Futura Medical plc (FUM) Earnings Call Transcript & Summary

Good morning, everybody. My name is James Barder. I'm the CEO of Futura Medical, and I'm delighted to be joined today by Angela Hildreth, who is the Chief Operating Officer; and Ken James, who is the Executive Director and Head of R&D. To start with just a little bit of a corporate overview about Futura. We describe ourselves as a virtual organization. We employ 15 staff, including Directors, which enables us to have a low overhead base. We have a significant outsourced infrastructure which includes contract manufacturing and currently use around about 30 consultants that we can switch on and off as and when required. Our real skill set is applying [ sauce ] to skin. We develop topical formulations. And we have a clinically proven track record of developing gel formulations. And our key product, which is really what we're going to talk about today, is MED3000, which is a topical gel for erectile dysfunction. It is already approved throughout Europe and in certain countries in the Middle East, and that will be expanded further. And the key differentiator for this product is its fast onset of action. And the claim that we can make in Europe helps you get an erection within 10 minutes. I'll talk a little bit more in a while around our sort of global distribution network. Key strategic objects for us. We continue to make good progress in achieving our key strategic objects and anticipate gaining U.S. approval as a clinically proven treatment for ED this quarter. We continue to progress commercial discussions to build our network to establish MED as a long-term, sustainable and profitable product, although our main focus at the moment is very much on securing a U.S. partner. Most recently, the initial launch of MED3000 has not happened. It's online in Benelux, literally in the last few weeks. And in the past 2 days, the initial retail launch in Belgium. We continue to expect this will be added with further country launches, but at the behest of our commercial partner, we've been asked to keep that confidential until it actually occurs. The year-end highlights, 2022 was a tremendous year for us, we're very much building on the success of 2021. In particular, we signed 2 new distribution agreements, which continues to expand our distribution network and Ken and his team delivered excellent results for FM71, which is required for U.S. approval with all clinical end points met, and Ken will talk a bit more about this in a minute. Other key developments during 2022 focused around preparing for the launch of MED3000 which included already increasing general awareness of MED3000. We've had several meetings at a major medical conferences in both EU and the U.S. where we met with key opinion leaders. Further manufacturing discussions as we look to expand our supply chain, not only to meet expected demand, but to build robustness into that. And then obviously, our specialist corporate advisers commenced the process of looking for a U.S. commercial partner. Only on the financials, Angela will talk about that in greater detail towards the end of the presentation. Eroxon, this is our sort of key product. We also called it MED3000 and really MED3000 is what we call it internally. We hope if we named a Eroxon brand, Eroxon through markets throughout the world, but that will obviously depend on the specific issues in each different country. But throughout Europe, it will be called Eroxon. And this is the first topical gel to treat erectile dysfunction in adult men that will be available without a doctor's prescription throughout Europe. It's clinically proven to treat a erectile dysfunction. And like I just said earlier, the key differentiating claim is speed, helps you get an erection within 10 minutes. Obviously, whilst Europe is an extremely important market to us, the biggest market in the world for erectile dysfunction is the U.S., and we see significant commercial potential there. The global market, even though it has now become much more generic with the likes of Viagra and Cialis coming off patent. It is still growing at around 8% a year, which is a significant rise. And as the prices drop, the volumes go up. In the U.S., we recently did some further market research to understand the market better as we get closer to getting approval and obviously, therefore, subsequent launch. And typically, a patient spends between $600 and $3,500 a year to get their current treatments on prescription. So even though the cost of the treatment per se has dropped as the PDE5i's become generic. By the time you then take to account the cost of going to see a doctor, typically patients are paying between $600 and $3,500 each year to cover not only the prescription cost, but the oversight. Again, the research showed that typically U.S. ED patients have around 70 intercourse attempts a year. And as I said earlier, this remains the biggest opportunity for us. I mean, interestingly, wanting for treatments that patients take does not lead to intercourse and this is because there are the preplanned nature of the PDE5i's, which typically take at least 30 minutes up to now to have an effect. And often when people