis and treatment of conditions and diseases affecting midlife
women and using this platform to promote hormonal management and
cardiovascular pharmaceutical products. We also plan to use this platform
to promote pharmaceutical products that address other conditions and
diseases often affecting women later in life, such as depression,
osteoporosis and incontinence, as well as nonprescription self-care
products, such as nutritional supplements.

- ENHANCE SALES THROUGH FOCUSED MARKETING EFFORTS. We are focused on
reaching our target market of 59 million midlife women through our sales
and marketing programs to OB/GYNs and the nurse practitioners and
physician's assistants focused on women's health and our
direct-to-consumer Internet and catalog marketing programs. We employ our
150 sales representatives to market our pharmaceutical products
throughout the United States, with a primary emphasis on OB/GYNs, nurse
practitioners and physician's assistants focused on women's health. We
market our self-care products to midlife women through a comprehensive
direct-to-consumer marketing program that includes the As We Change(R)
catalog, as well as the womenfirst.com and aswechange.com Internet sites.

- BECOME A PRIMARY SOURCE FOR WOMEN'S HEALTH CARE EDUCATION. We believe
that as women and clinicians become more informed, they will be more
likely to use or recommend pharmaceutical and self-care products that
address women's needs in midlife. Accordingly, we seek to provide
credible and comprehensive information to women and their clinicians. To
help us achieve this goal, we have organized a Health Advisory Board
comprised of a group of pre-eminent clinicians and scientists with
expertise in women's health to develop the content for a
multi-dimensional educational program called Gateway to Midlife
Health -- A Better Way(TM). Through an unrestricted grant from Women
First, the Mount Sinai School of Medicine and the Women's Health Care
Education Foundation have developed and sponsored the clinician education
portion of the program in cooperation with the Keck School of Medicine of
the University of Southern California. Two additional programs for
OB/GYNs and the nurse practitioners and physician's assistants focused on
women's health have also been offered, "Managing Cardiovascular Risk in
Women -- A Better Way(TM)" and "Lifetime Hormonal Management -- A Better
Way(TM)." The former is sponsored by Bristol-Myers Squibb and Women
First, and the latter is supported through an unrestricted educational
grant from Ortho-McNeil Pharmaceutical and Women First. The "Lifetime
Hormonal Management -- A Better Way(TM)" program is also jointly
sponsored by the Keck School of Medicine of the University of Southern
California and the Women's Health Care Education Foundation, in
cooperation with the Mount Sinai School of Medicine. We believe that
these educational programs will serve as an important resource for
clinicians on the healthcare needs of midlife women, as well as enhance
awareness of Women First among women and their clinicians.

- ESTABLISH "WOMENFIRST.COM" AS A COMPREHENSIVE INTERNET SITE FOR MIDLIFE
WOMEN. We believe that midlife women are actively seeking credible and
comprehensive information regarding their health concerns as well as
opportunities to purchase products related to their particular needs. Our
Internet site, womenfirst.com, contains extensive educational information
for women, while our

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aswechange.com Internet site contains a thoughtfully selected array of
self-care and lifestyle products. These sites provide an effective
platform to market the self-care products we currently offer and, in the
future, to promote the products of other companies that are targeted at
midlife women.

- SEEK PRODUCT CO-PROMOTION, CO-MARKETING AND PRODUCT ACQUISITION
OPPORTUNITIES. We plan to expand the range of products we offer midlife
women by obtaining rights to market and sell branded pharmaceutical and
self-care products to these women. One area of focus is on products that
are not being actively marketed to OB/GYNs or the nurse practitioners and
physician's assistants focused on women's health that complement the
product lines we currently offer or that we can distribute on an
exclusive basis. We continue to engage in discussions with major
pharmaceutical companies to license, acquire or co-promote pharmaceutical
products that have been approved by the FDA or pharmaceutical products in
the late stages of clinical development.

PRODUCTS

Pharmaceutical Products

In January 2000, we began to co-promote Ortho-Prefest(TM) (17
Beta-estradiol/norgestimate), a new oral combination estrogen and progestin HRT
product which received FDA approval in October 1999. Pursuant to our
co-promotion agreement with Ortho-McNeil Pharmaceutical, Women First promotes
Ortho-Prefest(TM) to designated OB/GYNs, primary care physicians, nurse
practitioners and physician's assistants focused on women's health care in the
United States and Puerto Rico. Ortho-Prefest(TM) combines 17 Beta-estradiol, the
principal form of estrogen produced naturally by the ovaries of pre-menopausal
women, with norgestimate, the most widely prescribed low-dose progestin, in a
unique pulsed regimen. Physicians generally prescribe a combination
estrogen/progestin product or a progestin along with estrogen to reduce the risk
of endometrial cancer in women with an intact uterus.

In November 1999, we initiated sales and distribution of the Esclim(TM)
estradiol transdermal system, an estrogen patch system that releases small
amounts of 17 Beta-estradiol, the main estrogen produced in the ovaries, through
the skin on a continuous basis. Esclim(TM) replenishes declining levels of
estradiol using a patented matrix technology. Under our distribution and license
agreement with Laboratoires Fournier S.A., Women First has the exclusive right
to promote, sell, and distribute the Esclim(TM) product line in the United
States and Puerto Rico. The product, a patch that is changed twice a week, is
available in a range of dosage strengths including 0.025, 0.0375, 0.05, 0.075
and 1.0 milligrams. Esclim(TM), which received FDA approval in August 1998, is
the leading transdermal estrogen product in France and has been launched in a
number of European countries and Canada.

We obtained the right to market Pravachol(R) (pravastatin sodium), an
HMG-CoA reductase inhibitor or "statin," to designated OB/GYNs and the nurse
practitioners and physician's assistants associated with OB/ GYN practices
pursuant to a co-promotion agreement with Bristol-Myers Squibb in March 1999,
and began our co-promotional efforts in relation to this product in the second
quarter 1999. Pravachol(R), which is available in three dosage strengths of 10
mg, 20 mg and 40 mg, has been shown to reduce the risk of a first heart attack
and coronary heart disease, as well as the risk of future heart surgery to clear
blocked arteries, in patients with high cholesterol without clinical evidence of
coronary heart disease. It also has been shown to reduce the risk of recurrent
heart attacks, stroke and mini-stroke as well as the risk of heart surgery to
clear blocked arteries in patients with prior heart attacks and normal
cholesterol (less than 240mg/dL). In patients with coronary heart disease and
hypercholesterolemia, Pravachol(R) is indicated to reduce the risk of total
mortality by reducing coronary death. Pravachol(R) has been shown to reduce
these risks by lowering total cholesterol and low density lipoprotein (LDL),
while increasing high density lipoprotein (HDL). Although, based upon our
performance for the first two quarters under the agreement, Bristol-Myers Squibb
has the right to terminate the agreement upon sixty days' prior written notice,
we are currently negotiating to restructure this agreement in order to improve
our ability to recognize revenue from our sales efforts.

We began selling and distributing Ortho-Est(R) (estropipate), a
soybean-derived estrogen product, through wholesale and retail channels pursuant
to an exclusive distribution agreement with Ortho-McNeil Pharmaceutical in July
1998. Ortho-Est(R) is available on the market in the United States in two
strengths, .625mg and

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1.25mg. The Ortho-Est(R) product replenishes declining estrogen levels in
midlife women with estrone, the principal type of estrogen that the body makes
following menopause.

Effective as of March 31, 2000, Women First discontinued the co-promotion
of Ortho Tri-Cyclen(R), a leading oral contraceptive, which had been offered
under a co-promotion agreement with Ortho-McNeil Pharmaceutical.

Self-Care Products

We offer a variety of self-care products to midlife women through our
subsidiary As We Change, LLC, a national mail order catalog and Internet
retailer directed at midlife women, and through our Internet sites,
womenfirst.com and aswechange.com. The As We Change(R) catalog offers women a
range of more than 200 products designed to meet the needs of women at midlife.

Nutritional Products

We plan to introduce Women First(TM) Daily Difference(TM), a line of
nutritional products uniquely formulated to address the specific needs of
midlife women during the second quarter of 2000. Developed by the Tufts
University School of Nutrition Science and Policy, these products will include a
daily nutritional supplement (multivitamin plus calcium), along with specialized
formulations intended to promote healthy bones and joints, vision, the
cardiovascular system, the skin, and the immune system in midlife women. To
assist women in their selection of nutritional supplements, we also are creating
a program to individualize nutritional recommendations to women based on factors
such as family history, lifestyle and physical characteristics. According to
Packaged Facts, the market for nutritional products is a large and growing
market, exceeding $5 billion in annual sales in the United States in 1998.

Other Products

In September 1998, we entered into an exclusive licensing arrangement with
CHPNC, LLC, pursuant to which we have the exclusive right to manufacture, market
and sell a product entitled, "Benefit: Risk Assessment Model." We are funding
the development of this product, a patient health questionnaire and software
program that assesses a woman's risk for developing heart disease, breast cancer
and osteoporosis. This product is based on Dr. Nananda Col's research that was
published in the Journal of the American Medical Association in April 1997 and
incorporated in her book, entitled A Woman Doctor's Guide to Hormone
Therapy -- How to Choose What's Right for You. We have completed the development
of RENEWAL -- a time for you(TM), a program that offers women practical
approaches to achieve a sense of well being in midlife, in conjunction with Dr.
Deepak Chopra and an exercise video, Strong Women Stay Young, which is based on
research published by Dr. Miriam Nelson, a highly respected expert on women's
health issues.

In the fourth quarter of 1999, Women First discontinued the operations of
Women First Pharmacy Services, Inc., and also discontinued the promotion of the
SafeStart(TM) umbilical cord clamp/cutter and certain consumer product
activities.

MARKETING AND SALES

Pharmaceutical Products

In August 1998, there were approximately 29,000 board certified OB/GYNs in
the United States. We have recruited and trained a direct pharmaceutical field
sales organization of 150 sales representatives to market pharmaceutical
products to these practices. We intend to hire additional sales representatives
as warranted by the growth of our business. To optimize our sales efforts, we
have prioritized OB/GYNs based on the frequency with which they prescribe
hormonal replacement therapy products. We have also hired a staff to support the
field sales force, including customer service representatives, sales trainers
and sales and contract administrators. Our co-promotion agreement with
Ortho-McNeil Pharmaceutical provides that Ortho-McNeil Pharmaceutical will
support our marketing and sales activities for the Ortho-Prefest(TM)

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oral combination HRT product by providing sales training, supplying product
samples and promotional materials, jointly developing marketing strategies and
promotional plans with us, and planning and financially supporting educational
programs. Our Pravachol(R) co-promotion agreement provides that Bristol-Myers
Squibb will support our marketing and sales activities through participation in
sales force training, jointly developing marketing strategies and promotional
plans and planning market research.

