Penny share in focus: why did the Futura Medical share price soar 125%+ today?

The Futura Medical (LON:FUM) share price is shooting skyward. Does this penny share have what it takes to make long-term shareholders wealthy?

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FTSE AIM All-Share pharmaceutical company Futura Medical (LSE:FUM) saw its share price skyrocket over 125% this morning. This was thanks to EU certification of its MED3000 gel as a Class 2B approved medical device.

Once the certification comes through, it means the topical gel can be purchased over the counter without a prescription. MED3000 gel is an erectile dysfunction treatment. Futura Medical expects full approval by the end of May, with EU certification and the subsequent CE mark.

This is a significant breakthrough for the company, as it will be the first of its kind available in Europe. And it lays the foundations for global approval. In the meantime, the company is also seeking marketing approval for MED3000 in the US. Again, this will be for use as a non-prescription, over-the-counter treatment.

A penny share with room for growth

Futura Medical is a penny share and as such carries considerable risk to shareholder capital. The company’s profitability depends on sales. While the treatment for approval is undoubtedly a positive step in the right direction, it still has to complete a clinical trial for a supplementary study.

The company projected the market for this product to be worth around $5.6bn, which is a significant sum. And there is clearly scope for a considerable share price upside—if the company can get its product to market and achieve a high level of sales.

Erectile dysfunction is a condition affecting one in five men globally. And being of a sensitive nature, means over-the-counter treatments could well be favoured over prescription only options.

James Barder, CEO of Futura, commented: “Once the certificate is issued, MED3000 may be marketed throughout the EU without the need of a doctor’s prescription subject to any national marketing restrictions. This will represent a significant commercial opportunity.”

Some analysts also believe MED3000 gel could be a safer and preferable alternative to prescription only rival products such as Viagra, Cialis, and Levitra. Earlier this month the company signed a deal with private equity firm Co-High to help it roll out MED3000 throughout China and South East Asia. Co-High will also cover Futura’s development and approval costs, which are expected to be around £4m. Futura will then earn 50% of any profits realised. 

Developing cannabidiol gel

This is not the only product the company is working on. Last summer it announced successful studies on a cannabidiol gel, called CBD100, which is intended to be used for several applications and indications expected to range from cosmeceutical through to pharmaceutical dermal and pain relief treatments. The company hopes to produce a high-quality cannabidiol gel that’s superior to unregulated, low-tech products in circulation.

Futura Medical financials

Futura Medical has a £99m market capitalisation, earnings per share are negative, and it doesn’t offer a dividend. Its share price has seen extreme volatility over the years.

The Futura Medical share price is now sitting around 40p, which has more than doubled overnight. But this remains far below its 2016 high of 95p.

The company is developing products in highly lucrative markets, with lots of potential for growth. However, I’m not tempted to buy Futura Medical shares today as it’s too speculative an investment for me at this time. Personally, I prefer a well-established healthcare stock such as AstraZeneca as a long-term investment.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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