Futura Medical (LON: FUM) shares are up 26% today as a major shareholder exercised their options to buy into the company. Lombard Odier Asset Management had the right to buy shares at 40 pence and they've exercised those rights on all their potential holding: near 11 million shares. Well, that's good, right? We knew the options were out there, this is about 3% of the expanded equity and it's not dilutive given the share price of Friday - or not that dilutive at least. This also puts £4.3 million into Futura's coffers with which they can continue to develop that MED3000 treatment.
Well, OK. Except there's still some concern about that MED3000 itself. Creating an erectile cream - rather than pill taken internally - would clearly have a significant market. But there's some confusion among market commentators about exactly what it is that is being developed. For example: “Viagra, the brand name, or sildenafil the actual drug, is used today as a – temporary – cure for erectile disfunction. It is taken orally, “the little blue pill” and works for most, most of the time, but it does have certain possible side effects. Topical application might have two benefits – might note – in fewer such side effects as the drug is not throughout the system and also a faster response time. 10 minutes instead of an hour perhaps. This is what is being tested.”
Well, yes, and that is the impression many will get about MED3000.
Futura Medical share price from London Stock Exchange
Except that's not, not really, what is being tested. MED3000 is like this, but is not this - according to one trusted commentator at least.
“MED3000 works through a unique evaporative mode of action. MED3000's combination of volatile components creates a novel action that stimulates nerve sensors in the highly innervated glans penis by a cooling and recovery warming effect, …”
Now, what “volatile components” might evaporate causing a cooling and recovery warming effect? Does it matter?
And if, following their diagram, it results in NO release in the capillaries of the glans, how does that NO get to where it is needed (hint: capillaries return to the venous circulation but we need more NO in the arterial supply to the penis).
One might go so far as to conclude it isn't even homoeopathic.”
That is, MED3000 is not a topical application of a drug known to work. Rather, it's an alternative method of trying to gain the same physiological response. It's entirely true that if it works then it'll have a very large market. But will it work?
As our commentator has said, if topical application of sildanefil would work then why isn't Pfizer doing it themselves? A useful conclusion there - not a certainty, but a useful one - being that Futura isn't doing that. It's therefore possible that Futura is rather more risky than the market currently seems to think it is.
That the FDA has just approved it for OTC sales is good, obviously. And that is perhaps the real driver of the share price change here. But if it is something just relying upon evaporative effects - not drug delivery - then there's got to be a questionmark about its actual effectiveness - as also about the moat that surrounds it from competition oif it does work. Such OTC drugs and creams simply do not receive the usual patent protections from competition after all.