Internet

We are implementing an "e-commerce" initiative through our womenfirst.com
and aswechange.com Internet sites. We launched womenfirst.com in May of 1999 to
provide extensive health information for women and the clinicians who care for
them. Our content covers more than 50 topics including information on acute and
chronic conditions, nutrition, fitness and alternative health as well as access
to interactive tools for health assessment and real-time medical news. In
December 1999, we developed a marketplace of products for women 40-plus on
womenfirst.com. In March 2000 we launched a Professional Gateway to provide
professional materials for OB/GYNs. Through the aswechange.com site, we provide
access to all of the products sold through our catalog, As We Change(R).

Because of the significant educational content we have placed on the
womenfirst.com Internet site, we believe that the site will be an attractive web
link. Pursuant to an agreement with iVillage Inc., we have provided educational
information on midlife health issues in a Women First designated area on
ivillage.com and implemented a link from the iVillage site to womenfirst.com.
iVillage has hosted one online event related to midlife health, a discussion
with Deepak Chopra, M.D, and has agreed to host two additional such events.
Under a separate agreement with our subsidiary, As We Change, LLC, iVillage has
established links on ivillage.com to the aswechange.com Internet site.

As We Change

Our As We Change, LLC subsidiary offers a broad array of self-care products
including nutritional, herbal, beauty, exercise, wellness and personal care
products. Since its inception in 1996, As We Change has published 14 unique
catalogs, generated more than 192,000 orders and currently has an in-house
database of nearly 177,000 customers and catalog requesters. The catalog
features private label products that are tailored to meet the individual
lifestyle needs of women. Private label products currently account for
approximately half of the catalog offering. As We Change has developed a
sophisticated infrastructure including a call center with telephone and Internet
customer support capability, warehouse and shipping, new product screening and
sourcing, catalog design and production, database and circulation management and
e-commerce.

EDUCATIONAL AND SUPPORT PROGRAMS

The Women First(TM) Clinician Education Program. Our Health Advisory Board
has developed the content for a midlife health education program entitled
"Gateway to Midlife Health -- A Better Way(TM)," to educate OB/GYNs, and the
primary care physicians, nurse practitioners and physician's assistants focused
on women's health with the goal of improving the diagnosis and treatment of
midlife conditions and diseases. Through an unrestricted grant from Women First,
the Mount Sinai School of Medicine and the Women's Health Care Education
Foundation have developed and sponsored the clinician education portion of the
program in cooperation with the Keck School of Medicine of the University of
Southern California. Two additional programs for OB/GYNs and the nurse
practitioners and physician's assistants focused on women's health have also
been offered, "Managing Cardiovascular Risk in Women -- A Better Way(TM)" and
"Lifetime Hormonal Management -- A Better Way(TM)." The former is sponsored by
Bristol-Myers Squibb and Women First, and the latter is supported through an
unrestricted educational grant from Ortho-McNeil Pharmaceutical and Women First.
The "Lifetime Hormonal Management -- A Better Way(TM)" program is also jointly
sponsored by the Keck School of Medicine of the University of Southern
California and the Women's Health Care Education Foundation, in cooperation with
the Mount Sinai School of Medicine. In August 1999, Women First launched a
nationwide program aimed at creating awareness of a woman's risk for developing
cardiovascular disease by offering free cholesterol testing in certain OB/GYN
offices across the country.

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The Women First(TM) Consumer Education Program. We have established
womenfirst.com as a comprehensive Internet site containing extensive information
on healthcare and lifestyle issues of concern to midlife women. Our content
covers more than 50 topics including information on health, nutrition, fitness
and alternative health, as well as access to interactive tools for health
assessment and real-time medical news. The content is clinically referenced,
consistent with Women First's philosophy of providing evidence-based education.

We have also developed a patient handbook called "A Better Way(TM) to
Midlife Health -- Your Personal Guide" that provides information to women about
midlife health issues including menopause. Each booklet includes a journal
section where women can record their symptoms and personal health data to
improve their interaction with their clinician.

MANUFACTURING AND LOGISTICS

We do not plan to establish manufacturing capability. We will source the
products we offer through manufacturing agreements with third-party
manufacturers. The third-party manufacturers will be responsible for receipt and
storage of raw materials, production, packaging, labeling and shipping of
finished goods. With regards to our pharmaceutical products, we currently have
arrangements with Laboratoires Fournier, S.A., for the supply of the Esclim(TM)
estradiol transdermal system and with Ortho-McNeil Pharmaceutical for the supply
of the Ortho-Est(R) oral estrogen product. Bristol-Myers Squibb is responsible
for the supply of the Pravachol(R) product in all distribution channels.
Ortho-McNeil Pharmaceutical is responsible for the supply of the
Ortho-Prefest(TM) oral combination HRT product in all distribution channels. For
more information about our sources of supply, see "Risks and Uncertainties" on
pages 15 through 23 of this Report on Form 10-K.

Initially, we intend to engage independent companies specializing in the
distribution of pharmaceutical and medical products to wholesalers, pharmacies
and hospitals to provide physical distribution and logistics management for the
pharmaceutical and medical device products we distribute. Livingston Healthcare
Services, Inc. currently provides these services.

COMPETITION

The health care industry is highly competitive. Most of our competitors and
those of our collaborative partners are large, well-known pharmaceutical, life
science and health care companies that have considerably greater financial,
sales, marketing and technical resources than we have. Additionally, these
competitors have research and development capabilities that may allow them to
develop new or improved products that may compete with product lines we market
and distribute. The pharmaceutical industry is characterized by continuous
product development and technological change. The pharmaceutical products we
market and distribute could be rendered obsolete or uneconomical by
pharmaceutical products developed by competitors, technological advances
affecting the cost of production, or marketing or pricing action by one or more
competitors. In addition, competitors may elect to devote substantial resources
to marketing their products to midlife women and may choose to develop
educational and information programs like those we have developed to support
their marketing efforts. Our business, financial condition and results of
operations could be materially and adversely affected by any one or more of such
developments.

Pharmaceutical Products

The pharmaceutical products we offer face significant competition.
Ortho-Prefest(TM), the new oral combination HRT product, Ortho-Est(R), the oral
estrogen product, and the Esclim(TM) estradiol transdermal system compete in the
hormone replacement therapy market. The primary competition in this market is
Wyeth-Ayerst Pharmaceuticals, Inc., a division of American Home Products, which
markets Premarin(R), an oral estrogen product, and Prempro(R) and Premphase(R),
combination oral estrogen and progestin products. The HRT products we market
also compete with HRT products marketed by Parke-Davis, a Warner Lambert
Division, Solvay Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc., and
others, as well as generic HRT products. The HRT products we market also compete
with non-hormonal replacement therapy products marketed by Merck & Co., Inc.,
and Eli Lilly & Company. In addition, the Esclim(TM) estradiol transdermal

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system competes with estrogen and combination estrogen/progestin patch products
marketed by Berlex Laboratories, Watson Laboratories, Inc., Novogyne
Pharmaceuticals and Rhone-Poulenc Rorer Pharmaceuticals, Inc. The Pravachol(R)
product competes with other cholesterol-lowering products marketed by Merck &
Co., Inc., Parke-Davis, Pfizer, Inc., Novartis Pharmaceuticals Corporation and
Bayer Corporation. Each of these competitors has substantially greater
marketing, sales and financial resources than we do.

Self-Care Products

Competition for the self-care products we offer is significant. As We
Change competes with a number of catalog companies and Internet retailers
focusing on self-care products. Transitions for Women(R) offers a range of
nutritional and herbal products for midlife women and Self Care(R), Well &
Good(TM), Feel Good(TM), Solutions(R), Intellihealth HealthyHome(TM) and
Harmony(TM) market and sell general lifestyle and personal care products.

Our Daily Difference(TM) nutritional products when launched will face
substantial competition from products such as Centrum(R), marketed by
Whitehall-Robins Healthcare, Natrol(R), marketed by Natrol, Inc., Nature
Made(R), marketed by Nature Made Nutritional Products, One-A-Day(R), marketed by
Bayer Corporation, Theragran(R) and Theragran-M(R), marketed by Bristol-Myers
Squibb, Viactiv(R), marketed by Mead Johnson Nutritionals and Myadec(R),
marketed by Parke-Davis. Each of these competitors has substantially greater
marketing, sales and financial resources than we do.

Other Education and Support Programs

Our educational programs will compete with programs that have been
developed by medical professionals and non-professionals alike. Our Internet
site, womenfirst.com, will compete with other Internet sites focused on women's
health as well as sites focused on health care issues in general, such as
cbs.medscape.com, nlm.nih.gov/medlineplus, healthfinder.gov, reutershealth.com,
drkoop.com, and webmd.com.

LICENSING AND CO-PROMOTION AGREEMENTS

Ortho-Prefest(TM) and Ortho Tri-Cyclen(R). We obtained the right to
co-promote the Ortho-Prefest(TM) and Ortho Tri-Cyclen(R) products in the United
States and Puerto Rico to designated physicians and nurse practitioners in the
field of women's health care pursuant to a co-promotion agreement with
Ortho-McNeil Pharmaceutical effective July 1, 1999 and continuing through
December 31, 2002 unless earlier terminated. We may extend this agreement for
one additional year provided minimum sales goals are met.

Ortho-McNeil will compensate us for sales of Ortho-Prefest(TM) through a
compensation arrangement based on the net sales of the product from
prescriptions written by the clinicians who are called on by us. Ortho-McNeil
also may reduce the payments otherwise required to be paid to us under the
agreement with respect to Ortho-Prefest(TM) if we do not make a specified
portion of the minimum number of sales calls for that product.

Under the co-promotion agreement, we are responsible for our costs in
promoting the product covered by the agreement and our out-of-pocket expenses in
training our sales force, except for the costs of certain promotional materials,
training materials and expenses and product samples which are provided by Ortho-
McNeil. Ortho-McNeil is responsible for the manufacture, labeling, distribution
and selling of the products. The agreement prohibits us from marketing,
promoting, selling or distributing any prescription contraceptive or
prescription hormonal replacement therapy product other than the Ortho
Tri-Cyclen(R), Ortho-Est(R) and Ortho-Prefest(TM) products and other than an
estrogen patch product (subject to specified restrictions) during the term of
the agreement and the three months following the expiration of the term. The
co-promotion agreement also limits the number of products other than Ortho
Tri-Cyclen(R) and Ortho-Prefest(TM) that our sales force may present during the
same sales call as Ortho Tri-Cyclen(R) and Ortho-Prefest(TM). The agreement
expressly permits Ortho-McNeil to enter into a co-promotion agreement with a
third party with respect to Ortho-Prefest(TM) but not with respect to Ortho
Tri-Cyclen(R).

