Futura Medical plc (FUM) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to Futura's webcast for the interim results for 6 months ending the 30th of June 2020. I am James Barder, the Chief Executive of the company, and I'm pleased to be joined by both Ken James, who is Executive Head of R&D; and Angela Hildreth, who is Finance Director and Chief Operating Officer. A corporate overview of the company. We're obviously listed on AIM, and we describe ourselves as a virtual organization. We employ 13 staff. We have a low overhead base, and we have a significant outsourced infrastructure with over 30 consultants. Our real core skill set is what we describe as applying skin science to deliver novel topical clinically proven products. And our main sort of core asset we describe as DermaSys. Again, we're looking to add licensed products and as such, it's all around about us being able to deliver clinically proven innovation in our 2 real key areas of expertise in sexual health and pain management. Today, we're going to be talking about 3 different products: MED3000, which is a topical gel for the treatment of erectile dysfunction; TPR100, which again is a topical gel for the treatment -- pain relief that uses diclofenac; and CBD100, which again is a topical gel, which contains cannabidiol, which is an extract of cannabis. Six months highlights. We've made very significant progress over the last 6 months. And strategic decision was taken a little while ago to really focus and maximize our efforts on MED3000, which is a topical gel for erectile dysfunction, and focusing on the research and development and completion of that to enable regulatory submissions and approval for the product in both the U.S. and Europe. We've also been working on further realization of value from our pain relief portfolio and also now progression of commercial discussions in out-licensing MED2005. Over the last 6 months or actually 9 months now, we've said -- had a number of key milestones that would be beneficial to the company: submission to the notified body in Europe for approval of MED3000 Class 2B medical device with an over-the-counter label; positive opinion from them, from the notified body relating to what we call our QMS or our quality management system, which is all key part of that regulatory approval. We've had 2 pre-submission meetings with the FDA, confirming the likely positioning of MED3000 as an over-the-counter product and as a de novo medical device. And we have a third pre-submission meeting set before the end of October, where we expect to finalize remaining data requirements. And we have also appointed specialized corporate advisers to help facilitate licensing and marketing discussion. On the pain relief portfolio, we have completed the lab work, which was critical as part of the sort of feedback we've had from the MHRA, which is the U.K. regulator. And Ken will talk about that a little bit later. And also compelling data on CBD100, which is the cannabis product. We've also filed a patent on that as well. Again, net loss for the 6 months is just over GBP 1 million. But Angela will talk more about that in due course. Strategic outlook, very much focused on MED3000 gaining approval as a clinically proven treatment for erectile dysfunction within the next 12 to 18 months in both Europe and the U.S.; realize its value through doing some commercial agreements; and also expanding our potential for our transdermal technology, DermaSys, through our pain relief portfolio. We now focus on MED3000 and give you more specific information in relation to that, which is an innovation in the treatment of erectile dysfunction. There is a big unmet need in erectile dysfunction. I'm sure most shareholders would be familiar with products like Viagra, but there is significant issues with these products which do not meet the needs of many men and their partners. And in fact, over half discontinued treatment within 1 year of taking the medication. Again, over 50% of men do not go and see their doctor to discuss the condition. It's obviously embarrassing. And of those that do, 67% do not actually end up taking any treatment. So there is definite demand for a breakthrough treatment, which we believe MED 3000 is, which has the potential to become the first over-the-counter treatment throughout, certainly, the key countries such as the U.S. and Europe. The key difference with this product is speed. It works -- goes to work in 10 minutes or less and therefore, removes the need for preplanning per se; clinically proven to be effective in mild, moderate and severe erectile dysfunction patients with minimal side effects, no adverse drug interactions. And there's strong IP protection, which we're working on, and because we're looking at a medical device classification, there's an expedited approval process with a low-cost of goods. So you may ask, "Well, how does this work?"