trying to second guess when they're going to have intercourse, it doesn't always result in actually leading to an event. And we've also seen that sexual partners of men want to be involved with their partners problem on want, and therefore, very interested if they can go out and buy the product themselves, which as an over-the-counter product will enable them to be able to do that, whereas previously as a prescription. You kind of need permission, you've got to go and see your doctor and ask permission to get a treatment. So this, again, will be a breakthrough in a market like the U.S., where all the treatments currently are there -- are sold prescription only. Target price is around about $5 per dose. We remain on building a global network. We currently have agreements in place for basically Europe or the economic -- European economic area, Switzerland, Middle East, Latin America and Korea. All the major ED markets are now covered really with the exception of the U.S. and China. I'm sure shareholders will recall, we do have an agreement in place with a company called [indiscernible] This is not progressing particularly well as we flagged last September and we now are in discussions with a number of other parties for the opportunity in China. In addition, we do also have interest from a number of parties for all the other -- really, all the other markets that we don't yet have an agreement in place for. But our main focus remains on the U.S. and then probably expect China. All the commercial discussions and all the agreements we have in place, there are some key things there which are very important. We've had many approaches over the years for the rights. But for us, it's important to find commercial partners that have the skill and experience and know how to build a brand, establish a pharmaceutical brand. And therefore, all the agreements have key performance obligations in there, especially around regulatory costs and in some instances, for the clinical studies, if those are required, but really focus on submission timelines to get approval and then performance obligations around both the advertising and spend promotion so that it optimizes the chance of a successful launch of MED3000. Finally, on the chemistry manufacturing controls. As I sort of touched on earlier, we now have a 42-month shelf life in Europe which, by the time it's gone from a factory to the different retailers, will give at least a 3-year shelf life on a point of sale. And first production batches have been made and delivered. And in fact, we are now already into production of further batches as we go into the launch phase. MED3000, we expect to be pretty much globally, if not all throughout the world, as an OTC product. And that opens up a large untapped market. The PDE5i's, Viagra, Cialis are very effective drugs. But for a number of men, they don't like the treatment because of the speed. It takes typically 30 to 60 minutes to have an effect. And in some instances, some men have side effects and around about 10% of men are contraindicated. So for an OTC treatment, there are a number of different segments where we feel MED provides an alternative solution. First of all, as I said, those men who are contraindicated. And it's between 10% and 20% of these men cannot take the existing treatment. So MED presents an alternative option for them. And then around about 50% of men drop out from using PDE5i's after a year. And there are a number of reasons behind this. But primarily, we believe it is around the fact that they have to plan because of the 30- to 60-minute delay. Therefore, some like MED, which works within 10 minutes is a very effective alternative treatment. And then obviously, there is the embarrassment factor. A lot of men just do not want to go and see their doctor. A, there's a cost, has already flagged beforehand, and then just the sheer embarrassment. And therefore, there's huge appeal for a treatment that is over the counter without those barriers of having to go and see a doctor to talk about an embarrassing conditions. In addition, there are now new or newer options for us. There's a growing evidence to show that young men, those men certainly under the age of 40, were seeing an increase in the level of erectile dysfunction. I think it's the pressures of modern life. There's also the fact that with the availability of online pornography, a lot of men increasingly have this sort of performance anxiety. They sort of watch pornography and see how they believe they should perform and therefore, are seeking treatment. In addition, a lot of women whose partners have erectile dysfunction up until now, there's very little that they can do, and here is an option where they could actually go to the pharmacy on behalf of that partner who has erectile dysfunction and buy a treatment. And again, the research that we've done shows the [ partner women ] would like to do something to help their partners. So as a new category, MED has all the key attributes to make it a very attractive over-the-counter treatment. And certainly, we see potentially up to 70% of sales would be coming from patients who are not currently on treatment. Ken, [indiscernible] over to you?

