Futura Medical plc (FUM) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to the Futura Medical webcast for our preliminary results for the year ending the 31st of December 2021. I am James Barder, the CEO of the company; and I'm ably joined today by Angela Hildreth, who's the Finance Director and COO; and by Ken James, who is the Executive Head of R&D. First of all, obviously, we have our usual disclaimer, which I'm not going to go through word for word. I'll let you read at your leisure in due course. Without further ado, let's move to Slide 4. A brief corporate overview. Futura is listed, obviously, our name, and we describe ourselves as a virtual organization with 13 staff and low overheads. We have a number of external consultants, around about 30, and we really have a significant outsourced infrastructure. Our key expertise or asset is applying skin science to deliver novel therapeutic treatments, topically applied, and we have a good track record of developing clinically proven innovation using existing Pharmaceutical compounds or novel applications. I'm not going to really talk about the portfolio now as we go into further detail in due course. Key strategic [ objectives ], really, there are 4 of these for us. First of all is to gain U.S. approval for MED3000, which is our clinically-proven treatment for erectile dysfunction over the next 18 months. Secondly is to complete our global distribution network to establish MED as a long-term, sustainable, and profitable brand. Thirdly is to initiate product launches over the next year to certainly validate the consumer interest and repeat purchase potential of MED3000 ahead of anticipated U.S. launch in 2023. And finally, to conclude, obviously, in order for us to do that, commercial negotiations for the U.S. marketing rights, and we plan to do that for later this year. So initially, let me just have a quick summary of the highlights of the year. We've made real progress over the last 12 months. And our real priority has been to -- at the moment is to complete FM71, which is what we expect to be the [ remaining ] clinical study to get U.S. approval. And again, Ken will talk a little bit more about that in a minute. In parallel, it's been around really focusing on building a global distribution network to enable initial launches over the next few years. And we've made good progress on that. And again, I will talk a little bit more about that in due course. Our key product, MED3000, is an approved medical device, currently approved throughout the EU and the U.K. and is available OTC, which obviously means without the need of a doctor's prescription, so giving -- opening up access. And again, I'll talk a little bit more about that in due course. We also got clarity on what is required to get a likely approval in The States and Ken will talk about that in due course. And we've also been working closely with our corporate specialist advisors on building a global distribution network. And we've made, again, good progress on that. We are targeting initial launches over the next year. And when we can give further information about that in due course -- we will do that in due course. Finally, on the financials, I'm going to skip that for the moment as Angela will talk a bit more about it in due course. MED3000, this is a clinically-proven breakthrough treatment for erectile dysfunction. And there are 4 key things here as far as we're concerned. It is the first topical gel to treat erectile dysfunction that is available now throughout EU, obviously subject to launch of the product. Key, again, is it's available without the need of a doctor's prescription. It is a clinically-proven gel to treat erectile dysfunction. And I think the key claim here is helps you get an erection within 10 minutes, which is significantly faster than the other oral treatments that are currently available in the market. MED3000 does represent significant commercial potential in a market which is growing. It has certainly undergone a certain amount of change over the last few years as the more well-known treatments -- oral treatments such as Viagra and Cialis have become generic and come off patent, which means there are a number of competitive products on the market in that regard. What that has meant is that there has been a drop, if you like, in the price that the product is available, and that has driven up volumes significantly, especially in the key market like the U.S. where we've seen up to an 85% increase in volume. I think it's also important to stress that even though the cost of the treatment may have dropped, the cost to the consumer or the patient has dropped less because as a prescription product, it still requires the need for the patient to source product through a doctor, and the doctor obviously has charges associated with that. With that in mind, there's been significant growth, especially in the U.S., for subscription services where you can buy products online where you have access to a doctor and there are costs associated with that. In the case of the hims, which is one of the 2 big brands in The States, you're typically looking at a subscription service where you get up to 10 generic tablets of sildenafil which is Viagra a month, and each tablet costs you around about USD 5. So even though in actual value terms the cost of treatments has dropped, the cost to the consumer hasn't dropped so much because of the cost of access to the product. Obviously, as we look to move this into an over-the-counter treatment, that will provide huge opportunities for a lot of men who are too embarrassed to go and see a doctor to actually be able to go into a credible retailer and buy the product, either through their online store or actually just quickly going -- when they go into shopping, putting it into their basket. As far as price is concerned, we expect MED to launch around about the USD 5, EUR 5, GBP 5 mark. Again, OTC does open up a large untapped market. The more traditional segments in this are those men who use PDE5s, which again are sort of the likes of Viagra and Cialis, and we're not looking to really target those men who are satisfied with this form of treatment. For a lot of men, they're very comfortable