Thank you, James. So this slide explains precisely how MED3000 works. And it has what we call a unique evaporative action that leads to an erection in ED sufferers. And by that, I mean that when the gel is applied to the head or the glans penis, as we call it, there -- as you can see on the left-hand side of the chart, there is a rapid temperature drop of about 10 degrees centigrade within a minute, and then a recovery warming effect over several minutes. Now the glans penis is highly innovative, as we call it, and that means that it's got many, many tiny nerve endings and is very sensitive to stimuli such as temperature change. And this temperature change causes a cascade of events, as you see on the right-hand side of the chart, which ultimately leads to smooth muscle relaxation, tumescence and penile erection, a somewhat different mechanism to the PDE5 inhibitors such as Viagra and Cialis, which is represented in yellow, but it ultimately leads to the same effect. So MED works through a physical evaporative action, and the PDE5 inhibitors work through a chemical affect. So relatively, how strong is the effect? And if you move on to the next slide, the data points on this chart come from a chart produced by the American urology association and plots data from all the pivotal PDE5 inhibitor studies that have been published, such as Viagra, Cialis and so on, and also plots the placebo results that were achieved in those studies. The axis on the bottom are the baseline readings or pretreatment levels of ED using the standard IIEF assessment method, and the axis on the right-hand side is the effect post treatment. And we've superimposed data from our Phase III study, FM57 onto this chart, which is the gold star, is this data, remember, from 250 subjects taking MED3000 and studied in 9 countries and 60 centers within those countries, so a very big Phase III study. Anything above the diagonal line is an improvement in the ED during the course of the treatment. Anything below is a worsening. And as you can see, MED3000 is superior to the placebo used in the PDE5 studies and compares favorably with the active products, trending towards the lower end. But in other words, we believe that MED3000 to be at least as effective as the lower-dose PDE5 inhibitors. So if you move on to the next slide, I just wanted to provide an update on the regulatory status. So on the left, we have where we are in the U.S. and on the right, where we are in the EU. And we've made excellent progress in our discussions with the regulatory bodies in both of those areas. The process is a little bit different. Insofar as the U.S. is concerned, the FDA offers the opportunity to have what they call pre-submission meetings with the medical device division to agree data requirements before filing, and this helps facilitate the final approval because you have the opportunity to basically agree what data FDA will feel comfortable with approving. And we've had 2 such meetings with FDA, one in February and one in July. And in February, importantly, we agreed the regulatory pathway as a de novo medical device. And then in July, we agreed in principle the need to conduct a small confirmatory clinical and the principle of MED3000 being available direct to OTC, which would make it the first OTC product recommended for the treatment of erectile dysfunction in the United States. A future meeting is planned before the end of October to finalize the clinical protocol for this small complementary clinical. And 2 main areas that FDA have asked us to consider is a study of 6 months duration. Our pivotal study, FM57, only ran for 3 months. They wanted reassurance that it'll work beyond the 3-month period. And they've asked us to consider a comparative product to put in there as well. So we've put a document together with an outlined clinical protocol to go to them, which hopefully they'll agree. And then on the OTC side, we have to do work to develop a satisfactory label. Because there is no physician supervising the use of the product, so the label has to be well understood by the user in respect of how they use the product, but making sure they don't use it in circumstances that they shouldn't use it. And that will require a small study looking at the comprehension of the label, and we've put a protocol together for that study as well. So those are the 2 areas for the discussion in October. Once that's agreed, hopefully, in October, we'll be cracking on with the clinical study and what they call the human factor study to develop the OTC label. That, ultimately, we believe, will give us marketing authorization in 2022. Now moving on to the EU. The process in Europe is a little bit different. We work through what we call a notified body. These are organizations authorized by the regulatory authorities to act on their behalf. And we've had very good discussions so far with the notified body. There are 2 elements leading to approval. You have to submit a technical dossier, which contains all the clinical data, the safety data and the data supporting the quality or CMC data, as we call it. That's the technical dossier. But also we have to develop what they call a quality management system. A quality management system is to ensure that when you go into final manufacture of the product, you've got all the elements in place to be able to produce the product with quality and monitoring safety and all the other important elements. So you have to provide reassurance on that. Now we have received a positive opinion on our quality management system that was achieved in August through inspections that we've had from the notified body, so a very big tick on that. And we also submitted our technical dossier back in July. That is now undergoing active review with the notified body. As is usually the case, we expect to get questions coming back in the next month or so. And in fact, the new device regulations allow the notified body to ask 3 rounds of questions. I don't know if that will be the case or not, but if we take that into account, I think we would -- that would lead us to expect regulatory approval in Europe within 2021.

