Futura Medical plc

Good morning and welcome to the Futura Medical PLC investor presentation. Throughout this quarter presentation, investors will be in this and any mode. Questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to James Bader, CEO. Good morning to you, sir.

Good morning, everyone, and welcome to Futura Medical's year-end results presentation for the period ending 31st of December 2024. I am James Barlow, CEO of Futura, and I'm joined today by Anja Hildreth, Futura's Finance Director and COO, and also Ken James, Executive Director and Futura's Head of R&D. Futura specializes in the development and commercialization of innovative sexual health products across the world. Our lead product is Roxon, a clinically proven breakthrough treatment for erectile dysfunction. Our key area of expertise is in topically delivered gel formulations. For the last year, I have said consistently that we saw 2024 as a year of execution, and I'm delighted to say this has proved very much the case, with the company delivering on our strategic priorities and in particular growing revenue and our maiden profit. Eroxon is now on sale both online and in retail pharmacies in at least 15 countries, including the USA, with further launches expected during 2025. We continue to see a strong sell-in to retailers through our commercial partners, but as previously mentioned, with any new OTC product launch in a new category, there is an iterative learning process and sales will vary until the brand is established. I will talk more about this later in the presentation. Nevertheless, commercial partners remain committed in building the Aroxon brand. We have also seen excellent progress from Ken and his team for both Iroxon Intents and WSD4000, and Ken will talk more about this shortly. We have also had a strong financial performance, and Andrew will also go into greater detail on this later in the presentation as well.

Thank you, James. So, as a reminder, why is our lead product, Iroxon, a breakthrough, safe and effective First and foremost, it's available without the need of a doctor's prescription. Secondly, we have a unique differentiated claim from the tablets, which helps you get an erection in 10 minutes. Tablets typically take one to two hours before they start to work. Also, it's the first topical gel clinically proven to treat ED available over the counter and linked to that. It's the first FDA-cleared OTC treatment 3D. Move on to the next slide, please. So, Iroxon operates in a market which is currently estimated to be $3.5 billion. Why is it such a big market? Well, around about 20% of men globally suffer from the condition of erectile dysfunction. It's a problem primarily related to the aging process. And it's a sad fact of life that as you get older, things don't work quite so well. And blood flow particularly can become impaired. In some instances, this can ultimately lead to heart disease and diabetes. But very often, the first indicator that blood vessels are narrowing is erectile dysfunction. So, around 50% of men over 40 actually experience ED. But also, it's becoming more and more of a problem in the younger population. And there was a recent study conducted out at Boston, Massachusetts, which showed that around 14% of men aged between 18 and 31 suffer from ED, and 25% of new diagnosis are in men under 40. Also important for our product is that around 50% of men with ED do not discuss their condition with their doctor, often being too embarrassed to present themselves and discuss it. So now I'll hand you back to James again.

