Australia's Green Whistle Going Global
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MVP is currently going through the hoops for approval of Penthrox by the US Food & Drug Administration (FDA), which is a potential company-changer.
Anyone who has experienced a painful injury or suffered a traumatic accident would be familiar with the “green whistle,” an inhaler that, after a few puffs, provides instant pain relief.
This pain management product is Australian. Known as Penthrox, it is made in Melbourne by Medical Developments Limited (MVP). Penthrox is a fast-acting, non-narcotic analgesic that can be self-administered, as well as used during short surgical procedures – such as dental and cosmetic surgery – as well as in other medical applications.
Penthrox has been used by hospitals, ambulances, the Australian Defence Force, national sporting leagues, surf lifesavers and other emergency services for more than 30 years, with more than five million units sold in Australia. It is currently sold in more than 15 countries, with the company recently granted regulatory approval in the UK, Belgium and France.
MVP is currently going through the hoops for approval of Penthrox by the US Food & Drug Administration (FDA), which is a potential company-changer. The company says there are 136 million admissions to hospital emergency departments each year in the USA, of which 32 million cases are possible uses for Penthrox. Where possible, US hospitals are keen to move away from narcotic pain treatments such as morphine, and Penthrox – which is based on methoxyflurane – is a potential solution.
One of the principal benefits of Penthrox is that it acts fast: MVP says 85 per cent of patients reach clinical analgesia (the inability to feel pain) within ten breaths. The average time spent in the ER if you have a narcotic is six hours: Penthrox may be able to reduce that by more than 50 per cent. In the economics of hospitals, Penthrox can materially improve the throughput of patients in the ER because its use requires less medical care and observation compared to narcotics. In this way Penthrox can materially reduce the cost of ER treatment.
As well, Penthrox is non-addictive, safe, and patients can drive home and return to work after their procedure (addiction is a growing problem with narcotic analgesics.) There is no risk of overdose.
The fast-acting nature of Penthrox means rapid pain relief when a patient is treated for pain, burns, trauma, etc, and also means that other procedures, possibly more painful, can be performed about three minutes after it is given to the patient. Also, because the patient can self-administer Penthrox with minimal supervision needed, the attending medical professionals can concentrate on whatever treatment the injury requires.
Apart from trauma, MVP says Penthrox also suits treatments such as dentistry, cosmetic surgery, skin treatments, colonoscopy, invasive angiographies, imaging and other non-general anaesthetic painful procedures.
Because Penthrox has a demonstrated safety and efficacy profile for more than 30 years, MVP has a world-class regulatory dossier, which it has submitted to the FDA and for CE Mark approval in Europe. At the moment MVP says it is working on regulatory approvals to expand into 28 new countries, and expects to achieve a flurry of regulatory approvals during the remainder of this year and 2017.
The crucial approval is the FDA in the US – Medical Developments estimates that “peak sales” in the US market, in trauma alone, could be $1 billion a year. In May, MVP told the market that the FDA had advised it that the verdict on the company’s Penthrox submission had been delayed, because of a workload build-up in the FDA’s Division of Anesthesia, Analgesia, and Addiction Products (DAAAP).
The FDA confirmed that the delay was not related to Penthrox and estimated a delay in its response until the end of June – but this has not yet been received. In its May communication, MVP said that the FDA had indicated that MVP was “well placed,” – as many other FDA responses were being delayed to September – and that it was “encouraged by the informal feedback that the review of our non-narcotic Penthrox is towards the top of the list.”
The European market should also provide a huge sales opportunity for the company. To put this in context, MVP sells about 300,000 Penthrox units annually, while it estimates the European market to be more than 10 million units a year.
The other main growth area for Medical Developments is its respiratory medical device range, which delivers medication for asthma and chronic obstructive pulmonary disease (COPD). In 2011 MVP launched a new range of products using its patented cross valve technology, a drug delivery system that ensures very low resistance during inhalation and exhalation, while maximising the dose of medication available. This technology was developed into a range of devices that help patients manage and take control of their asthma and COPD, with the core product being the Antistatic Compact Space Chamber range.
In February, MVP bought leading respiratory device company Breath-A-Tech for just over $2 million dollars in cash, and the issue of 117,894 shares. Breath-A-Tech has a range of respiratory products in the Australian pharmacy and hospital markets designed to improve the delivery of aerosol medication from puffers in the management of Asthma and COPD.
The FDA approved MVP’s respiratory medical device range for sale in the US earlier this year, and it was also recently approved for full reimbursement in the UK National Health Service (NHS.) Medical Developments is now selling the range in the USA, UK, Australia, Singapore, Hong Kong, Canada, Malaysia, Belgium, Germany, Netherlands, Greece, Italy, Spain, Denmark, New Zealand, UAE, Austria, Switzerland and Portugal. MVP is investing heavily in developing new and innovative products to add to the range.
MVP’s third division, veterinary products, has supplied a comprehensive range of anaesthetic machines to veterinarians for more than 30 years.
Last month, Medical Developments announced that it will build a new manufacturing plant at Scoresby in south-eastern Melbourne, helped by a $365,000 grant from the Victorian government, under a program to assist Victorian companies that are implementing new manufacturing technologies. The new plant has been designed to support the global expansion of Penthrox and demand for up to 25 million units a year. The facility, which will have the ability to expand, is expected to be completed by March 2017. It incorporates new manufacturing technology developed in partnership with the CSIRO.
Capitalised at $247 million, MVP has been profitable every year since it listed on the Australian Securities Exchange (ASX) in 2003, and has been a sporadic payer of dividends – it is expected by analysts’ consensus to pay a fully franked dividend for FY16 and FY17. The company has received almost $12 million in upfront and milestone payments in the last 15 months, and expects a further $17 million in milestone payments to be received over the next 18 months, as well as finalising additional distribution deals.
The stock has been an outstanding performer in recent years, generating a total return (capital gain plus dividends) of 77 per cent a year over the past five years (and 123 per cent over the past 12 months), but it could be on the verge of even bigger strides, as it seeks to capitalise on its two potential company-making market opportunities. The consensus of analysts’ price forecasts collated by Thomson Reuters for MVP is $7.72, which if borne out, would represent a gain of 29 per cent on the current price (at $5.99). Medical Developments is a high-quality Australian company that could be our next global winner in the healthcare space.
James was founding editor of Shares magazine, and oversaw one of the most successful magazine launches in Australia. He has also written for BRW, Personal Investor, The Age and Management Today, and was subsequently personal investment editor at The Australian and editor of financial website, investorweb.com.au