OTC availability adds significantly to the actual market opportunity from MED3000. We still very much have the existing opportunity for men with ED, diagnosed or otherwise where the need to plan ahead of sexual intercourse about when you take the medication such as Viagra for some men is a big issue. This may, in part, explain why around 50% of men stop taking treatment within a year of initially being put on oral treatments, and only 1 in 4 men diagnosed of ED are currently taking the treatment. Side effects are also cited as another reason. And then, of course, you have a number of men who are reluctant to meet their doctor to talk about a condition they find embarrassing. Therefore, an OTC treatment such as MED3000, which is fast acting with a very favorable side effect profile without either contraindications for other medications nor with the need of a doctor's prescription, is extremely attractive. And that is really sort of what we call sort of traditional segment. The newer segments, you have 2 areas there: young men who have grown up with the Internet and effectively, had unlimited access to pornography, which gives way to a perception of how they should perform, resulting in some real performance anxiety issues. You also have women whose partners suffer from ED. However, they want to have an active sex life and feel frustrated and helpless. Again, an extremely safe and fast-acting treatment such as MED3000 represents a significant opportunity and sizable market. Research commissioned by Ipsos -- by us a little while ago underlines the potential for a new OTC category, especially for a treatment with MED3000 attributes, and suggests that roughly 3/4 of sales could come from new patients not currently taking treatment. The ED market is currently $5 billion plus, and as I just raised on the previous slide, an OTC indication for clinically proven treatment for erectile dysfunction gives us significant commercial opportunity. And these values are reflected by the Ipsos research commissioned by us. We have also retained special corporate advisers in July and are actively progressing discussions with potential commercial partners. These will take some time, but we are pleased with the progress we've made so far. TPR100, which is our topical gel for erectile dysfunction -- topical pain relief. Again, it is a big market, and there continues to be a big demand for safe, effective and long-lasting treatment, which can drive the therapeutic active, such as diclofenac, which we use, in this case, through the skin. We have been working with our U.K. commercial partner, Thornton & Ross, and have recently completed additional lab work which is essential in order for the regulatory submission within the U.K. through the MHRA to be progressed. So that work is now being completed, and we are now seeking a scientific advisory meeting with the U.K. regulator before the end of this year. We do have other discussions which are sort of progressing, but they will be heavily influenced by the outcomes of this meeting with MHRA. And so therefore, that is really where our main kind of focus at this time is.

So turning to topical cannabidiol formulated with DermaSys. We've recently signed a joint venture with CBDerma Technology to fund development of the DermaSys-based cannabidiol formulation. Our belief here is that the vast majority of products currently on the market, topical CBD products are fairly -- poorly formulated and may have stability issues associated with them and they may not drive enough CBD into the skin and through the skin to be effective. So we've been testing that hypothesis. It represents potentially a near-term opportunity for us under cosmetic regulations, which are constantly evolving by the way, but we think that by developing a product to strict pharmaceutical standards that we will be well placed for the future. And we believe that we've developed a superior product in respect to absorption. Longer term, of course, we could support the entity with strong clinical evidence and register the product as a drug, medicinal product, probably in the area of pain relief, which seems to be the most popular use for topical CBD. And I'm pleased to report also that what we've created is novel, and a patent application has been filed. So if you look down the bottom here at the 2 charts, these are the results that we've achieved against a competitive product, which is quite widely used actually in the U.K. There are 2 things being measured here. On the left-hand side, it's measuring the amount of cannabidiol which goes into the skin. And then on the right-hand side, it measures how much actually goes through the skin to treat more deep-seated conditions like pain and inflammation in joints. And in both cases, you can see that we're vastly superior to the competitive product. On the left-hand side, we're about a factor of eightfold better. And then somewhat surprisingly actually, on the right-hand side, there was no, 0, cannabidiol from the competitive product that actually went through the skin into the medium beyond the skin. So clearly, we're vastly superior there as well. The next steps for us are being discussed and explored with CBDerma, about how we could possibly commercialize the product. Now I'll hand you over to Angela to talk about the financial results and the outlook.

Thanks, Ken. So we had a net loss of just over GBP 1 million in the period. This is compared to a net loss of approximately GBP 4.5 million in the same period last year. This is not surprising given that we're currently not running any significant clinical study and our efforts are firmly focused on regulatory activities for MED3000, which a big part of that can be done with existing internal resources. We have GBP 2.6 million of cash in the bank, and given the current cash burn, this gives us runway until Q2 next year. This runway does not factor in the cost of generating the additional data required by the FDA. We're still finalizing the cost of this work, but the expectation is that the cost will be significantly lower than previous studies that we've run, such as FM57. So in parallel to finalizing these costs, we're exploring various funding options. Equity investment is not our only funding option. James mentioned earlier that we have now commenced a formal process to find a commercial partner for MED, and we're also looking at other sources of non-dilutive funding. And I think the key thing is that we've got time. We've got time to finalize the costs, and we have no immediate requirements for cash to support the current ongoing activities, which include the EU regulatory process. And we hope to provide more update in the next few months as to the full cost of that study. Looking at the outlook, we're obviously looking forward to having MED3000 approved in the EU as a fast-acting clinically proven treatment, which we expect to be over-the-counter during 2021. We're also going to be finalizing the data requirements with the FDA. Hope to have that confirmed and virtually completed during 2021. We have commenced commercial discussions regarding the out-licensing agreements for MED3000, and this could be on a worldwide, regional or country basis. We will be progressing TPR100 with the MHRA and we'll be looking at that regulatory submission, pending the outcome of a scientific advice meeting that we plan to have with them. And we will be providing further updates on the development of CBD100, which is our topical cannabidiol formulation using DermaSys.

Thank you, Ken and Angela and myself, James Barder. That concludes today the presentation. You will find there are a few more slides which are in the appendix, which provides a bit more additional information for those that are interested. Thank you.