Thank you, James. So I'm now going to provide a regulatory update where we've made considerable progress through the course of the year. Firstly, as you can see from the left-hand side of the slide here, we have achieved OTC approval in the U.K. and the European Union and in 4 countries in the Middle East. We have ongoing dialogue and a number of submissions with regulators across the globe. We've evaluated the Chinese market, and we know that additional clinical data will be expected there. And I'm now going to provide a much more extensive update on the preeminent market for erectile dysfunction, which is, of course, the United States. So on the right-hand side, you can see the chronology of the work that we've been doing in conjunction with the FDA, going all the way back actually to Q1 2020 through Q1 2021, where we had a number of pre-submission meetings with FDA to identify what data would be required by FDA to eventually approve the product as a de novo medical device. And now to that, there were 2 main requirements. FDA required us to do a human factor study, which is essentially to check the labeling of the product to ensure that it's suitable for OTC classification. And that study was completed and reported in December 2021. And then, of course, as James has referred to, the second requirement was to conduct a confirmatory clinical study, which we call FM71, which we commenced in January 2022 and that study was reported in Q3 2022 and very rapidly thereafter led to submission of the MED3000 or Eroxon dossier to FDA. As part of FDA's standard review process, they ask a number of questions for clarification. And we started receiving questions at the back end of last year. And those questions continued through February. And as part of that process, we had a fairly productive meeting with FDA to clarify some of the labeling questions that we received. And I'm pleased to report that all those questions have been answered and in some cases, additional data was required. All that was resubmitted to FDA by the end of March. So if FDA stick to the timetable, which they publicize, we expect to have USA OTC marketing authorization sometime in Q2 2023. Just as a reminder of the clinical study, which is the pivotal piece of evidence that supports our application. We met the primary efficacy objectives, and I'll show you in a moment how we did that. The secondary objective was also agreed with FDA about how we could support speed claims, and we met a 10-minute speed claim, which is a key differentiating claim over the PDE5 inhibitors, which typically take 30 to 60 minutes to work. So that secondary objective was agreed as well. And overall, when you look at the clinical data, it presented a very favorable benefit-to-risk profile versus a leading prescription product, paving the way for OTC marketing authorization in the U.S.A. So here, we see the key clinical result, which was the primary endpoint. And on the left, you see a tabulation; on the right, you see the same data plotted out graphically. The primary endpoint was defined whereby we had to exceed a value of 4 units in the IIEF change from baseline and improvement in the erectile functionality of 4 units using this gold standard measure. And you can see that all time points that were studied over the 24-week period of the study, we exceeded the value of 4. The key time point was week 24. FDA required us to show efficacy at week 24, and we achieved a value of 5.73, well in excess of the required value of 4, and that had a p-value of 0.001. But notwithstanding that, you can see that at all time points, we achieved clinical significance of the value of 4. Now this value of 4 is significant in clinical research because it represents the clinically improvement that is meaningful to consumers. So this is where consumers really notice a difference with the product if you get a value of greater than 4 units. So that was what was agreed with FDA, and that's what we achieved in the study. And you can see, if anything, over the course of the study, there's a slight build-in effect as well. And that allayed any concerns that FDA have or had, whereby they thought that the effect might tail off after about 8 or 12 weeks. And that clearly isn't the case in the data that we have. Moving on to intellectual property. We have a corporate strategy of developing layers of protection. And in the case of Eroxon, we have 2 layers of protection. We've been working with specialist patents and trademark advisers to optimize the strategy and patents are now filed in all major ED markets. The initial EPO examination has confirmed the novel and inventive nature of the patent applications. So that's the first layer of protection. The second layer of protection is part of the USA marketing authorization process, whereby FDA require us to define what they call special controls for the product. Now these special controls are there to ensure the safety and effectiveness of the de novo device. And it creates quite a significant barrier. If a competitor wants to use our product as a predicate device, they have to meet the same exacting standards that we had to go through in terms of all the safety data and the clinical data as we've defined it in the special controls. So that's a further layer of protection beyond the patent protection. MED3000 is to be launched wherever possible under the Eroxon brand, as James has already mentioned, to help establish global awareness and consumer trust with a common brand identity wherever we choose to launch it. So I'll now hand you over to Angela Hildreth, the Finance Director of Futura, to talk about the financial outlook and the results.

Thanks, Ken. So looking at the 2022 financials, we had a net loss in the period of GBP 5.85 million. This was an increase on the year prior, but was also as expected. The increase relates to the completion of the FM71 study, which was required for the FDA submission; relates to manufacturing scale-up and validation activities, which have ensured we can meet supply-demand and readiness for the commercial launches this year. There has also been a slight increase in some G&A costs as we strengthened our supply chain and commercial capabilities so we can effectively support our commercial partners ahead of the launches this year. There was no revenue recognized in 2022, but I can confirm that we do expect to be revenue generating from the first half of 2023. We closed the financial year with just over GBP 4 million in cash, and we expect to receive an R&D tax credit refund of just over GBP 1 million in 2023. We believe that existing cash added to the tax credit refund and revenues generated in 2023 will see us beyond expected U.S. regulatory approval for MED3000 and the initial launches of Eroxon throughout 2023. It's important to note that revenue levels assumed with that cash runway estimation are quite conservative. And any revenues over and above those estimates will clearly only serve to extend that runway further. Looking forwards and really just to recap on the presentation so far, 2023 looks to continue the progress that's been made in 2022. We remain confident that the FDA will grant OTC marketing authorization for MED3000 in this quarter. We are expecting and excited for further launches of Eroxon throughout this year in regions where commercial partners are in place, and we hope to announce further commercial agreements for regions where no partner currently exists. Finally, we expect to be revenue generating from half 1 this year. That brings us to the end of this presentation. On behalf of myself, James and Ken, I'd like to thank you for listening. Thank you for your continued support. I'll now bring the presentation to a close. Thank you.