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The co-promotion agreement requires us to make a significant number of
sales calls each year, with the number increasing significantly after the launch
of Ortho-Prefest(TM) in January 2000. The agreement also allows Ortho-McNeil to
terminate the agreement in the event at least a specified portion of the minimum
sales calls are not made for three consecutive quarters. As of December 31,
1999, we had not made the required minimum number of sales calls for two
consecutive quarters. The agreement also may be terminated by either party on a
product by product basis if any product covered by the agreement loses
regulatory approval. In addition, the agreement also may be terminated in the
event that there is a change in control of Women First or if Edward F. Calesa or
David F. Hale is no longer associated with Women First (other than as a result
of death or disability). A change in control includes the acquisition by a third
party unaffiliated with Women First of (1) a majority of our stock or the right
to vote a majority of our stock or (2) sufficient stock to elect a majority of
our Board of Directors or (3) the power to designate a majority of our Board of
Directors. The agreement also may be terminated for other specified reasons.

The agreement requires Ortho-McNeil to compensate us for sales of Ortho
Tri-Cyclen(R) with a performance fee based on the value of Ortho-McNeil's net
increase in its market share of oral contraceptive products for the
prescriptions written by the clinicians called on by us over the increase, if
any, in Ortho-McNeil's market share for oral contraceptive products for the
prescriptions written by the clinicians who are not called on by us. Through
December 31, 1999, we did not meet the minimum performance levels required to
receive compensation under this co-promotion agreement in relation to Ortho
Tri-Cyclen(R). As a result, we have not recorded revenue under this agreement
through December 31, 1999. Effective as of March 31, 2000, Women First has
discontinued the co-promotion of Ortho Tri-Cyclen(R). Under an amendment, which
is being negotiated, Ortho Tri-Cyclen(R) will be eliminated from the
co-promotion agreement but Women First will continue to co-promote
Ortho-Prefest(TM).

Esclim(TM). In July 1999, we entered into a distribution and license
agreement with Laboratoires Fournier S.A. under which we have been granted the
exclusive right (subject to exceptions) to market, use, distribute and sell the
Esclim(TM) estradiol transdermal system in various dosages in the United States
and Puerto Rico. The agreement requires us to pay Fournier a non-refundable
license fee of $1.45 million payable over a two-year period, with $700,000 of
this fee subject to sales objectives being reached. As of December 1999, we have
already paid $750,000 of the total amount of the license fee owed to Fournier
under the agreement. We are also required to pay Fournier a royalty during the
term of the definitive agreement based upon the net sales of the product. The
agreement provides that Fournier is solely responsible for the manufacture of
the product and for quality assurance, quality control and other aspects of
manufacturing the product, except that after payment of the initial license
fees, Fournier has transferred to us responsibility for the New Drug Application
filed with the FDA with respect to the product. We are solely responsible for
U.S. customs clearance, sales, marketing, advertising, distribution of the
product and for handling product complaints.

Pravachol(R). We obtained the right to co-promote the Pravachol(R) product
in the United States to OB/GYNs, primary care physicians designated as OB/GYNs
by Bristol-Myers Squibb U.S. Pharmaceuticals Group, and nurse practitioners and
physician's assistants associated with OB/GYN practices, pursuant to a
three-year co-promotional agreement effective March 1, 1999 with Bristol-Myers
Squibb. Under the agreement, we are responsible for the costs incurred by both
parties in approved promotions of the product to the clinicians covered by the
agreement (less a specified credit) and for the training of our sales force
relating to the Pravachol(R) product. Bristol-Myers Squibb is responsible for
the manufacture, shipping, distribution and warehousing of the product as well
as billing and collection services. Bristol-Myers Squibb has agreed to pay
specified costs associated with product samples and education of the clinicians
covered by the agreement.

Bristol-Myers Squibb compensates us with a performance fee paid quarterly
based upon the number of prescriptions written by the clinicians covered by the
agreement above an applicable baseline number. During the first year, the
quarterly baseline amount increases each quarter. During the second and third
years, the baseline amounts increase by a percentage which reflects growth in
prescriptions for pravastatin in the United States over the prior year. Our
compensation is calculated based on a percentage of net sales from prescriptions
in excess of the applicable baseline amount as adjusted to reflect previous
payments. In addition, we are entitled to receive a residual compensation
payment during the 24-month period following the

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expiration of the agreement as long as Bristol-Myers Squibb does not terminate
the agreement due to our breach of or failure to perform our obligations under
the agreement.

In the event that Pravachol(R) prescriptions written in the United States
by the clinicians covered by the agreement do not exceed specified minimum
prescription amounts that increase quarterly in the first year and yearly from
year to year thereafter, Bristol-Myers Squibb may terminate the agreement. The
minimum amounts require us to achieve a significant increase over the number of
prescriptions for this product currently written by the clinicians covered by
the agreement and substantially exceed the baseline amounts used for purposes of
calculating the performance fee. Bristol-Myers Squibbs' termination rights arise
upon either our failure to meet certain prescription forecasts for two
consecutive quarters or the yearly prescription forecasts for one year.
Moreover, if we experience a change in control, Bristol-Myers Squibb may
terminate the agreement. A change in control includes: (1) the sale of any
securities which transfers over 50% of our assets relating to the product to any
person, (2) any person or entity that derives more than half of its gross
revenues from the sale, licensing or distribution of drug products, nutritional
agents and medical devices or the provision of drug or device management
services becoming the beneficial owner of 20% of the combined voting power of
Women First, or (3) any person becoming the beneficial owner of 50% of the
combined voting power of Women First. The agreement may also be terminated for
other specified reasons. As of December 31, 1999, the end of the first three
consecutive quarter periods under the agreement, we had not achieved the minimum
amounts during the first three quarters of the agreement. Although Bristol-Myers
Squibb has the right to terminate the agreement upon sixty days' prior written
notice based upon our performance, we are currently negotiating to restructure
this agreement in order to improve our ability to recognize revenue from our
sales efforts.

Ortho-Est(R). We obtained the rights to distribute and sell the
Ortho-Est(R) product in the United States and Puerto Rico pursuant to an
exclusive distribution agreement dated as of July 1, 1998 with Ortho-McNeil
Pharmaceutical. The agreement requires us to make minimum aggregate payments of
$33.4 million to Ortho-McNeil over the remaining eight-year term of the
agreement, regardless of the actual sales performance of the Ortho-Est(R)
product. We are required to make a minimum payment of $5.4 million during 2000.
The minimum payments in future years decrease annually based on a ten-year
forecast that was determined at the time the contract was executed. If our
annual purchases of the Ortho-Est(R) product exceed our minimum payments, we are
entitled to the amount of this excess less specified royalties and manufacturing
costs. Ortho-McNeil may terminate the distribution agreement (1) upon one year's
notice so long as Ortho-McNeil provides us with a one-year supply of the
Ortho-Est(R) product and uses reasonable commercial efforts to transfer to us
the manufacturing and distribution rights to the product, (2) immediately if the
cost of FDA revalidation, should it become necessary, exceeds $3 million, or (3)
for other specified reasons.

Benefit: Risk Assessment Model. In September 1998 we entered into a license
agreement with CHPNC, LLC to develop a patient health questionnaire and software
program related to hormonal replacement therapy based upon the book A Woman
Doctor's Guide to Hormone Therapy -- How to Choose What's Right for You. Under
the agreement, we are obligated to pay over the first two years of the agreement
a development fee in the amount of $900,000, of which we paid $275,000 in 1998
and $450,000 in 1999. The development fee is payable to CHPNC regardless of
whether or not the product is released for sale to the public. In addition,
commencing in the third year of the contract, we must make minimum royalty
payments over the remaining term of the contract, which commence at $100,000 and
which increase by an additional $100,000 for each two-year period thereafter.
This license is subject to becoming non-exclusive in the event of certain
defaults and also contains a non-competition provision which prohibits us from
manufacturing, promoting, publishing or selling any product directly competitive
with the Benefit:Risk Assessment Model.

Daily Difference(TM). In April 1999, we entered into a development and
license agreement with Tufts University to formulate nutritional or herbal
products for midlife women, which will be marketed by Women First under the
trade name, Daily Difference(TM). In accordance with this agreement, Tufts
developed general formulations for midlife women as well as specific
formulations to address the needs of women who are at risk for particular
diseases or conditions. The agreement provides that Tufts will also create a
program to individualize nutritional recommendations to women and their
clinicians. The agreement grants us the right to acknowledge the participation
of the Tufts University School of Nutrition Science and Policy in the

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development of the products and to use its name in connection with labeling,
promotion, marketing and sale of the nutritional products. Tufts may revoke our
right to use the Tufts name if Tufts determines that our actions have adversely
affected or may adversely affect Tufts' reputation.

Under the agreement, we were required to pay a fee to Tufts, payable in
four installments over five months, that covered all of Tufts' internal and
external expenses incurred in connection with the project. We are solely
responsible for the manufacturing, marketing and sale of the products. Further,
we must pay a license fee equal to a certain percentage of net sales of each
product developed under this agreement for fifteen years or the term of the
patent, if any, whichever is greater. The license fee will be reduced if Tufts
revokes our right to use its name without cause or if Tufts develops and
licenses nutritional products that compete with our products.

iVillage. In May 1999, we entered into a one-year agreement with iVillage
Inc. to develop educational content for ivillage.com. Under the agreement,
iVillage created a Women First area on ivillage.com, while we provided articles
on midlife health topics for this area. We have agreed to provide iVillage with
two feature articles each month and iVillage has agreed to promote at least one
of these articles as a lead editorial. iVillage has hosted an online event on
midlife health featuring Dr. Deepak Chopra, and has agreed to host two
additional such events. In addition, we have implemented a link from the Women
First area in ivillage.com to womenfirst.com and our womenfirst.com Internet
site includes a prominent link to ivillage.com. Under our agreement with
iVillage, we have agreed that we will not provide educational materials to
certain competitors of iVillage. iVillage has agreed to exclude certain
competitors of ours from advertising within the Women First area of
ivillage.com. There are no financial terms to the agreement.

The minimum payments we are required to make under these and other
agreements may exceed our sales of the products to which these minimum payments
relate, and our failure to achieve specified minimum sales could be a violation
of these agreements. See "Risks and Uncertainties" on pages 15 through 23 of
this Report on Form 10-K.

