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Futura’s huge potential draws investor interest

This is set to be a pivotal year for the pharmaceutical company that is developing a portfolio of innovative products based on its proprietary transdermal Dermasys drug delivery technology

Investors are rightly starting to take notice of the commercial prospects for Futura Medical (FUM:30.5p), a pharmaceutical company that is developing a portfolio of innovative products based on its proprietary, transdermal Dermasys drug delivery technology.

In fact, the share price of the Aim-traded company has risen by more than 100 per cent since I included the shares, at 14.85p, in my 2019 Bargain Shares portfolio, in turn helping the portfolio to outperform the FTSE Aim All-Share index by almost 10 percentage points since launch on 31 January 2019. For good measure, I subsequently highlighted a timely repeat buying opportunity in Futura’s shares, at 14.75p, in a detailed analysis in early April ('Futura’s blue-sky opportunity', 15 April 2019). It’s easy to understand why investors are warming to the investment case.

That’s because the company has just confirmed that it is on track to release headline data by the year-end from its Phase III clinical study for flagship product MED2005, a breakthrough topical gel for the treatment of erectile dysfunction (ED). The company has recruited more than 1,000 patients across 60 centres in central and eastern Europe in order to compare the efficacy of glyceryl trinitrate (GTN) absorption of the gel, against that of placebo, with an initial three-month study period for each patient. The gel has a rapid response, with first detection in blood plasma in four to five minutes, reaching peak levels in the bloodstream within 10 to 12 minutes for all doses. Futura will incorporate feedback from key opinion leaders in ED, the US and EU regulatory agencies, as well as potential commercial partners, to increase the chances of regulatory approval and to optimise the commercial value.

James Barder, chief executive of Futura, believes that the Phase III data read-out at the year-end should significantly clinically de-risk MED2005, and help provide commercial partners with greater certainty around the potential opportunity it presents. The addressable market for this product is huge if MED2005 is approved by the drug regulators. The prescription-only market could potentially generate $560m (£441m) in annual sales, according to research carried out by Decision Resources and Cello Health, and sales from the over-the-counter (OTC) product are estimated at $660m (£520m), according to Ipsos Mori. The profit margin to be earned is eye-catchingly, too, given that each dose is expected to cost less than €0.30 (26.5p) to produce, but could sell for $5 (£4).

Any investment clearly carries a fair degree of risk, as there can be no guarantee that the study will be a success, nor is there any certainty that a commercial deal with potential partners will be signed. However, the signs are very positive, and I maintain my view that Futura’s share price has the potential to multiply many times over if the £62m market capitalisation company delivers the headline data that potential commercial partners are looking for. I also note that heavyweight brokerage Liberum Capital was appointed as the company’s nominated adviser and sole broker late last month, and has since initiated coverage with a positive research note. This can only be supportive of creating investor interest. Buy.

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