Futura Medical plc LON:FUM has proprietary transdermal technology which can be incorporated into formulations of well characterised drugs to improve performance and extend their uses. Headline results from a clinical trial assessing its three pain portfolio products suggest that its anti-inflammatory drugs applied locally are ‘not inferior’ to formulations of the established gold standards. These should provide a value inflection point, with further potential uplift when management concludeslicensing deals with commercial partner(s).
Clinical trial: FUM commissioned a complex pivotal trial to assess the efficacy and safety of all three drugs in its pain portfolio – diclofenac, ibuprofen, methyl salicylate – against both topical and oral formulations of their respective gold standards. The trial was a double-blind, randomised, placebo-controlled study in 60 volunteers at a cost of £750k.
Results: TPR100 and TIB200 were both superior to placebo and were ‘non-inferior’ to gel and oral formulations of Voltarol and Nurofen,respectively. There were no serious adverse events. These preliminary findings were as good as could be expected. SPR300 was no different to placebo, which is unsurprising as this drug is not mainstream for inflammation.
Next steps: FUM has already commenced optimisation of the manufacturing process and outer packaging. Preparations are underway for consultation with US and EU regulators. These results pave the way to concluding commercial deal(s) with pharmaceutical majors.
Valuation: After drifting back recently, we expect these results to produce a re-valuation of the shares and to regain positive momentum. FUM is still forecast to reach break-even and become cashflow positive in 2017. Our risk-adjusted DCF has risen from 110p to 126p per share. Any licensing deal would provide further upside potential.
Risks: Clinical trials always carry risk, but with the 1o end-point being ‘non-inferiority’, these risks have been minimised. Greatest risk is the timing of licensing deals and commercial, where any delay impacts the time to cashflow breakeven and profitability.
Investment summary: Commercialisation of Future Medical plc’s first three products is key over the next 18 months and drives the cashflow which could provide a significant valuation uplift. Today’s results reduce risk, provide a value inflection point taking the DCF up to 126p and improve the probability of finding an attractive licensing partner from the pharmaceutical majors.
You can download the Full Report free right here: FUM Pain trial results – 14 July 2015 final