INTELLECTUAL PROPERTY

We regard the protection of patents, copyrights, trademarks, and other
proprietary rights that we own or license as material to our success and
competitive position. We rely on a combination of laws and contractual
restrictions such as confidentiality agreements to establish and protect our
proprietary rights. Laws and contractual restrictions, however, may not be
sufficient to prevent misappropriation of our technology or deter others from
independently developing products that are substantially equivalent or superior.

Patents. Due to the length of time and expense associated with bringing new
pharmaceutical products to market, we recognize the considerable benefits
associated with acquiring or licensing products that are protected by existing
patents or for which patent protection can be obtained. However, we do not
currently own any issued patents or have any pending patent applications. Some
of the products that we offer incorporate patented technology owned by others,
including the Ortho-Prefest(TM), Esclim(TM), and Pravachol(R) products, but most
of our self-care products are not protected by patents.

Copyrights. We have applied for copyright registration for the Women First
HealthCare logo. The copyrights to the product developed with Dr. Deepak Chopra,
entitled RENEWAL a time for you(TM), are owned jointly by us and Infinite
Possibilities Media LLC. We also own all the copyrights in the Strong Women Stay
Young video. Copyrights for the source code of the womenfirst.com Internet site
that we created with SF Interactive have been assigned to us.

Trademarks and Domain Names. Our subsidiary, As We Change, LLC, owns the
registered U.S. trademark As We Change(R). In addition, we have applied for U.S.
trademark registrations for a number of key trademarks, including Women First
HealthCare(TM), Women First(TM), A Better Way(TM), and Daily Difference(TM). We
have a non-exclusive worldwide license to use the trademarks owned by Dr. Chopra
in connection with the products that we develop with Infinite Possibilities.
Some of our distribution agreements also include rights to use the
manufacturer's trademarks, such as the Ortho-Est(R), Ortho Tri-Cyclen(R),
Ortho-Prefest(TM), Esclim(TM) and Pravachol(R) tradenames during the term of
these agreements. We intend to introduce new trademarks,

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service marks and brand names and to maintain registrations on trademarks that
remain valuable to the business. We have no trademark registrations or
applications pending outside the United States.

We currently hold the Internet domain names "womenfirsthealthcare.com" and
"womenfirst.com," and our subsidiary, As We Change, LLC, holds the Internet
domain name "aswechange.com." Under current domain name registration practices,
no one else can obtain an identical domain name, but can obtain a similar name,
or the identical name with a different suffix such as ".net" or ".org" or with a
country designation such as ".jp" for Japan. The relationship between
regulations governing domain names and the laws protecting trademarks and
similar proprietary rights is evolving. Domain names are regulated by Internet
regulatory bodies while trademarks are enforceable under local law. In addition,
the regulation of domain names in the United States and in foreign countries is
subject to change. There are plans to establish additional top-level domains,
appoint additional domain name registrars or modify the requirements for holding
domain names. As a result, we may not acquire or be able to maintain our domain
names in all of the countries in which we conduct business, and we could be
unable to prevent third parties from acquiring domain names that infringe or
otherwise decrease the value of our domain names or trademarks.

While we intend to take the actions that we believe are necessary to
protect our proprietary rights, we may not be successful in doing so. In
addition, we may be dependent on the owners of the proprietary rights we license
to protect those rights. In addition, we and our licensors may face challenges
to the validity and enforceability of proprietary rights and may not prevail in
any litigation regarding those rights.

We are also subject to the risk of adverse claims and litigation alleging
infringement of the proprietary rights of others. While we are not currently
involved in any such claims, there can be no assurance against future
infringement claims by third parties. The resolution of any such infringement
claims may result in protracted and costly litigation, regardless of the merits
of such claims. Moreover, it may require us to obtain a license to use those
proprietary rights or possibly to cease using those rights altogether. Any of
these events could have a material adverse effect on our business, financial
condition and results of operations.

GOVERNMENT REGULATION

The manufacturing, processing, formulation, clinical investigation,
packaging, labeling, storage, promotion, distribution and advertising of the
products we offer are subject to extensive regulation by one or more federal
agencies including the FDA, DEA, Environmental Protection Agency, Federal Trade
Commission, Occupational Safety and Health Administration, Consumer Product
Safety Commission, the United States Customs Service, and the United States
Postal Service. These activities are also regulated by various agencies of the
states and localities in which our products are sold. For both currently
marketed and future products, failure to comply with applicable regulatory
requirements could limit or prevent our ability to market and distribute such
products, and would harm our business.

Pharmaceuticals. All pharmaceutical firms, including manufacturers from
whom we license or for whom we distribute products, are subject to regulation by
the FDA. Any restriction or prohibition applicable to sales of products we
market could materially adversely affect our business.

We market prescription drug products. Prior to marketing, new prescription
drugs must be approved by the FDA before they may be marketed, except for those
prescription drugs for which the FDA is not requiring applications because of
"grandfather status" under 1938 legislation, "grandfather status" under 1962
legislation or for other reasons. The FDA has the authority to revoke existing
approvals, or to review the status of currently exempt pharmaceuticals and
require application and approval, of prescription drugs if new information
reveals that they are not safe or effective. The FDA also regulates the
promotion, including advertising, of prescription drugs.

Drug products must be manufactured, packaged, and labeled in accordance
with their approvals and in conformity with standards known as current Good
Manufacturing Practices and other requirements. Drug manufacturing facilities
must be registered with and approved by FDA and must list with the FDA the drug
products they intend to distribute. The manufacturer is subject to inspections
by the FDA and periodic inspections by other regulatory agencies. The FDA has
extensive enforcement powers over the activities of

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pharmaceutical manufacturers, including authority to seize and prohibit the sale
of unapproved or non-complying products, and to halt manufacturing operations
that are not in compliance with current Good Manufacturing Practices. Also, the
FDA regulates the distribution of samples of drugs. Both FDA and DEA may impose
criminal penalties arising from non-compliance with applicable regulations.

We do not currently conduct pharmaceutical research and development. If we
obtain rights to develop and market a pharmaceutical product, we will. Prior to
any commercial sale or shipment of a new drug, the FDA generally requires each
of the following steps and possibly others to be conducted: (1) preclinical
testing, including laboratory and usually animal tests; (2) the submission to
the FDA of an Investigational New Drug Application which must become effective
before human clinical trials may commence; (3) adequate and well-controlled
human clinical trials to establish safety and efficacy; (4) the submission to
the FDA of a New Drug Application; and (5) FDA approval of the New Drug
Application. This process generally takes a number of years and may also require
post-marketing testing and surveillance to monitor for adverse effects, which
can involve significant additional expense. In addition, an abbreviated
application process is available for generic drugs. For newer generic drugs,
there can be no assurances that the FDA will approve a particular application.

Medical Devices. We market and obtain approvals for medical device
products. All medical device firms, including manufacturers from whom we license
or whose products we distribute, are subject to regulation by the FDA. The FDA
controls when medical devices may enter the market, and can require their
withdrawal from the market, restrict their marketing and recall or seize
products.

In addition to obtaining FDA approval or clearance to market a medical
device, each device manufacturing facility must be registered with the FDA.
Facilities and quality systems are subject to regular inspections by the FDA for
compliance with FDA's Quality System Regulations. As is the case with drugs,
failure to comply with applicable regulatory requirements after obtaining
approval may result in the suspension of regulatory approval, as well as civil
and criminal sanctions. Any restriction or prohibition applicable to sales of
products we market could materially adversely affect our business.

Dietary Supplements. The manufacturing and production of dietary
supplements historically has been subject to less intensive regulation than
pharmaceutical products. Under the Dietary Supplement Health & Education Act of
1994, the FDA may exercise authority over the labeling and sales of dietary
supplements. In addition, the United States Postal Service regulates claims with
respect to products sold or marketed through the mail and the FTC regulates
dietary supplement advertising.

The FDA and other federal authorities are reviewing alternative approaches
to assure the safety of vitamins, minerals, herbals and other products sold as
dietary supplements. Increased regulatory oversight could subject us and other
manufacturers and distributors of dietary supplements to increased production
and compliance costs and possibly require capital expenditures. Future
regulation affecting dietary supplements could result in a recall or
discontinuance of certain products.

Cosmetics Regulations. We market cosmetic products. The FDA regulates the
labeling on cosmetic products and does not require cosmetics to be approved
before products are released to the marketplace. The FDA does not have the
authority to require manufacturers to register their cosmetic establishments,
file data on ingredients, or report cosmetic-related injuries. The FDA maintains
a voluntary data collection program, however, and companies wishing to
participate in the program may do so. The FDA may inspect cosmetics
manufacturing facilities, collect samples for examination, and take action to
remove adulterated and misbranded cosmetics from the market.

EMPLOYEES

As of February 29, 2000, we employed 239 full-time people, of whom 193 were
employed in sales and marketing, 3 were employed in research and development, 5
were employed in education and program development and 38 were employed in
administration. None of our employees is represented by a labor union, and we
consider our relations with our employees to be good. Our ability to achieve our
financial and operational objectives depends in large part upon the continued
service of our senior management and key

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personnel and our continuing ability to attract and retain highly qualified
managerial personnel. Competition for such qualified personnel in the
pharmaceutical and health care industry is intense.

LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

SEASONALITY

Catalog sales are typically higher in the fourth calendar quarter due to
larger catalog circulation, merchandising improvements during the year, and some
increase in consumer buying surrounding the holiday season. We anticipate this
trend will continue.

RISKS AND UNCERTAINTIES

WE HAVE RECENTLY STARTED OPERATIONS AND HAVE EXPERIENCED LOSSES SINCE OUR
INCEPTION. OUR BUSINESS MUST EXPAND FOR US TO ATTAIN PROFITABILITY.

We are an early stage company with a history of losses. Through December
31, 1999, we have generated only $27.3 million in net revenues. We have incurred
significant losses since we were founded in November 1996, accumulating a
deficit of $42.9 million through December 31, 1999, and we expect to incur
losses at least through the end of 2000. We may not successfully complete the
transition to successful operations or profitability. Early stage companies such
as ours frequently encounter problems, delays and expenses. These include, but
are not limited to, unanticipated problems and additional costs related to
marketing, competition and product acquisitions and development. These problems
may be beyond our control, and in any event, could adversely affect our results
of operations.

WE HAVE A BROAD BUSINESS MODEL THAT WILL REQUIRE THE DEVELOPMENT OF MANY
DIFFERENT AREAS. IF WE FAIL TO IMPLEMENT ANY OF THE KEY ELEMENTS OF OUR BUSINESS
PLAN, OUR BUSINESS MAY NOT SUCCEED.