Thank you, Ken. We often get asked why the launches take so long. I don't propose to go through this slide in detail, but we wanted to itemise some of the many steps required to get to this point of launch. Many have to be done sequentially and cannot be run in parallel. For example, each country has their own set of rules around advertising and promotion, and I would add this is no different in a EU where each member sets its own rules rather than being controlled centrally. All marketing materials must be submitted for pre-clearance prior to launch. The time each country's regulator may take varies significantly, but as you would expect, it is not within our or our commercial partners' control. Another example, use of trademarks is critical in building and protecting the Oroxon brand. To date, all launches have been under the Oroxon brand, and this remains our preference. Nevertheless, due process with country-specific trademark offices must be allowed to take place in our efforts to register the Oroxon trademark prior to launch. an expensive process and again not within our control. I will talk about some of the key learnings since launch in a minute nevertheless it is important to understand that any new launch in the OTC arena is an iterative process and to optimize the value of the product is a continual process adapting to market feedback and learnings as well as the external landscape such as competition and new innovation. Our ABC strategy remains unchanged, and we continue to deliver across our three strategic pillars of addressing the growing needs within the OTC sexual health market, broadening our product pipeline portfolio, and committing to building sustained profitability whilst maintaining financial discipline. On the last point of building sustained profitability, I would like to re-emphasize the point we frequently make to investors. Our revenue is made up of three different components, which by their very nature will not always deliver us a consistent growth trajectory. So at this early stage of global rollout of our first product, I would urge investors to focus on the trends and direction of travel, the non-specifics. So putting this into context, in 2024, our commercial partners launched in a number of key ED markets, such as France, Italy, Spain, Mexico, and U.S., Our focus moving forward remains on launching in those markets where we already have commercial partners in place, and I expect Eroxon to be innovative in at least 20 countries by the end of 2025. This is a major achievement for a company that only employs 14 staff. We continue to explore commercial agreements in a number of new markets, and especially Asia. However, the greater feedback we can gain from those markets where Eroxon has already launched, the more we can tailor our requirements for launching new markets. The more specific we can be around what is required for success, the greater confidence we can give to potential commercial partners, and in turn gain their buy-in around the necessary commitments required for any commercial agreement. When we can say more, we obviously will. This is quite a busy slide, but this highlights some of the key Eroxon learnings. Sexual health category is quite broad, covering a range of products from contraceptives to sex toys. Displays in stores are therefore pretty crowded. Cultural and religious attitudes vary significantly from one country to the next. This has implications again on how Eroxon can be marketed. We are also marketing Eroxon against an established modus operandi for existing ED drugs, where patients take the drug and wait for at least an hour before they attempt to have sex. We are hearing of many instances where men will adopt the same approach with Oroxon, applying the gel and then literally waiting 10 minutes rather than incorporating Oroxon into sexual foreplay, which is a recommendation method of use for optimal efficiency. Whereas the clinical studies showed Oroxon was effective across all ages and severity of ED, all the consumer research has shown it is most effective in men under 60 years old and normally with mild to moderate erectile dysfunction. Finally, install theft in markets where OTC products are sold in chain stores such as the UK and US remain a major problem. Keeping rocks under lock and key resolves this problem but does create an additional and often embarrassing barrier to access for buyers. Integrated media and digital education is helping to overcome some of these marketing challenges with continued adaption to drive awareness, sales and repeat purchase. Providing interactive online questionnaires, for example, can help manage customer expectations and identify where Roxxon will be an appropriate treatment for them is absolutely critical. Men that are satisfied with Roxxon generally don't write a review. Men who are disappointed are much likely to. Improving ratings is important to promote rather than discourage trial use. Whereas the specifics of some of the learnings have been surprising and unique to Roxxon, The time to build and establish a new HTC brand is not. This is why we have specific three-year commitments in all our agreements with our commercial partners. Mind for the time and investment required to establish a new brand. Ken.

Thank you, James. As you... launch a new brand and develop a new category, it's vitally important that you fuel the category with new innovations. And we have two very exciting developments in progress now and a number of important results that we're now starting to generate. So, the first one we call Eroxon Intense. Now, as a brief reminder, the way current neroxon works is to create a sensorial effect on the end of the penis, which stimulates the nerve endings, and that ultimately leads to increased blood flow and erections. Now, we find that many men are satisfied with the sensorial effect of current neroxon, but there are a group of men who have told us that they would like a stronger effect. So, we've developed this product, which we call Neroxon Intense. for strong sustained erections. And we've carried out a proof of concept study and some further work in a larger group of people where we assess the sensorial effect of our current product, which you can see in yellow here on the graph, versus the intense formulation to create this added intense effect on the glans penis. And at 15 seconds, 2 minutes, 5 minutes, and 10 minutes, you notice that we get a significantly greater sensoric effect, which is quite important because that's the period of time at which men are expected to get erections and have sexual intercourse. So, we're making very good progress on this. We're completing the necessary work for registrations to occur, and we hope to have EU and USA regulatory approval by the end of this year. Now, moving on to the second development, which we call WSD 4000. This is a treatment for sexual dysfunction in women. And we really do see this as a big opportunity because there is no currently available female version of Viagra, let's say. And therefore, women are, in general, very poorly served when it comes to this category. Now, we've conducted market research recently in 1,000 women aged 22 to 75 years old in the USA. And over 50% of those women say that their sex lives are important. But also 60% of those women experience symptoms of sexual dysfunction in the past 12 months. And most of those women experience more than one symptom of sexual dysfunction. And therefore, 50% of women, when you add it all up, are motivated to treat, giving a large commercial opportunity regarding 34 million women in the USA alone. Of course, this product will be available globally. Now, our product, which is based on the same technology as the NOW product, we've conducted two proof of with some aspects of sexual dysfunction in some of those women. And we get very interesting results, very positive results, actually. For example, 63% reported increased genital sensations, 54% reported improved genital pleasure. Interestingly, in the home user study, We asked women to use the product at least four times over the four-week study period. But we noticed that 57% of those women used the product more than the minimum study. So they were using it five, six, seven, even eight times during that four-week period. And then at the end of the study, a very large percentage, 87%, wanted to continue using the product for completion of chronologically where we are in development. I've referenced the two proof of concept studies, more recently the home user study. It's important also, and this is where we hope to have clear differentiation, that we get regulatory approval for the product. Clinically proven and with regulatory approval would be a key point of differentiation. We've Therefore, it's important that we take the regulatory agency, particularly the FDA in the U.S., with us on the journey. And we've already had two very successful meetings with the FDA, and we've provisionally agreed with them the OTC regulatory pathway. As part of that pathway, we have to conduct what we call an early feasibility study to test that the product is well understood by people and used appropriately. And the way we want to go about measuring efficacy is part of that early feasibility study. That study commences quite shortly, and we hope to complete that by the second quarter of 2026. That will be followed by a phase three pivotal study, clinical study, which we hope to complete by the fourth quarter of 2027. And that would lead to US and EU approval by the second quarter of 2028.