with this, but then there are a lot of men who don't like the fact that because it is not fast-acting, they do need to preplan when they're going to take Viagra or Cialis, which loses spontaneity. Also, the side effect profiles of these products is high, and for some men they don't like that. So what we're really looking to target is those men who don't like using those treatments, also those men who are probably undiagnosed. They suspect they may have a erectile dysfunction, but again, they're too embarrassed to go and see a doctor. And therefore, to be able to buy something with ease of access, which an OTC product would give, it's a lot more convenient, it's a lot less embarrassing, and therefore we see that as a big opportunity. That's really the traditional segment. The newest segments relate to there is a growing evidence to suggest that younger men are increasingly presenting or have a problem. In part, we suspect this is driven by a generation of men growing up with the Internet, growing up with free access to more pornography, and the perception of how they should perform. And therefore, a treatment such as MED, which is safe, easily available, could be a real boon for them, and certainly in market research that we've done and commercial partners have done to date has shown strong interest from this segment. In addition, a product that provides spontaneity is something that we've seen a lot of women like. They can become much more involved in the treatment. Again, in the clinical studies we've run to date, 30% of the time, the partner applies the gel directly to her partner's penis. And therefore, something that they can go and buy. So this will be the first time that they can go buy an erectile dysfunction treatment because, of course, it is -- it doesn't require a prescription. They can introduce this into the relationship with their partner. And again, there is strong interest in that. OTC, and again, based on the research that we've done to date are suggesting that 73% of sales would be from new patients not currently on treatment. I'll also finally add that this research was done several years ago, and we are actively now updating that, and I suspect at the time of our September or our interim results, we'll be able to provide additional information. But we've done a lot of research and our commercial partners have done a lot of research on this. And the data is very consistent, very strong on where the key opportunities lie. One of the key things that we've been working on over the last year is building a global distribution network. Again, for us, it's very important that we build a sustainable and profitable brand and that we find commercial partners that share our common ambition and are not necessarily looking at making a quick buck while trying to sell. And if it doesn't work out, shrug their shoulders and move off and go on to something else. So in all the commercial agreements that we have to date and to those that we are still negotiating on, we're very much focused on the key performance obligations, which we think is absolutely critical. Obviously, aside from making in those markets where MED is not already approved, it is a commitment to launch and get regulatory approval within a certain timeline at their expense. And then critically, key performance obligations around launch timings, and the amount that they will spend on advertising and promotion to make the brand a credible and successful brand over a period of time. And again, we're very much focused on commercial partners who we think have the track record and expertise of building a new brand, a new credible brand in the pharmaceutical arena. To date, we have signed 4 agreements, 1 for Southeast Asia, 1 for Latin America, 1 for the Middle East, and 1 for South Korea. Obviously, at the moment, our real priority is markets near to home and in particular the EU and U.K. markets. And we have entered into a period of exclusivity with a potential commercial partner for those rights. Those discussions are going well. However, until the deal is done, no deal is done, if you understand what I mean. And we'll update shareholders as soon as we have more information about that. Key requirements for the suppliers, we will remain basically in control of manufacture and supply of goods at competitive price. And obviously, always is a balancing act of making sure we have a certainty of supply and manufacturing capacity to cope with the projected levels of sales that we and our commercial partners anticipate. The U.S. strategy, to date, we have received a number of inquiries from a number of different parties. But our focus has been much more on, as far as America is concerned, is understanding the requirements that is needed for U.S. approval and completing that. Ken, again, will touch on this shortly to provide an update on that. We'll want, hopefully, those requirements are successfully concluded. We will be very much focusing on going out with our corporate advisers to find commercial partners and negotiate a deal for the key market in the U.S. Again, I think it's important to stress, whilst we have done licensing deals in the other markets in a more traditional manner, I'm not ruling out -- obviously, we're looking at that, but we are looking at other options as well. We're very much looking at the best way of delivering the maximum value over a period of time for our shareholders. So I just wanted to stress that we will be exploring more options as we go out later this year to look to commercialize this. And we would hope that we'll be able to update shareholders more on this around the time that we expect to get U.S. regulatory approval or probably shortly after that. So, again, that will be a key aspect of derisking the project and obviously giving us the opportunity of maximizing potential for us. One final thing on that with this very much in mind, we're delighted that Jeff Needham who joined the Board at the end of last year who has significant consumer healthcare experience having previously been the Chairman of Perrigo, which is the largest provider of -- in volume terms of OTC products throughout the U.S. market. That concludes my piece and I'll now hand over to Ken.