We have embarked on an ambitious plan to provide products, educational
programs and support systems to women to help them make better decisions
regarding their health care in midlife. There is a limited market awareness of
our company and the products and services we offer. To be successful, we must
continue to develop, coordinate and balance various elements of our business.
Among other things, we must:

- generate market demand for the products we offer, prepare and disseminate
information about midlife women's health care and establish the Women
First(TM) brand,

- convince OB/GYNs and the nurse practitioners and physician's assistants
focused on women's health to prescribe and recommend the products we
offer,

- maintain and obtain rights to market and distribute products and
integrate them into our business, and

- augment sales and marketing and manage different distribution channels
for the products we offer.

If we fail to implement any of these key elements of our business plan, our
business may not succeed.

MANY OF OUR PRODUCT AGREEMENTS REQUIRE US TO MAKE MINIMUM PAYMENTS OR MAKE A
MINIMUM NUMBER OF SALES CALLS. IF OUR SALES OF THESE PRODUCTS DO NOT EXCEED THE
COSTS OF THESE MINIMUMS, OUR MARKETING AND DISTRIBUTION OF THESE PRODUCTS WILL
NOT BE PROFITABLE AND OUR RESULTS OF OPERATIONS WILL BE HARMED.

We have acquired the right to market and sell many of the products we offer
through license or co-promotion agreements with third parties. Some of these
agreements require us to make minimum payments or make a minimum number of sales
calls regardless of our actual sales of product covered by the agreement. The
minimum payments we are required to make or our costs of making the minimum
number of sales calls under these agreements may exceed our sales of the
products to which these minimum payments or minimum sales calls relate, and, as
a result, our marketing and distribution of some or all of these products may
not be profitable. In particular, our distribution agreement for the
Ortho-Est(R) oral estrogen product requires us to

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make minimum aggregate payments of $33.4 million to Ortho-McNeil Pharmaceutical
over the remaining eight-year period of the contract, regardless of the actual
sales performance of this product. Under this agreement, we are required to make
minimum payments of $5.4 million during 2000. The minimum payments in future
years decrease annually based on a ten-year forecast that was determined at the
time the contract was executed.

Our co-promotion agreement with Ortho-McNeil Pharmaceutical relating to the
Ortho Tri-Cyclen(R) oral contraceptive product and the Ortho-Prefest(TM) oral
combination estrogen and progestin hormonal replacement therapy product requires
us to make a significant number of sales calls each year during the term of the
agreement. In addition, the agreement required us to expand our field sales
organization to at least 100 representatives in 1999 and requires us to commit
at least 150 sales representatives to co-promote Ortho-Prefest(TM), in each of
2000, 2001 and 2002. Ortho-McNeil also may reduce the payments otherwise
required to be paid to us under the agreement with respect to the
Ortho-Prefest(TM) product if we do not make a specified portion of the minimum
number of sales calls for that product. Through December 31, 1999, we did not
meet the minimum performance levels required to receive compensation under this
co-promotion agreement in relation to Ortho Tri-Cyclen(R). As a result, we have
not recorded revenue under this agreement through December 31, 1999. Effective
as of March 31, 2000, Women First has discontinued the co-promotion of Ortho
Tri-Cyclen(R). Under an amendment, which is being negotiated, Ortho
Tri-Cyclen(R) will be eliminated from the co-promotion agreement but Women First
will continue to co-promote Ortho-Prefest(TM). The co-promotion agreement also
limits the number of products other than Ortho Tri-Cyclen(R) and
Ortho-Prefest(TM) that our sales force may present during the same sales call as
Ortho Tri-Cyclen(R) and Ortho-Prefest(TM).

We are also obligated to pay future development fees of $175,000 to CHPNC,
LLC prior to September 25, 2000 for the development of the Benefit: Risk
Assessment Model and minimum royalty payments over the remaining term of the
contract, which commence at $100,000 and which increase by an additional
$100,000 for each two-year period thereafter. In July, 1999, we entered into a
distribution and license agreement with Laboratoires Fournier S.A. under which
we have the exclusive right (subject to exceptions) to market, use, distribute
and sell the Esclim(TM) estradiol transdermal system in various dosages in the
United States and Puerto Rico. The definitive agreement requires us to pay
Fournier a non-refundable license fee of $1.45 million payable over a two-year
period, of which $750,000 was paid in 1999. The remaining $700,000 of this fee
is subject to sales objectives being reached in 2000 and 2001. Our failure to
generate sales exceeding the specified minimum payments or the costs of the
minimum sales calls could have a material adverse effect on our business and
could give the other party the right to terminate or modify the contract. For
more information concerning our agreements containing minimum payment and
minimum sales call obligations, see "Item 1: Business -- Licensing and
Co-Promotion Agreements."

MANY OF OUR PRODUCT AGREEMENTS MAY BE TERMINATED IF WE FAIL TO MAKE MINIMUM
PURCHASES, MAKE A MINIMUM NUMBER OF SALES CALLS OR FOR OTHER REASONS. THIS COULD
FORCE US TO DISCONTINUE SALES OF KEY PRODUCTS AND COULD HARM OUR RESULTS OF
OPERATIONS.

Our contracts relating to the products we offer contain various provisions
that allow the other party to terminate the contract, which, if exercised, could
force us to discontinue sales of the product and could have a material adverse
effect on our business. Our co-promotion agreement with Bristol-Myers Squibb
relating to the cholesterol-lowering drug Pravachol(R) provides that
Bristol-Myers Squibb may terminate the agreement in the event that Pravachol(R)
prescriptions written in the United States by designated OB/GYNs and the nurse
practitioners and physician's assistants in their offices do not exceed
specified minimum prescription amounts. These specified minimum amounts increase
quarterly in the first year and yearly from year to year thereafter.
Bristol-Myers Squibb may terminate the agreement in the event that prescriptions
for Pravachol(R) written by the clinicians covered by the agreement do not
exceed these minimum amounts for two consecutive quarters or the yearly
prescription forecasts for one year. These minimum amounts require us to achieve
a significant increase over the number of prescriptions for this product
currently written by the clinicians designated by the agreement and
substantially exceed the baseline amounts used for purposes of calculating the
performance fee under the contract. Furthermore, the co-promotion agreement with
Bristol-Myers Squibb contains a provision that allows Bristol-Myers Squibb to
terminate the agreement upon a change of control of Women First. As a

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result, we could lose our rights to market and sell Pravachol(R) if we fail to
meet our minimum performance obligations or if we are acquired. As of December
31, 1999, the end of the first three consecutive quarter period under the
agreement with Bristol-Myers Squibb, we had not achieved the minimum amounts
required to receive compensation under the agreement. Although Bristol-Myers
Squibb has the right to terminate the agreement upon sixty days' prior written
notice based upon our performance, we are currently negotiating to restructure
this agreement in order to improve our ability to recognize revenue from our
sales efforts.

Our co-promotion agreement with Ortho-McNeil Pharmaceutical allows
Ortho-McNeil to terminate the contract if we fail to make a specified portion of
the required sales calls for three consecutive quarters. As of December 31,
1999, we had not made the required minimum number of sales calls for two
consecutive quarters. Effective as of March 31, 2000, Women First discontinued
the co-promotion of Ortho Tri-Cyclen(R). Under an amendment, which is being
negotiated, Ortho Tri-Cyclen(R) will be eliminated from the co-promotion
agreement but Women First will continue to co-promote Ortho-Prefest(TM).
Ortho-McNeil also may terminate the agreement if there is a change of control of
Women First or if either Edward F. Calesa, the Chairman of the Board, or David
F. Hale, our President and Chief Executive Officer, is no longer associated with
Women First (other than as a result of death or disability).

In addition, our contract with Ortho-McNeil Pharmaceutical relating to the
Ortho-Est(R) oral estrogen product allows Ortho-McNeil to terminate the contract
(1) upon one year's notice so long as Ortho-McNeil provides us with a one-year
supply of the Ortho-Est(R) product and uses reasonable commercial efforts to
transfer the manufacturing and distribution rights to the product to us or (2)
immediately if the cost of FDA revalidation, should it become necessary, exceeds
$3 million. Most of our contracts permit termination by the other party if we
breach our obligations, including our minimum payment commitments, under the
contracts or enter bankruptcy. For more information about how our product
agreements may be terminated, see "Item 1: Business -- Licensing and
Co-Promotion Agreements."

WE ARE UNCERTAIN OF OUR ABILITY TO OBTAIN ADDITIONAL FINANCING FOR OUR FUTURE
CAPITAL NEEDS. IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING, WE MAY NOT BE
ABLE TO CONTINUE TO OPERATE OUR BUSINESS.

We will require significant amounts of additional capital to achieve our
goals. We believe that our existing cash balances will be sufficient to meet our
working capital, capital expenditure requirements and minimum purchase
commitments through the end of the year 2000. Our future capital requirements
will depend on many factors including:

- the costs of our sales and marketing activities and our education
programs for clinicians and women,

- competing product and market developments,

- the costs of acquiring or developing new products,

- the costs of expanding our operations, and

- our ability to generate positive cash flow from our sales.

Additional funding may not be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to curtail significantly or
defer one or more of our marketing or educational programs or to limit or
postpone obtaining new products through license, acquisition or co-promotion
agreements. If we raise additional funds through the issuance of equity
securities, the percentage ownership of our then-current stockholders may be
reduced and such equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock. If we raise additional funds
through the issuance of debt securities, these new securities would have certain
rights, preferences and privileges senior to those of the holders of our common
stock, and the terms of these debt securities could impose restrictions on our
operations.

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IF MIDLIFE WOMEN DO NOT USE AND THEIR CLINICIANS DO NOT RECOMMEND THE PRODUCTS
WE OFFER, WE WILL CONTINUE TO EXPERIENCE SIGNIFICANT LOSSES.

The products we license, acquire or co-promote may not achieve market
acceptance. The market acceptance of these products will depend on, among other
factors:

- their advantages over existing competing products,

- their perceived efficacy and safety,

- the actual or perceived side effect profile of hormonal replacement
therapies, and

- the reimbursement policies of the government and third-party payors.

Our model assumes that our marketing programs and the growth in our target
market will result in increased demand for the products we offer. If our
marketing programs do not succeed in generating a substantial increase in demand
for our products, we will be unable to realize our operating objectives. In
addition, our business model seeks to build on the expanding roles of OB/GYNs
and the nurse practitioners and physician's assistants focused on women's
health, and our marketing efforts are concentrated on this group. If the
clinicians we target do not recommend and prescribe the products we offer or if
midlife women do not regularly use these products, we will continue to
experience significant losses and our business will be adversely affected.
Moreover, if we fail to develop the market-wide brand identity for Women First
that we are seeking, our business will be adversely affected.