So for the financial year ending December 2024, we're reporting revenues of just under £14 million. of which around 50% has been generated through milestone payments received from our US partner. $4 million was received in 2023, but we recognised that in 2024, and a further $5 million was received in Q4. The other 50% of revenues relates to product sales and royalties received or approved in 2024, but it's important to stress that there were key launches in the US and large markets in the EU, so the revenues do include a certain amount of channel fill in respect of that. Those sales generated a gross profit of £9.7 million, resulting in a blended gross margin of 70%. After R&D expenses of £1.7 million and G&A expenses of £6.7 million, This resulted in profit after tax of $1.3 million. G&A expenses do include $2 million of non-cash share-based payments, and if those are stripped out, this gives you an adjusted profit after tax of $3.3 million. We ended the year with $6.6 million of cash, which added to expected revenues, means we are well capitalised to support the ongoing operations. And more importantly, the focused investment into the development of a Roxxon Intent under the USD4000. I thought it would be useful to provide a recap on how we generate revenues with our commercial partners. Just a reminder, we currently have two models. An IP license model, where our partner is responsible for their own manufacturing and supply chain. They're responsible for all regulatory and quality. and their own sales and marketing spend and activities. In return, we receive royalty payments and milestone payments where applicable. The other model is what we call a direct sales model. We manufacture products through our third-party manufacturers, and we're also responsible for quality and regulatory. But as in the IP license model, the partners are responsible for all sales, marketing, spend, and activities. And we take our revenue in the form of a transfer price. And in some agreements, there are other milestone payments too. Despite revising the expectations of 2025 earlier this year, the investment case remains largely unchanged. And it is largely business as usual. The ED market remains large and growing. Eroxon remains highly differentiated against other treatments with its fee-to-work and its OTC availability. Our commercial partners are leading consumer healthcare companies who remain extremely committed to Eroxon. We continue to grow Eroxon revenues, especially with other potential new markets. We remain well capitalised to fund the ongoing growth strategy. Our in-house R&D team are highly experienced and are focusing on broadening our innovative product ranges. And we have IP protection with an EU patent granted out to 2040 and other patent applications for growth in the other key markets.

Thank you, Angela, for that. Whereas 25 did not start the way we would have liked, you should not lose sight that Futura has grown and changed beyond all recognition from where we were just three years ago. Revenue Earning was a growing out-licensed brand with an R&D team with a proven track record of delivery working on two new products. We believe the Eroxon Intense could diversify and strengthen the Eroxon proposition, whereas WSD4000 has the potential to meet an unmet need in women. This is potentially a larger market than Eroxon, especially when you consider the extremely limited treatment options available for women at the moment. On behalf of Angela, Ken and myself, we thank you for listening today. I'm now very happy to answer any questions that people have.

That's great. James, Ken, Angela, thank you very much for your presentation. What I'll do is I'll just bring your camera up now. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the Q&A tab that's situated on the right-hand corner of your screen. We have had a number of questions that have come through, both pre-submitted and throughout today's presentation, and we'll start with the first one here, which reaches follows. Does Halion still remain committed to a Roxxon?

Absolutely. I mean, we've said all the way along, and we've said it for a number of years, sales are never going to be straight line, the number of different things that affect that. And in all the agreements we've signed, we have minimum three-year commitments, because any new launch takes time. So yes, all the commercial departments are still committed. It's a very early stage of the launch, so yes.

