UPDATE 2-New, cheaper female condom wins U.S. approval

* New female condom to cost less

* Female Health Co shares close up 22 pct

* FC2 available immediately for U.S. health organizations

* Delay seen for U.S. retail consumers (Adds reaction, updates share price)

By Susan Heavey

WASHINGTON, March 11 (Reuters) - Female Health Co FHC.A has won U.S. approval to market its newer, less expensive female condom, which could help it win over American women as well as boost use in developing countries, the company said on Wednesday.

The company's FC2 Female Condom is made with a softer material for quieter use. Its original version failed to gain a foothold in the male condom-dominated U.S. marketplace in part because it was noisy to use, as well as more expensive.

Its new condom is made using a less costly process that company officials have said should lower its shelf price, as well as allow health organizations to distribute more of the birth control device to women in Africa and other areas where AIDS is a major concern.

The approval "is an important development in efforts to deliver affordable access to woman-initiated HIV prevention in the United States and around the world," Female Health Co's strategic adviser Mary Ann Leeper said in a statement.

The Chicago-based company's shares rose as much as 30 percent after the news. Its shares closed up 22 percent, or 68 cents, at $3.73 on the American Stock Exchange on Wednesday.

Female Health's initial Female Condom was approved in 1993 to prevent pregnancy, as well as sexually transmitted diseases (STDs), but has not been widely used in the United States, which made up just 10 percent of its 34.7 million unit sales in 2008.

The product competes with other birth control methods, most notably male condoms, which can cost as little as 50 cents each amid a variety of competing brands. The original Female Condom costs between $2.80 and $4 apiece.

While it is not clear what the retail price will be for FC2, Leeper told Reuters it will cost as little as 60 cents when sold directly to health organizations and government agencies. That will help more groups offer more condoms in the hope of preventing HIV/AIDS and other STDs, she added.

"Having a less expensive Female Condom increases the probability of women who need it having access to it," she said.

Despite the FDA's approval it could be next year or longer before U.S. consumers can buy the new condom in stores.

Female Health is still looking for a pharmaceutical or device company to help it market and distribute FC2, including possibly a male condom maker, Leeper said.