ANY FAILURE BY US TO OBTAIN RIGHTS TO ADDITIONAL PRODUCTS OR TO ACQUIRE
COMPANIES AND SUCCESSFULLY INTEGRATE THEM WILL LIMIT OUR GROWTH AND MAY HARM OUR
BUSINESS.

We plan to obtain rights to additional products through license,
co-promotion or acquisition agreements and may acquire companies that complement
our business. Our failure to obtain rights to market products or to acquire
products or companies on acceptable terms or to integrate these products or
companies into our organization could harm our business. We may not be able to
identify appropriate licensing, co-promotion or acquisition candidates in the
future. Even if we identify an appropriate candidate, competition for it may be
intense. We may not be able to successfully negotiate the terms of a license,
co-promotion or acquisition agreement on commercially acceptable terms. The
negotiation of agreements to obtain rights to additional products or to acquire
companies could divert our management's time and resources from our existing
business. Moreover, we may be unable to finance an acquisition or integrate a
new product or company into our existing business. If we use shares of our
common stock as consideration for one or more significant acquisitions, our
stockholders could suffer significant dilution of their ownership interests.

OUR QUARTERLY FINANCIAL RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND MAY
FAIL TO MEET OR EXCEED THE EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS,
WHICH COULD CAUSE THE PRICE OF OUR STOCK TO DECLINE SIGNIFICANTLY.

Our quarterly operating results may fluctuate significantly based on
factors such as:

- changes in the acceptance or availability of the products we offer,

- the timing of new product offerings, acquisitions or other significant
events by us or our competitors,

- regulatory approvals and legislative changes affecting the products we
offer or those of our competitors,

- the productivity of our sales force,

- the timing of expenditures for the expansion of our operations, and

- general economic and market conditions and conditions specific to the
health care industry.

Due to our short operating history and the difficulty of predicting demand
for the products we offer, we are unable to accurately forecast our revenues.
For example, we only recently began co-promoting the cholesterol-lowering drug
Pravachol(R), the Ortho-Prefest(TM) oral combination hormonal replacement
therapy

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product and the Esclim(TM) estradiol transdermal system. Accordingly, we have
little basis to estimate our revenues from co-promoting these products. In
addition, we plan to obtain rights to additional products and fund additional
sales and marketing and general and administrative activities, all of which
would increase our operating expenses. Accordingly, we may experience
significant, unanticipated quarterly losses. Because of these factors, our
operating results in one or more future quarters may fail to meet the
expectations of securities analysts or investors, which could have a material
adverse effect on our stock price.

THE HEALTH CARE INDUSTRY AND THE MARKETS FOR THE PRODUCTS WE OFFER ARE VERY
COMPETITIVE. WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, ESPECIALLY AGAINST
ESTABLISHED INDUSTRY COMPETITORS WITH SIGNIFICANTLY GREATER FINANCIAL RESOURCES.

The health care industry is highly competitive. Most of our competitors and
those of our collaborative partners are large well-known pharmaceutical, life
science and health care companies that have considerably greater financial,
sales, marketing and technical resources than we have. Additionally, these
competitors have research and development capabilities that may allow them to
develop new or improved products that may compete with product lines we market
and distribute. In addition, competitors may elect to devote substantial
resources to marketing their products to midlife women and may choose to develop
educational and information programs like those we have developed to support
their marketing efforts. Our business, financial condition and results of
operations could be materially and adversely affected by any one or more of such
developments.

The pharmaceutical products we offer face significant competition.
Ortho-Prefest(TM), the new oral combination HRT product, Ortho-Est(R), the oral
estrogen product, and the Esclim(TM) estradiol transdermal system compete in the
hormone replacement therapy market. The primary competition in this market is
Wyeth-Ayerst Pharmaceuticals, Inc., a division of American Home Products, which
markets Premarin(R), an oral estrogen product, and Prempro(R) and Premphase(R),
combination oral estrogen and progestin products. The HRT products we market
also compete with HRT products marketed by Parke-Davis, a Warner Lambert
Division, Solvay Pharmaceuticals, Inc., Duramed Pharmaceuticals, Inc., and
others, as well as generic HRT products. The HRT products we market also compete
with non-hormonal replacement therapy products marketed by Merck & Co., Inc.,
and Eli Lilly & Company. In addition, the Esclim(TM) estradiol transdermal
system competes with estrogen and combination estrogen/progestin patch products
marketed by Berlex Laboratories, Watson Laboratories, Inc., Novogyne
Pharmaceuticals and Rhone-Poulenc Rorer Pharmaceuticals, Inc. The Pravachol(R)
product competes with other cholesterol-lowering products marketed by Merck &
Co., Inc., Parke-Davis, Pfizer, Inc., Novartis Pharmaceuticals Corporation and
Bayer Corporation. Each of these competitors has substantially greater
marketing, sales and financial resources than we do.

Competition for the self-care products we offer is significant. As We
Change, LLC competes with a number of catalog companies and Internet retailers
focusing on self-care products. Transitions for Women(R) offers a wide range of
nutritional and herbal products for midlife women and Self Care(R), Well &
Good(TM), Feel Good(TM), Solutions(R) and Intellihealth HealthyHome(TM) and
Harmony(TM) promote general lifestyle and personal care products. Our
educational products will compete with products that have been developed by
medical professionals and non-professionals alike. Our Internet site,
womenfirst.com, will compete with other Internet sites focused on women's health
as well as sites focused on health care issues in general, such as
cbs.medscape.com, nlm.nih.gov/medlineplus, healthfinder.gov, reutershealth.com,
drkoop.com, and webmd.com.

Our failure to adequately respond to the competitive challenges faced by
the products we offer could have a material adverse effect on our business,
financial condition and results of operations.

IF WE DO NOT SUCCESSFULLY MANAGE ANY GROWTH WE EXPERIENCE, WE MAY EXPERIENCE
INCREASED EXPENSES WITHOUT CORRESPONDING REVENUE INCREASES.

Our business plan will, if implemented, result in rapid expansion of our
operations. This expansion may place a significant strain on our management,
financial and other resources. It also will require us to increase expenditures
before we generate corresponding revenues. Our ability to manage future growth,
should it occur,

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will depend upon our ability to identify, attract, motivate, train and retain
highly skilled managerial, financial, business development, sales and marketing
and other personnel. Competition for these employees is intense. Moreover, the
addition of products or businesses will require our management to integrate and
manage new operations and an increasing number of employees and could require us
to expand into new areas such as pharmaceutical development. We may not be able
to implement successfully and maintain our operational and financial systems or
otherwise adapt to growth. Any failure to manage growth, if attained, would have
a material adverse effect on our business.

WE MAY NOT BE ABLE TO OBTAIN REIMBURSEMENT FOR THE PHARMACEUTICAL PRODUCTS WE
OFFER. ANY FAILURE TO OBTAIN REIMBURSEMENT COULD REQUIRE US TO DISCONTINUE SALES
OF A PARTICULAR PRODUCT AND COULD HARM OUR RESULTS OF OPERATIONS.

Our ability to market new and existing pharmaceutical products depends in
part on whether health care payors, including government authorities, private
health insurers, health maintenance organizations and managed care
organizations, will provide sufficient reimbursement for the products we offer.
Third-party payors are increasingly challenging the prices of pharmaceutical
products and demanding data to justify the inclusion of new or existing products
in their formularies. Significant uncertainty exists regarding the reimbursement
status of pharmaceutical products, and we cannot predict whether additional
legislation or regulation affecting third-party coverage and reimbursement will
be enacted in the future, or what effect such legislation or regulation would
have on our business. Reimbursement may not be available for the products we
offer and reimbursement granted may not be maintained. In particular, sales of
the Ortho-Est(R) oral estrogen product and the Esclim(TM) estradiol transdermal
system may be adversely affected by formularies that require substitution of
generics on prescriptions written for these products unless the physician
indicates "dispense as written" on the prescription. Moreover, limits on
reimbursement available from third-party payors may reduce the demand for, or
adversely affect the price of, the products we offer. The unavailability or
inadequacy of third-party reimbursement for the products we offer would have a
material adverse effect on our results of operations.

WE DO NOT CURRENTLY CONDUCT PHARMACEUTICAL RESEARCH AND DEVELOPMENT. THIS MAY
LIMIT THE RANGE OF PRODUCTS WE OFFER.

We do not presently conduct our own pharmaceutical research and development
programs. In addition, we do not presently anticipate conducting our own
discovery research for pharmaceutical products. However, we may obtain rights to
develop and market a product in clinical development. If that occurs, we intend
to rely on third parties to perform the development work. We may not be able to
obtain arrangements for development by third parties on commercially reasonable
terms, if at all, and this may limit the range of products we are able to market
and distribute.

TECHNOLOGICAL CHANGE COULD RENDER THE PHARMACEUTICAL PRODUCTS WE OFFER OBSOLETE.

The pharmaceutical products that we market and distribute could be rendered
obsolete or uneconomical by the development of new drugs or devices to treat the
conditions that they address. Technological advances affecting costs of
production or marketing also could adversely affect our ability to sell
products. In addition, our own licensing, acquisition, co-promotion or
development of additional products could adversely affect the demand for the
products we currently offer if the new product has the same or similar
indications as one or more of the products we currently offer.

WE ARE DEPENDENT ON SINGLE SOURCES OF SUPPLY FOR ALL OF THE PRODUCTS WE OFFER.
IF ONE OF OUR SUPPLIERS FAILS TO SUPPLY ADEQUATE AMOUNTS OF A PRODUCT WE OFFER,
OUR SALES MAY SUFFER AND WE COULD BE REQUIRED TO ABANDON A PRODUCT LINE.

We are dependent on single sources of supply for all of the products we
offer. With respect to these products, we cannot guarantee that these third
parties will be able to provide adequate supplies of products in a timely
fashion. We also face the risk that one of our suppliers could become insolvent,
declare bankruptcy, lose its production facilities in a disaster, be unable to
comply with applicable government regulations or lose

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the governmental permits necessary to manufacture the products it supplies to
us. If we are unable to renew or extend an agreement with a third-party
supplier, if an existing agreement is terminated or if a third-party supplier
otherwise cannot meet our needs for a product, we may not be able to obtain an
alternative source of supply in a timely manner or at all. In these
circumstances, we may be unable to continue to market products as planned and
could be required to abandon or divest ourselves of a product line on terms
which would materially adversely affect us.

WE MAY BE EXPOSED TO PRODUCT AND PROFESSIONAL LIABILITY CLAIMS NOT COVERED BY
INSURANCE THAT WOULD HARM OUR BUSINESS.

