Futura Medical PLC's (AIM:FUM, OTC:FAMDF) clinically proven, topical gel treatment for erectile dysfunction, Eroxon, offers a "significant and still underappreciated opportunity", said Stifel as it initiated coverage on the stock with a 'buy' rating.
As highlighted in today's results, Eroxon last year received marketing approval in the US, EU and UK and is in the early stages of the commercial launch in the UK and EU with its US launch on the horizon, under a partnership with Advil and Sensodyne maker Haleon.
The shares offer "a compelling investment opportunity" as the US launch approaches, said the brokerage, setting a 125p share price target.
The initiation note also highlighted the ED market is large at $3.5 billion annually and still growing, with Eroxon's key differentiating features versus current treatments being rapid onset of action, cleaner safety profile and unique off-the-shelf status.
Eroxon is a "true off-the-shelf product, available without prescription or consultation" and its drug free profile "means there are no restrictions on use or contraindications with other drugs, making it a treatment for nearly all ED sufferers", analysts said.
As a topical application with an onset of action under 10 minutes reduces side effects and increase spontaneity, "addressing two key limitations associated with current treatment options".
Future generated first revenue last year of £3.1 million and Stifel forecasts this rising to £9.2 million this year and £15.8 million in 2025, when it forecasts a first pre-tax profit.
House broker Liberum's estimates are for £10 million sales this year and £18 million in 2025.
Stifel forecasts peak worldwide sales of $364 million for Eroxon in 2029, though a chunk of that will be absorbed by distributors and other middlemen.
The majority of expected sales are seen derived from the US market, around $223 million (£176m) in that year, with Europe peaking at $117 million by 2028.
"Importantly, Futura is fully funded through to profitability, supported by UK and European revenues, with US royalty revenues expected in FY25.
"We note that profitability might come sooner than our current expectations if there is an earlier-than-anticipated US launch in FY24, triggering an estimated $5m launch milestone in the process."
Liberum noted that 2023 revenues had been pre-announced and that gross profit was in line with expectations and that the 57% gross margin "should be indicative of steady state margins".
Reported EBIT was below expectations, analyst Seb Jantet said, but most of this was due to a higher-than-expected share-based payment charge triggered by the long-term investment plans issued in October.