SMALL CAP IDEA: Frustration for Futura Medical as enthusiasm wanes

In investment circles, a company’s turning points (key events that can drive growth) often indicate an increase in stock price.

For Future MedicalThere have been several events of this type recently, but their assessment seems slow to reflect them.

The stock is up 23 percent this year, but the most recent announcements about the rise in value were initially greeted with enthusiasm, only to see gains taper off.

This trend may be due to broader market uncertainties and changes to AIM’s inheritance tax regime rather than Futura’s fundamentals.

deeper dive

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

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

It has launched in more than ten countries, including major European markets such as the United Kingdom, France, Italy and Spain.

Last month, Futura partner Haleon began rolling out Eroxon in the United States, the world’s largest pharmaceutical market. This milestone led to a payment of $5 million to Futura, which represents a significant boost to its coffers.

US debut

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

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

Trinity Delta, a research firm that follows Futura, sees the U.S. launch as a pivotal moment.

Eroxon’s status as the only over-the-counter treatment for erectile dysfunction in the US gives it a strong competitive advantage.

TD cautioned that “revenue forecasting 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 product portfolio.

On Monday (Nov. 4), it revealed two new products in development: WSD4000, a gel for female sexual dysfunction, and Eroxon Intense, an improved version of its treatment for male sexual dysfunction.

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

Broker Panmure Liberum considers the market potential of the product to be “significant”, although it is still in an early phase.

For men, Eroxon Intense seeks to meet demand for a more powerful experience and is expected to reach consumers in late 2025.

Where are we going now?

According to Panmure Liberum: ‘Eroxon Intense is a valuable brand extension and the partners are interested in expanding the Eroxon product family. If Futura is successful with WSD4000, the market for female sexual dysfunction could be even larger than that for erectile dysfunction.’

Futura shares are currently trading at around 34p, valuing the business at approximately £103m.

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

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

‘Management has achieved all its important milestones on time and the launch of Eroxon in the United States exceeded expectations. Futura is now at a compelling juncture: profitable, with a US launch underway and a project in development.’