In October 2024, we highlighted sexual health specialist Futura Medical (FUM:AIM) as a great opportunity to get on board as it launched its ED (erectile dysfunction) product Eroxon into the US market through commercial partner Haleon (HLN).
WHAT HAS HAPPENED SINCE WE SAID TO BUY?
Although we acknowledged the extra risks of owning smaller, single product companies, it was still disappointing to face a profit warning on 30 January, which sent the shares roiling by 50%.
On the bright side, Futura revealed that revenue and profit after tax for the year to 31 December 2024 will be ahead of market forecasts which it believes to be £13.4 million and £500,000 respectively.
Unfortunately, the company now expects to undershoot prior revenue expectations for 2025 by 50%, which means the company anticipates reporting a full year loss.
Management believes consensus forecasts were £18.5 million of revenue and £6.3 million of profit. The company said the ramp-up in sales has been slower than expected.
Launching a new product into a new category was never going to be plain sailing, especially given US consumers are not accustomed to buying an ED product without a prescription.
One improvement Futura has identified is removing in-store lock boxes which then need the intervention of a shop assistant, impacting sales.
Further launches of Eroxon across European countries has also been slower than originally expected and the company is working with commercial partner Cooper Consumer Healthcare to iron out the issues and challenges faced in generating greater consumer awareness.
The company referenced its ‘robust’ balance sheet with cash of £6.6 million at the end of 2024, providing working capital through to the second half of 2026.
WHAT SHOULD INVESTORS DO NOW?
It would be unrealistic not to expect teething problems when launching an entirely new product into a big market. That said, investors now face the prospect of the shares needing to double to recoup the loss.
If the short-term issues are fixable, the value creation opportunity remains potentially significant. However, the magnitude of the sales downgrade leaves a nagging doubt around credibility and, painful as it is, it’s time to cut our losses.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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