We may be exposed to product or professional liability claims. Although we
believe that we currently carry and intend to maintain appropriate product and
professional liability insurance, we cannot guarantee that this insurance will
be sufficient to cover all possible liabilities or that such insurance will
continue to be available in the future at acceptable costs. A successful suit
against us could have an adverse effect on our business and financial condition
if the amounts involved are material.

OUR INABILITY TO OBTAIN NEW PROPRIETARY RIGHTS OR TO PROTECT AND RETAIN OUR
EXISTING RIGHTS COULD IMPAIR OUR COMPETITIVE POSITION AND ADVERSELY AFFECT OUR
SALES.

We believe that the patents, trademarks, copyrights and other proprietary
rights that we own or license, or that we will own or license in the future,
will continue to be important to our success and competitive position. If we
fail to maintain our existing rights or cannot acquire additional rights in the
future, our competitive position may be harmed. Due to the length of time and
expense associated with bringing new pharmaceutical products to market, there
are benefits associated with acquiring or licensing products that are protected
by existing patents or for which patent protection can be obtained. While some
products we offer, such as the Ortho-Prefest(TM) product, the Pravachol(R)
cholesterol-lowering drug and the Esclim(TM) estradiol transdermal system,
incorporate patented technology, most of the self-care products we sell are not
protected by patents. We have applied for registration of a number of key
trademarks and intend to introduce new trademarks, service marks and brand
names. We intend to take the actions that we believe are necessary to protect
our proprietary rights, but we may not be successful in doing so on commercially
reasonable terms, if at all. In addition, parties that license their proprietary
rights to us may face challenges to their patents and other proprietary rights
and may not prevail in any litigation regarding those rights. Moreover, our
trademarks and the products we offer may conflict with or infringe upon the
proprietary rights of third parties. If any such conflicts or infringements
should arise, we would have to defend ourselves against such challenges. We also
may have to obtain a license to use those proprietary rights or possibly cease
using those rights altogether. Any of these events could harm our business.

MUCH OF OUR BUSINESS IS SUBJECT TO REGULATION. REGULATORY BODIES COULD IMPAIR OR
ELIMINATE OUR ABILITY TO CONDUCT PORTIONS OF OUR BUSINESS.

Many of our activities are subject to extensive regulation by one or more
federal, state or local agencies. These regulatory bodies have the power to
restrict or eliminate many of our business activities, and to seek civil and
criminal penalties for noncompliance with applicable laws and regulations.
Changes in existing laws and regulations could adversely affect our business.
For further discussion of these regulatory matters, see "Item 1:
Business -- Government Regulation."

OUR FAILURE TO RETAIN THE PRINCIPAL MEMBERS OF OUR MANAGEMENT TEAM OR TO HIRE
ADDITIONAL QUALIFIED EMPLOYEES WOULD ADVERSELY AFFECT OUR ABILITY TO IMPLEMENT
OUR BUSINESS PLAN.

Our success depends upon the retention of the principal members of our
management, technical and marketing staff, particularly Edward F. Calesa, the
Chairman of the Board, and David F. Hale, our President and Chief Executive
Officer. The loss of the services of Mr. Calesa, Mr. Hale or other key members
of our management team might significantly delay or prevent the achievement of
our development and strategic objectives. Our co-promotion agreement with
Ortho-McNeil Pharmaceutical relating to the Ortho Tri-Cyclen(R) oral
contraceptive and the Ortho-Prefest(TM) oral combination hormonal replacement
therapy product

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contains a provision that would allow Ortho-McNeil to terminate the agreement if
either Mr. Calesa or Mr. Hale is no longer associated with Women First (except
as a result of their death or disability). We have entered into employment
contracts with Mr. Calesa and Mr. Hale. We are the beneficiaries of life
insurance policies on the lives of Mr. Calesa and Mr. Hale in the amount of $2.0
million each. We do not have life insurance policies on the lives of any other
members of our management team. Our success also depends on our ability to
attract additional qualified employees. Companies in the pharmaceutical and
health care industries compete intensely for qualified personnel. We have agreed
not to solicit sales representatives from Johnson & Johnson or any of its
subsidiaries or from any contractor of Ortho-McNeil Pharmaceutical, Inc. that
provides a sales force that calls on physicians. Our inability to retain our
existing personnel or to hire additional qualified employees would have a
material adverse effect on our company.

OUR MANAGEMENT AND EXISTING STOCKHOLDERS HAVE SUBSTANTIAL CONTROL OVER OUR
VOTING STOCK AND CAN MAKE DECISIONS THAT COULD ADVERSELY AFFECT OUR BUSINESS AND
OUR STOCK PRICE.

As of February 29, 2000, Edward F. Calesa and his family members jointly
beneficially own approximately 41.2% of our common stock. Johnson & Johnson
Development Corporation, a subsidiary of Johnson & Johnson, owns approximately
12.2% of our common stock. Our present directors, executive officers and
principal stockholders as a group beneficially own approximately 60.2% of the
outstanding common stock. Accordingly, if all or certain of such stockholders
were to act together, they would be able to exercise significant influence over
or control the election of our Board of Directors, the management and policies
of Women First and the outcome of certain corporate transactions or other
matters submitted to our stockholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets.

Our directors and management, acting together, are able to prevent or
effect a change in control of Women First and are able to amend certain
provisions of our certificate of incorporation and bylaws at any time. The
interests of this group may conflict with the interests of our other holders of
common stock, and this concentration of ownership may discourage others from
initiating potential merger, takeover or other change in control transactions.

THE PUBLIC MARKET FOR OUR COMMON STOCK MAY BE VOLATILE, AND THE PRICE OF OUR
STOCK MAY FLUCTUATE FOR REASONS UNRELATED TO OUR OPERATING PERFORMANCE. A
SIGNIFICANT DECLINE IN THE PRICE OF OUR STOCK COULD LEAD TO A CLASS ACTION
LAWSUIT AGAINST US.

The market prices and trading volumes for securities of emerging companies,
like Women First, historically have been highly volatile and have experienced
significant fluctuations both related and unrelated to the operating performance
of those companies. The price of the common stock may fluctuate widely,
depending on many factors, including factors that may cause our quarterly
operating results to fluctuate as well as market expectations and other factors
beyond our control. In the past, following periods of volatility in the market
price of a company's securities, class action litigation has often been
instituted against that company by some of its stockholders. This type of
litigation, if instituted against us, could result in substantial costs and a
diversion of our management's attention and resources, which could materially
and adversely affect our results of operations and financial condition.

SALES OR THE PERCEPTION OF FUTURE SALES OF OUR COMMON STOCK MAY IMPAIR OUR STOCK
PRICE.

Sales of substantial numbers of shares of our common stock, or the
perception that such sales could occur, could adversely affect the market price
of our common stock and make it more difficult for us to raise funds through
equity offerings in the future. A substantial number of outstanding shares of
common stock and shares of common stock issuable upon exercise of outstanding
stock options will become available for resale in the public market at
prescribed times. As of February 29, 2000, we had 17,270,552 shares of common
stock outstanding. The 5,175,000 shares sold in the company's initial public
offering in July 1999 are now freely tradable under the Securities Act of 1933,
as amended, unless held by our "affiliates" as defined in Rule 144 under the
Securities Act. The remaining 12,095,552 shares of common stock outstanding as
of February 29, 2000 are now eligible for sale under Rule 144 under the
Securities Act, subject to volume and other limitations. As of February 29,
2000, we had 2,256,205 shares of common stock reserved for issuance upon the

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exercise of stock options granted or available for grant under the Women First
HealthCare Long-Term Incentive Plan and the Women First Incentive Stock Plan and
541,128 shares reserved for issuance upon exercise of outstanding warrants. Some
of our stockholders have rights that entitle them to register their common stock
under the Securities Act at our expense. In March 2000, our Board of Directors
ratified the 1999 Non-Qualified Stock Option Plan of Women First HealthCare,
Inc., and approved the reservation of 250,000 shares for issuance under this
Plan.

WE HAVE IMPLEMENTED ANTI-TAKEOVER PROVISIONS THAT COULD PREVENT AN ACQUISITION
OF OUR COMPANY AT A PREMIUM PRICE.

Provisions of our Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws may make it difficult for a third party to acquire
us and could discourage a third party from attempting to acquire us at a premium
price. These include provisions classifying our board of directors, prohibiting
stockholder action by written consent and requiring advance notice for
nomination of directors and stockholders' proposals. In addition, Section 203 of
the Delaware General Corporation Law also imposes restrictions on mergers and
other business combinations between us and any holders of 15% or more of our
common stock. Moreover, our certificate of incorporation allows our board of
directors to issue, without further stockholder approval, preferred stock that
could have the effect of delaying, deferring or preventing a change in control.
The issuance of preferred stock also could adversely affect the voting power of
the holders of our common stock, including the loss of voting control to others.
Our option plans provide that unvested options will become fully vested and
exercisable upon a change in control of Women First. The provisions of our
certificate of incorporation and bylaws, our option plans, as well as certain
provisions of Delaware law, may have the effect of discouraging or preventing an
acquisition, or disposition, of our business. Some of our key contracts contain
provisions that would allow the other party to the agreement to terminate the
agreement upon a change in control. These provisions also may diminish the
opportunities for a stockholder to participate in certain tender offers,
including tender offers at prices above the then-current fair market value of
our common stock.

ITEM 2. PROPERTIES

We are headquartered in facilities consisting of approximately 16,800
square feet in San Diego, California, pursuant to a lease expiring in August
2003. As We Change, LLC is headquartered in facilities consisting of
approximately 12,880 square feet in San Diego, California, pursuant to a lease
expiring in September 2002.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a) Our Common Stock, $ .001 par value per share, has traded on The Nasdaq
National Market under the symbol "WFHC" since June 29, 1999. The following table
sets forth the high and low sale prices for the Common Stock as reported by the
Nasdaq National Market in each of the quarters of fiscal 1999 following the
completion of our initial public offering.

PERIOD HIGH LOW
------ ------- -------

Second Quarter (beginning June 29, 1999)................. $13.750 $11.000
Third Quarter............................................ $14.625 $ 6.250
Fourth Quarter........................................... $ 9.188 $ 4.125

As of February 29, 2000, there were 17,270,552 shares of Common Stock
outstanding held by approximately 76 holders of record.

