SMALL CAP IDEA: Frustration for Futura Medical as enthusiasm wanes

In investment circles, a company’s inflection points—key developments that can boost growth—often signal a rise in its stock price.

For Futura MedicalSeveral such events have occurred recently, but appreciation seems slow to reflect them.

The stock is up 23 percent this year, but the latest appreciation announcements were initially met with enthusiasm, after which gains declined.

This trend may stem from broader market uncertainties and shifts in AIM’s 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 presents a longer-term opportunity for investors willing to look beyond the market noise and into the company’s growth trajectory.

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

It has launched in more than 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 led to a $5 million payment to Futura, which provided a significant boost to the treasury.

American debut

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

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

Trinity Delta, a research firm that follows Futura, sees the launch in the United States as a crucial moment.

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

TD warned that “revenue forecasting remains a challenge 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 (November 4), it unveiled two new products in development: WSD4000, a gel for female sexual dysfunction, and Eroxon Intense, an improved version of the male ED treatment.

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

Broker Panmure Liberum considers the market potential of the product to be “significant”, even though it is still in its early stages.

For men, Eroxon Intense aims to meet the demand for a more powerful experience and is expected to reach consumers by the end of 2025.

Where to now?

According to Panmure Liberum: ‘Eroxon Intense is a valuable brand extension and partners are keen to expand the Eroxon product family. If Futura succeeds with WSD4000, the market for female sexual dysfunction could even be bigger than ED.”

Currently, Futura shares are trading at around 34p, valuing the company at around £103m.

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

“This update only reinforces our view that Futura remains a highly attractive, but undervalued, investment opportunity,” Stifel said.

“Management has achieved all key milestones on time and the launch of Eroxon in the US has exceeded expectations. Futura is now at an attractive time: profitable, with its US launch underway and a developing pipeline in place.”