Thank you, James, and I'm pleased to report that we're making excellent progress on the technical and regulatory side of MED3000. We're on track to submit the FDA dossier for the all-important U.S. market by end of September. More on that in a moment. We achieved approval to market across all EU countries by obtaining the CE mark last April, and we recently obtained approval to market in great Britain post-Brexit by obtaining the UKCA mark, and distributor partner regulatory submissions in other countries are well underway as well. Now coming back to the U.S. The U.S. invites early interaction with them on the planned work program through what they call pre-submission meetings, which they state may improve the quality of subsequent submissions, shorten total review times, and facilitate the development process for new devices. And we've taken full advantage of this and through a number of pre-submission meetings, we identified 2 key pieces of work that FDA recommended. The first one is what they call a human factor study to support OTC or nonprescription classification. This was to ensure that users could self-diagnose they had erectile dysfunction, ensure they could successfully select the product from the supermarket shelves, and could use the product as directed on the label and leaflet. And this study was successfully completed in December. The second piece of work was a relatively small confirmatory clinical study, which we call FM71, which is now well underway with results expected in September. The clinical is being run in approximately 100 patients based in Poland, Georgia, Bulgaria, and the United States and runs for 24 weeks unlike the previous clinical study that we ran which was for 12 weeks. In the hierarchy of endpoints, the primary endpoints are as laid out on the slide here, a significant improvement in erectile function over baseline at 24 weeks, and the second primary endpoint is to ensure that that difference meets the requirement of being minimally clinically important with the 4 units on the IIEF scale at 24 weeks. Both of those endpoints were studied in the previous clinical as well with successful results. We also have defined a secondary endpoint with FDA to enable us to support the 10-minute claim. And we have also included exploratory endpoints where we look at the comparative safety, efficacy, and onset to action against a commercial control product, which is tadalafil 5 milligram. And the point of including this is to enable us to frame the risks versus the benefits against an RX or prescription marketed product and further make the case for OTC classification where currently no tablets are allowed over the counter in the United States. Aside from the lead product, MED3000, it would be important after launch to provide a flow of new innovation to support what we hope would be a very successful franchise. Hence, we're already exploring new packaging formats with potential cost of goods advantages, new delivery systems, and in the long run potentially new indications such as premature ejaculation or female sexual dysfunction. So changing gears now and moving on beyond MED3000. Another product that we are developing is topical cannabidiol using the DermaSys technology, which is patented. We have generated data, which we believe will show superior skin penetration properties and improved shelf life over the many CBD products currently in the market. And this slide shows the in vitro data generated to date to support this assertion with excellent skin penetration for CBD100 and virtually no skin penetration from the [ marketed ] control. The strategy is to out-license initially for use under cosmetic regulations, but potentially longer term as a licensed medicine with strong pain relief claims. So now I hand over to Angela to discuss the financial outlook and results.

Thanks, Ken. So moving on to yearend financials, we had a net loss of just under GBP 5 million of which GBP 3.77 million was related to R&D, mainly costs incurred with conducting the FM71 study, which Ken touched on earlier, and other manufacturing and scale-up costs. There was an increase in central and administrative costs compared to the year before. This was down to some one-off costs relating to the funding transactions and other legal and professional fees incurred with negotiating and concluding commercial arrangements for MED3000. But our cost base will start to increase. We've remained quite lean over the past few years, but as we expand the team and our capabilities across commercial, manufacturing, and supply chain ahead of anticipated MED3000 launches over the next 12 months, of course, that is going to result in a slight increase of our central costs. Following the GBP 12 million [ raised ] in retail offer which concluded in June 2021, we ended the year with a cash balance of GBP 10.37 million, with an additional GBP 900,000 R&D tax credit refunds expected in the next few months. We continue to believe that under current plans, this provides sufficient runway to take us beyond expected U.S. regulatory approval and EU and other market launches of MED3000. The cash runway does not factor any milestone payments or the revenues generated from sales of MED3000 which, of course, could extend the runway even further. Moving on to the final slide and the outlook. We are, of course, looking forward to the readout of FM71 study results, which should enable us to file the regulatory submission with the FDA by the end of Q3 this year. We also expect initial launches of MED3000 in the U.K. and EU and other markets over the next year. In Q4, we will also commence the formal process of securing commercial arrangements for the U.S. This is a key market for us to ensure we maximize long-term sustainable value. And finally, we expect to receive FDA approval for MED3000 as a clinically proven treatment for ED available without the need of a doctor's prescription. This is a key driver in maximizing the opportunity for MED3000 in the U.S. So I think it's fair to say that 2021 was a transformational year for Futura Medical, and we expect 2022 to continue that progress ahead of launching our lead asset in key markets and expanding the approval in the U.S. and other markets globally. That brings us to the end of the presentation today. And before I thank you all for listening, we would like to thank the team at Futura for their hard work, their dedication and their enthusiasm in 2021, which is continuing into 2022, and we look forward to updating you further as progress is made.