About: Medical Developments manufactures and sells Penthrox, a non-narcotic fast acting painkiller also known as ‘the green whistle’. Penthrox provides quick relief of moderate to severe pain and is used by ambulances and hospitals. MVP’s intellectual property is the device known as the ‘green whistle’ that is central to administering the pain relief containing methoxyflurane, which is used as an anaesthetic, in a safe way. Penthrox has a clear competitive advantage as a quick short term pain relief being classified as S4 prescripted medicine meaning its use isn’t restricted to nurses and is easy to administer. There is a significant opportunity for Penthrox to be used in emergency departments of hospitals worldwide. Penthrox is in a unique position being a non-narcotic, fast acting, portable and easy to use. In the US narcotics cannot be administered by paramedics, placing Penthrox as a solution for administering pain relief before arrival at the emergency department. Penthrox is widely used in Australia and has been approved for use in the majority of European countries and is currently going through the FDA process for approval in the US.

Why it is in the portfolio: We are attracted to MVP as having a product (Penthrox) that has proven itself in Australia (widely used in Australian ambulance market) with a clear competitive advantage, being the best solution to pain relief being administered without the need of a nurse. A sustainable competitive advantage is important to us and one that we monitor closely. Penthox’s competitive advantage of being a fast acting pain relief for acute pain was substantiated following a recent meeting we had with a potential opioid based acute pain relief competitor in the US. Penthrox has a large addressable market (worldwide in ambulances and hospitals). With a major issue of addiction to opioids when used as pain relief, an issue that has been making headlines in the US, Penthrox is shaping up to be a suitable alternative in certain cases and as such the thematic is working in MVP’s favour. MVP has an experienced Board and management team and are aligned to shareholders with 30% ownership in MVP. Medical device rollouts such as this can be very rewarding for shareholders if done successfully. The valuation upside is compelling. We see at least 100% upside to the current share price, based on our DCF valuation, as Penthrox gains momentum in Europe and is rolled out to other large regions including the US market. Results from two trials are expected shortly that are likely to appease the FDA’s previous queries which do not seem onerous. This should put Medical Developments on a pathway for FDA approval in 2020. Regardless of the US outcome, Penthrox is likely to be rolled out to other large markets including China.

Fundamentals: Coming soon.

What could go wrong: Coming soon.