(b) In March 1999, Women First filed a registration statement under the
Securities Act of 1933 to sell up to 4.5 million shares of common stock in its
Initial Public Offering ("IPO"). The effective date of the registration
statement was June 28, 1999, under Commission File No. 333-74367. The offering
was managed by Allen & Company Incorporated and Needham & Company, Inc. and
closed on July 1, 1999 after Women First sold an aggregate of 4.5 million shares
of common stock at an initial public offering price per share of $11.00. On July
21, 1999, Women First sold an additional 675,000 shares of common stock at an
initial public offering price per share of $11.00 upon the underwriters'
exercise in full of their over-allotment option. The IPO, including the
underwriters' exercise of their over-allotment option, resulted in gross
proceeds to us of $56.9 million, $4.0 million of which was applied toward the
underwriting discount. Other expenses related to the offering totaled
approximately $1.5 million. Our net proceeds totaled $51.4 million, all of which
were deposited into our accounts in July 1999. Since the completion of our
offering in July 1999, the net offering proceeds have been applied to
approximately $7.5 million to repay short-term notes issued in March 1999,
$750,000 to develop and acquire rights to additional products, $411,000 to
purchase machinery, equipment and leasehold improvements, and $14.4 million for
working capital and other general corporate purposes. John Simon, a Director of
Women First, is a managing director with Allen & Company Incorporated.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected financial information set forth below with respect to our
consolidated financial statements has been derived from our audited financial
statements. The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the related notes
included elsewhere in this report.

PERIOD FROM
NOVEMBER 1, 1996
(INCEPTION)
THROUGH
1999 1998 1997 DECEMBER 31, 1996
----------- ---------- ---------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Consolidated Statement of Operations Data:
Net revenue.............................. $ 22,502 $ 4,834 $ -- $ --
Costs and expenses:
Cost of sales......................... 12,327 2,648 -- --
Marketing and sales................... 26,827 5,478 791 --
General and administrative............ 10,793 5,912 975 --
Research and development.............. 1,697 573 -- --
Write-down of assets and other
charges............................. 1,639 -- -- --
----------- ---------- ---------- ----------
Total costs and expenses......... 53,283 14,611 1,766 --
----------- ---------- ---------- ----------
Loss from operations..................... (30,781) (9,777) (1,766) --
Interest income, net..................... 646 395 39 --
----------- ---------- ---------- ----------
Net loss................................. (30,135) (9,382) (1,727) --
Accretion of beneficial conversion
feature related to convertible
preferred stock....................... (3,362) -- -- --
----------- ---------- ---------- ----------
Net loss available to common
stockholders.......................... $ (33,497) $ (9,382) $ (1,727) $ --
=========== ========== ========== ==========
Net loss per share (basic and diluted)... $ (2.67) $ (1.22) $ (0.23) $ --
=========== ========== ========== ==========
Weighted average shares used in computing
net loss per share (basic and
diluted).............................. 12,547,154 7,685,993 7,551,484 6,806,353
=========== ========== ========== ==========

AT DECEMBER 31,
------------------------------------
1999 1998 1997 1996
------- ------- ---- ------
(DOLLARS IN THOUSANDS)

Consolidated Balance Sheet Data:
Cash and cash equivalents............................ $32,719 $ 4,438 $567 $1,000
Working capital...................................... 30,499 3,364 394 967
Total assets......................................... 43,648 12,504 776 1,033
Total stockholders' equity........................... 36,719 8,436 531 1,000

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. This discussion may contain forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Item 1:
Business -- Risks and Uncertainties." We undertake no obligation to release
publicly the results of any revisions to these forward-looking statements or to
reflect events or circumstances arising after the date hereof.

OVERVIEW

Women First HealthCare is a specialty health care company dedicated to
improving the health and well-being of midlife women. Our mission is to help
midlife women make informed choices about their physical and emotional health
and to provide pharmaceutical products, self-care products, educational programs
and

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support systems to help midlife women improve the quality of their lives. We
market these products in the United States through a number of channels
including our dedicated sales force and our direct-to-consumer marketing
programs through our catalog operation and the Internet. On July 1, 1999, we
completed our initial public offering of 4,500,000 shares of our common stock,
providing us with proceeds, net of underwriting fees and offering expenses, of
approximately $44.5 million. Also, in July 1999, the underwriters exercised in
full their over-allotment option, and we issued an additional 675,000 shares of
common stock providing us with net proceeds of approximately $6.9 million.

RESULTS OF OPERATIONS

We were engaged in development stage operations from November 1, 1996 (the
date of our inception) through December 31, 1997 and did not earn any revenue
during this period. Operations during this period consisted primarily of
formulating a marketing plan, conducting market research, developing strategic
relationships, acquiring equipment, performing administrative functions and
raising capital. In January 1998 and May 1998, we entered into agreements to
sell an aggregate of 2,200,000 shares of Series A Preferred Stock for gross
proceeds of $22 million. Upon completing the initial phase of the financing, we
began to implement our plans for growth by actively recruiting management, staff
and sales personnel, consummating distribution agreements, launching products
and developing educational programs and support systems. We began selling and
distributing the Ortho-Est(R) oral estrogen product in July 1998 and acquired As
We Change, LLC on October 21, 1998.

In March 1999, we entered into a co-promotion agreement with Bristol-Myers
Squibb U.S. Pharmaceuticals Group relating to the Pravachol(R)
cholesterol-lowering drug, and in May 1999, we entered into a co-promotion
agreement with Ortho-McNeil Pharmaceutical, Inc. relating to the Ortho
Tri-Cyclen(R) oral contraceptive product and Ortho-Prefest(TM), a new oral
combination hormonal replacement therapy (HRT) product. We began selling and
distributing the Esclim(TM) estradiol transdermal system in November 1999.

Our product co-promotion agreements with Bristol-Myers Squibb and
Ortho-McNeil Pharmaceutical require us to achieve minimum performance levels to
receive compensation or to prevent contract termination. Through December 31,
1999 we did not meet the minimum performance levels required to receive
compensation under the co-promotion agreement with Bristol-Myers Squibb relating
to the Pravachol(R) cholesterol-lowering drug. In addition, Bristol-Myers Squibb
has the right to terminate the agreement upon sixty days' prior written notice
based upon our performance for the first three quarters under the agreement.
Bristol-Myers Squibb has not notified us of its intent to terminate the
agreement. While we are currently negotiating with Bristol Myers-Squibb to
restructure our agreement in order to improve our ability to recognize revenue
from our sales efforts, there can be no assurances that such negotiations will
prove successful. During 1999, we offered Ortho Tri-Cyclen(R), a leading oral
contraceptive, under the co-promotion agreement with Ortho-McNeil
Pharmaceutical. Through December 31, 1999, we did not meet the minimum
performance levels required to receive compensation under this co-promotion
agreement in relation to Ortho Tri-Cyclen(R). As a result, we have not recorded
revenue under this agreement through December 31, 1999. Effective as of March
31, 2000, Women First has discontinued the co-promotion of Ortho Tri-Cyclen(R).
Under an amendment, which is being negotiated, Ortho Tri-Cyclen(R) will be
eliminated from the co-promotion agreement but Women First will continue to
co-promote Ortho-Prefest(TM).

We have incurred significant losses since we were founded in November 1996.
We had an accumulated deficit of $42.9 million as of December 31, 1999, and we
expect to incur losses at least through the end of 2000. We believe that due to
our limited operating history we are unable to accurately predict our future
results of operations. Accordingly, our operating results should not be relied
upon as an indication of future performance. We review the operating results of
our business as a specialty health care company with one operating segment. The
results of operations include the results of our operations since our inception
and the actual results of operations of As We Change, LLC from its acquisition
date on October 21, 1998 in accordance with the purchase method of accounting.

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In the third quarter of 1999, we took actions designed to enhance our
ability to focus our resources on our core programs: pharmaceutical sales and
marketing to obstetricians and gynecologists (OB/GYNs) and the nurse
practitioners and physician's assistants focused on women's health in order to
leverage the midlife woman's key medical relationships; and direct-to-consumer
marketing through our catalog operation and the Internet. As a result of these
actions, we recognized asset write-downs and other charges amounting to $1.6
million in 1999.

YEARS ENDED DECEMBER 31, 1999 AND 1998

Net Revenue. For 1999, total net revenue was $22.5 million as compared to
$4.8 million for 1998. Revenue for 1999 was derived primarily from
pharmaceutical product sales of the Ortho-Est(R) oral estrogen product and the
Esclim(TM) estradiol transdermal system of $12.0 million, and sales from our
subsidiary As We Change, LLC, a national mail-order catalog and Internet
retailer of $6.8 million. In addition, in September 1999, in accordance with our
co-promotion agreement with Ortho-McNeil Pharmaceutical, Inc., a related party,
pursuant to which we have agreed to co-promote Ortho-Prefest(TM), an oral
combination HRT product, Ortho-McNeil agreed to provide us with up to $5.5
million to be used to fund the development of an educational program with an
independent provider of continuing medical education programs regarding HRT and
the application of hormonal management to clinical situations. We recorded
related party revenue of $2.3 million in 1999 for work completed under this
contract. For 1998, revenue was derived primarily from sales of the Ortho-Est(R)
oral estrogen pharmaceutical product beginning in July 1998 of $3.7 million and
sales from As We Change beginning October 21, 1998 of $899,000.

Costs and Expenses. Costs and expenses increased $38.7 million to $53.3
million for 1999 from $14.6 million for 1998. The increase in costs and expenses
was due primarily to the growth in commercial operations in 1999 and the
write-down of assets and other charges recognized in the third quarter 1999
discussed below.

Cost of sales was $12.3 million, or 54.8% of net revenue, for 1999 as
compared to $2.6 million, or 54.8% of net revenue, for 1998. Cost of sales
consists primarily of the amounts we pay for products under supply agreements.
The increase in costs was primarily due to increases in the fixed and contingent
payments under our distribution agreement with Ortho-McNeil Pharmaceutical and
costs incurred under our distribution and license agreement with Laboratoires
Fournier S.A. regarding our distribution of the Esclim(TM) estradiol transdermal
system.

Marketing and sales expense increased $21.3 million to $26.8 million for
1999 from $5.5 million for 1998. The increase in these expenditures was
primarily due to increases in the number of employees and the corresponding
increased salary expense, deferred compensation and recruiting costs resulting
from the establishment of a direct sales organization, the acquisition of As We
Change, LLC, costs associated with our education programs including the costs of
our programs focused on hormonal replacement therapy and cardiovascular health,
increased travel and business entertainment expense and increased expenses for
market research, product literature and professional samples.

General and administrative expense increased $4.9 million to $10.8 million
for 1999 from $5.9 million for 1998. The increase in these expenses for 1999
over the prior year was primarily due to increases in the number of employees
and the increased salary expense, employee benefits expense and management
incentive bonus expense, increased recruiting and relocation costs, and
increased amortization expense from the purchase of intangible assets as