SMALL CAP IDEA: Frustration for Futura Medical as enthusiasm wanes

In investment circles, a company’s inflexion points – key developments that can drive growth – often signal a rise in stock price.

For Futura Medical, several such events have unfolded recently, but its valuation seems slow to reflect them.

The stock has climbed 23 per cent this year, but the most recent value-accretive announcements were initially met with enthusiasm, only to see gains wane.

This trend may stem from broader market uncertainties and shifts in the AIM inheritance tax regime rather than Futura’s fundamentals.

Deeper dive

And while this state of affairs is likely a frustration for CEO James Barder and his team, it also offers a long-term opportunity for investors willing to look beyond market noise to the company’s growth trajectory.

The core asset is the fast-acting gel Eroxon, the first over-the-counter erectile dysfunction treatment approved by the US Food & Drug Administration.

Eroxon is the first over-the-counter erectile dysfunction treatment approved by the US Food & Drug Administration.

It has launched in over ten countries, including major European markets such as the UK, France, Italy, and Spain.

Last month, Futura’s partner Haleon began rolling out Eroxon in the US, the world’s largest pharmaceutical market. This milestone prompted a $5 million payment to Futura, representing a significant boost to its coffers.

US debut

The potential financial impact of Eroxon’s American debut is still difficult to gauge, but it adds to Futura’s existing momentum.

Recent interim results exceeded expectations, with analysts upgrading revenue forecasts for 2024 and 2025 to £13.4 million and £18.6 million, respectively, from previous estimates of £9.2 million and £15.1 million.

Trinity Delta, a research firm following Futura, sees the launch Stateside as a pivotal moment.

Eroxon’s status as the only OTC ED treatment in the US gives it a strong competitive advantage.

TD cautioned that ‘forecasting revenues remains challenging given unpredictable launch dynamics’ but remains optimistic about Futura’s potential.

Next generation

Not content to rely solely on Eroxon’s commercial success, the company is diversifying its pipeline.

On Monday (Nov 4), it revealed two new products in development: WSD4000, a women’s sexual dysfunction gel, and Eroxon Intense, an enhanced version of its male ED treatment.

WSD4000 aims to be the first OTC solution for common issues such as low desire and arousal, an underserved market.

Broker Panmure Liberum considers the product’s market potential “significant,” although it remains early-stage.

For men, Eroxon Intense seeks to address the demand for a more potent experience and is expected to reach consumers by late 2025.

Where to now?

According to Panmure Liberum: ‘Eroxon Intense is a valuable brand extension, and partners are keen on expanding the Eroxon family of products. If Futura succeeds with WSD4000, the female sexual dysfunction market could be even larger than ED.’

Currently, Futura shares trade around 34p, valuing the business at approximately £103million.

This is far below Trinity Delta’s valuation, which puts the company’s net present value at £392 million, or 130p per share. Panmure Liberum’s target price is similar, while American house Stifel has raised its outlook following recent developments.

‘This update only enhances our view that Futura remains a highly compelling, yet underappreciated investment opportunity,’ Stifel noted.

‘Management has hit all its major milestones on time, and the US Eroxon launch exceeded expectations. Futura now sits at a compelling juncture—profitable, with the US launch underway and a developing pipeline.’