Perfect. Thank you very much, James. We have another question here. Have the partners started to now implement the learnings?

Yes. I mean, obviously, each different partner is a competitor. I appreciate having said that. Each market is exclusive to different commercial partners. We share feedback as much as we can do, mindful of confidentiality between the different commercial agreements. Today, I think everybody's been pretty pragmatic about it. But again, I want to reiterate, this is a new category, a new product in a new category. You're going to get learnings. It's an embarrassing product for many people. Culturally, in some markets, there are other challenges. So yes, we try and share as much information as we can between the different commercial partners.

Perfect. Thank you very much. Another pre-submitted question we've got here. Are you still going to progress with MPD given you will now be loss-making?

Well, we've been loss-making for the rest of our lives, so there's nothing unusual there. I don't want to sound facetious about it, but yes, absolutely. We need to be mindful of our costs. We've always been very controlled in what we spend. But any new category, all our commercial partners want that. They're looking to build a category, not a one product, one. So absolutely, we're developing on our pipeline both Erox on Intense and WSD 4000. So absolutely, we're committed to doing just that.

That's great. Thank you, James. Another question from an investor kind of asks, why are some markets more successful than others?

I mean, every market is different. Culturally, each different market will quite often view sexual habits, for want of a better expression, differently. You then have advertising restrictions on what can and can't be said publicly, how people buy products, who buys products in some markets. You know, women will tend to go out and buy products of this nature. Men, in our markets, men will. So there's a plethora of different reasons behind it. And again, that's why, and again, it's important to emphasize, we, the strategy that the board took with all our products development was to license it out to commercial partners who have expertise and understand how to build brands. in markets. We have well over 100 approaches for rights in different markets and we've been very conservative and very cautious on how we or who we do deals with and we focus on commercial partners who we believe have a good understanding of their markets and we out-license it to them. It is 100% all the costs associated with AMP are theirs and we have commitments over the lifetime of the agreement but in particular the first three years for them to be able to go out and do the best they can with the product. So in many respects, we are slightly passengers on this. Yes, we share the learnings that we're getting, the feedback we're getting from different markets, but the whole operating model of Futura is to go out and we out-license it to commercial partners who we believe have the capabilities to go out there and make a successful product. But it won't happen overnight. It takes time to build a new brand.

That's great, James. Totally understood. I know you mentioned partners there, so we do have a question on partners. Can you talk us through the performance with other partners?

Sorry, I'm not quite sure what you mean by talk us through the performance.

I mean, we don't comment directly on one partner or one performance to another, if that's what you mean. I'm not quite sure what you mean by that.

No problem at all. We have another question, and it asks, have you reintroduced forecasts today?

So the in-house analyst has reintroduced forecasts, and that's Samuel Lebrun.

Thanks very much, Angela. We have a question on the share price, and the question reads as follows. What are your thoughts on the share price performance?

Well, I mean, I think you know the answer before I start it. You know, I think it's frustrating, but as a company, all we can do is focus on what we control, not what we don't control. Not only are we obviously sharing information, we can be with our commercial partners with regards to learning some different markets. We're focused on building that partner with two other products. But the share price is not within our control. We provide information to the market when we can. But the rest is outside our control. So, yes, look, we share and understand a lot of shareholders' frustration and pain. And trust me, we're all shareholders here, so we feel the same pain. But we cannot control that. We just focus on those things that we can control.

That's great. Thank you very much, James. Turning to the final pre-submitter question before we start answering some of the live questions. The final pre-submitter question is, which markets do you expect to launch in by the end of 2025? You said it would be 20 in the R&S.

Well, it's not 20. It's an additional five. do not want us to announce ahead of launch where we're going to launch. As soon as we can say more, we will do. But as we've said, we're around 15 at the moment. We expect to be in over 20 by the end of this year. And we'll update the market as of when that happens.

Perfect. So as I say, we'll turn to some of the live questions now. The group has recognised provision of around £725,000 for minimum order penalties under its supply contracts due to not meeting the agreed upon minimum order quantities during the financial year. Please explain further and what went wrong and what has been done to fix this.

