GlaxoSmithKline has pulled out of a development deal for an erectile dysfunction drug in a move that has left the share price of its partner, UK firm Futura Medical, in tatters.

GSK has decided to return the development rights for MED2002, a topical formulation of the widely-used angina drug glyceryl trinitrate that could have become the first over-the-counter product to treat erectile dysfunction. The announcement came as something of a surprise, especially as the firms only teamed up in July last year, but Futura pointed out that “current priorities within GSK meant that they were unlikely in the near future to approve a marketing agreement for MED2002.”

Under the agreement signed last year, GSK's consumer health unit had agreed to cover two-thirds of the costs, or around £2.4 million, of three studies involving approximately 1,500 men with erectile dysfunction. Regulatory submissions were pencilled in for 2008 ahead of launches a year later.

Futura chief executive James Barder said that while the firm is “clearly disappointed by the decision, the progress in the development of MED2002 has been significant.” He added that “we are therefore confident in our ability to secure new commercial arrangements on favourable terms for the final development and marketing” of the treatment. Futura also noted that before it signed the pact with GSK, it received “a significant amount of interest” in an earlier formulation of MED2002 and will therefore “reopen discussions with potential licensees with the benefit of the considerable improvements to the product.”

Futura stressed that ongoing talks with GSK over the global distribution rights for DermaSys, its gel technology that allows drugs to be delivered rapidly through the skin, are unaffected by the announcement. Also the likelihood of finding another partner is pretty high, given the burgeoning erectile dysfunction market, and Futura is hoping to get approval of its CSD500 condom, which is designed to help maintain erections, by the end of the year. Despite these factors, the stock crashed almost 30% to 42.5 pence on London’s AIM exchange.