Futura Medical: getting closer to the key point

The regulatory filings for MED3000, Futura Medical’s topical gel for erectile dysfunction (ED), are progressing well in both Europe and the US. Positive discussions with the European Notified Body and FDA suggest approval as an OTC product is expected in both geographies. Such ready availability, coupled with a proven clinical efficacy, rapid onset of action, and a clean side-effect profile, suggests that it is well placed to capture a sizeable share of a large, and growing, market. Management have engaged a specialist corporate advisor to initiate licensing discussions with suitable commercial partners. We have modelled, using conservative assumptions, OTC sales of $225m in Europe and $250m in the US. We reiterate our view that, whilst not without risks, the current valuation fails to reflect the likely prospects.

H120 results have confirmed that progress is as expected. The regulatory filings for MED3000 are the key near-term determinants of Futura Medical’s prospects.

In Europe MED3000 has been submitted for approval as a Class 2B medical device. Continuing positive interactions with the designated EU Notified Body has seen the Technical Documentation (essentially the efficacy, safety and quality data from the clinical trials and supporting pre-clinical evidence) and the Quality Management System (QMS) documentation being submitted, with the latter having received a positive audit opinion. The Technical Dossier has been accepted and is currently under formal review, which, in our view, would support a regulatory approval in 2021.

Exhibit 1: Key milestones on EU Class II Medical Device regulatory pathway

Source: Futura Medical. Note: 2 = Notified Bodies are the regulatory authorities that oversee the approval of medical devices within the EU including the UK; 3 = Quality Management System

In the US MED3000 is being filed as a medical device with a De Novo Classification, as there is no similar predicate device to allow a 510(k) submission. Two pre-submission meetings with the FDA (February and July 2020) clarified the OTC route to market and the need for an additional six-month clinical trial to demonstrate longer term efficacy. The details and scope of this small study will be subject of a third meeting (provisionally expected by end-October), as will the development of the OTC label and patient leaflet. The clinical study report (CSR), and additional clinical, safety, stability, and manufacturing information are similar to the European requirement and the package has already been collated.

Exhibit 2: Key milestones on FDA De Novo Medical Device pathway

Source: Futura Medical. Note: 1 = Clinical Study Report

The form of the supplementary study will be known after the next FDA meeting, but the indications are that the patient numbers required will modest, with active cooperation to determine the ‘least burdensome design’. Developing the OTC label and associated patient information leaflet is a crucial process that seeks to minimise all risks; for example, consumer panels are employed to establish wording that is clear and unambiguous. Although multifaceted, the procedure is not expected to be a time limiting step. Management appears confident that a US OTC approval will be granted during 2022.

Assuming a smooth regulatory pathway, MED3000 would be the first clinically proven ED product that is approved OTC in Europe and the US. Its rapid onset of effect, undoubted safety, and ease of use suggest MED3000 would offer an attractive, clearly differentiated (not ‘me too’), and competitive clinical profile compared not only to the market leading class of PDE5 inhibitors, but other classes of competing ED therapies. Management has conducted market research analyses that suggest sales of $500m three years post-launch, rising to $584m by year five and $661m by year ten.

Exhibit 3: User benefits of MED3000

Source: Trinity Delta, Futura Medical

Our assumptions and expectations were detailed in our June 2020 Outlook report and, despite our conservative approach, we arrive at five-year sales for MED3000 of $225m in Europe and $250m in the US. Using more aggressive assumptions, notably on having motivated and commercially astute partners, could result in materially faster adoption curves and higher peak sales (Exhibit 4). Futura Medical has recently engaged a specialist corporate advisor to initiate discussions with potential licensing and marketing partners.

Exhibit 4: OTC availability opens a large untapped ED market

Source: Futura Medical. Note: 1 – Cello Healthcare Consulting research amongst physicians in the US, France and Germany, commissioned by Futura; 2 – Corona G., Andrology, 2016, 4, 1002–1009; 3 – Frederick  L., J Sex Med, 2014, Oct, (10):2546-53; 4 – Nguyen Sex Med Rev. 2017 Oct, vol 5, 508-520; 5 – MSP 2018: Data for 75 countries, IQVIA IMS Health; 6 – Ipsos research commissioned by Futura 7 – Directors’ belief based on market research conducted on Company’s behalf by Ipsos

The update on the other development programmes also showed progress. The additional laboratory data the UK regulator, MHRA, had requested to support submission of the TRP100 diclofenac pain relief gel was completed during Q320. This will be submitted at the next scientific advisory meeting, which is expected to take place before end-2020. Thornton & Ross, part of STADA, has UK rights to TRP100. We expect existing commercial discussions with potential partners for other geographies will depend on the outcomes of the next MHRA meeting.

The topical cannabidiol programme, CBD100, in development with CBDerma showed promising pre-clinical study results. The permeation of CBD100 into the skin was markedly superior to the comparator cannabidiol product, with the through the skin permeation clearly demonstrating why DermaSys is such an attractive dermal formulation technology. Next steps are under evaluation with CBDerma.

Futura Medical’s H120 results showed careful cost control, with cash resources of £2.62m at end-June 2020. Low overheads mean the cash runway for the ongoing operations extends to Q221. Management remains candid that additional funding will be required to perform the supplementary clinical trial required for FDA approval. Although the amount needed will not be known until the scope of the study in known (end-October), the amount is expected to be modest, and could be funded by a licensing deal, debt, other non-dilutive funding, or an equity raise.

Exhibit 5: Summary of financials

Source: Company, Trinity Delta    Note: Adjusted numbers exclude exceptionals. The funding requirement is shown as short-term debt in FY21e, until transaction type, source and size are confirmed.