So just as a reminder, we moved manufacturing from the UK to Europe. We took that decision late 23, early 24. our commercial partner in Europe, launching in some of the larger key markets across Europe later on in the year. We made the decision to move manufacturing to ensure continuity of supply. And in order to ensure that continuity of supply, we did have to make certain commitments to the new third-party manufacturer. As the partner launched and those forecasts were revised, We have not made, we've not hit those commitments. So as a result, we have a two year commitment with them. We have recognised the provision within the accounts for 24 and 25 and that's what it is related to.

Thank you very much, Angela. We have another question here from the same investor. I understand the need for commercial sensitivity, but the lack of sell figures broken down by market effectively turns the company accounts into a black box, which I would suggest is having a negative effect on private and institutional investment decisions, which ultimately drives the share price. When will the company be in a position to release more detailed accounts?

So first of all, I understand it's frustrating and I don't disagree with you. That does create a certain black hole of information. But unfortunately, there is absolutely nothing that we can do about it. We have a statutory requirement to analyse sales by segment. So on a retrospective basis, these are disclosed within the financial statements. but I'm only able to do that because we have a statutory reason and it does therefore not compromise any of the confidentiality agreements. And I think everybody would agree the last thing that we want to do with our commercial partners, given that they are so significant in the overall strategy, is we definitely don't want to get on the wrong side and compromise those relationships. So we are very, very mindful and very respective of the commercial sensitivities that are in place with those commercial partners

especially if some of those commercial partners are public companies themselves.

Totally understood. Thank you very much, Angela. We have another question here. I think you've largely covered it, but if you have anything to add, that'd be great. Obviously, the trading statement has created uncertainty. What greater detail, more than you have said, can you provide? For instance, are we looking at lower peak sales potential? And what are the differences that you're learning between the US and, say, Europe? What's happening in new markets?

I mean, yes, I mean, this is a new product. Stressing to say it again, this is a new product, a new category. You know, the guidance that we've historically given is based on what we believe the forecasts are. What we're seeing is the product is being quite effective in men who are 60 years or younger. It is less effective in older men. We may find that Oroxone Intense can address that. You know, it's still too early to really comment, but I think, yes, sales have been less than perhaps we all originally thought, but I stress it was a forecast. Yes, this is a new category. I keep saying it. It's a new category, a new product in a new category. You know, we are slightly looking into a crystal ball on this, and we're doing our best to come out with what we felt. So, yes, I would say overall sales probably will be there, but I don't think we can stay much more stage as far as the launch is concerned.

Perfect. Thank you very much, James. We have a question on the Trump tariffs and I'll ask if there'll be an issue for you guys.

Well, if you can tell me what Trump's going to decide next week, I'll comment on that. I think the only thing I would say is that we have manufacturing in both the US and Europe. So I think the very rich man, but we do have manufacturing on both sides of the Atlantic, which does give us an element of robustness. So I think the impact of tariffs, which I assume is really what the question's about, we're not expecting a major impact on us.

But we are keeping up with you.

But we are keeping up with you, as you said.

Thank you, that's great. Perhaps time for just one more question. Which age demographic is Oroxon Intense likely to benefit the most?

So, intuitively, I think it might have appeal to the older people. As James has said, the in-market experience is that the under-60s seem to get the most benefit from it. But also, the demographics directions are generally required. We hope to learn more about that during the development phase. We hope to conduct further consumer research to narrow that down a bit more, be much more focused. But at this stage, I think our intuition is leaning more towards the rational settlement.

That's great. Thank you very much, Ken. And thanks for answering all those questions you can for investors. Of course, the company can review all the questions submitted today, and we will publish a response to that on the InvestorMeet company platform. Just before redirecting investors to provide you their feedback, which I know is particularly important to all of you at the company, James, could I just ask you for a few closing comments?

Yeah, sure. I mean, look, the company has travelled a long way, especially in the last two or three years. You know, 24 was a great year, 14 million in sales, a first profit. launched in 15 markets, that's going to expand to 20 markets, we've got manufacturing both sides of the Atlantic, and we've got an exciting pipeline, both, as Kent has been talking about, the rocks on the Intense, but also WSD 4000, our treatment for female dysfunction, which we feel is probably actually a bigger market because there's no other products out there. So, yes, obviously, we're frustrated with the share at the moment, we're moving ahead, and I think, you know, feel pretty happy for the future. That would be great to get the share price up. So, thank you all for listening, and I'm sure we'll talk again soon.

James, Ken, Angela, thank you once again for updating investors today. Can I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. On behalf of the management team of Futura Medical PLC, we'd like to thank you for attending today's presentation and good morning to you all.