This is one that I got terribly wrong. I sold out at least a year ago for a big loss but glad I got out when I did.

They have a great product in Oz and should have been able to make it work internationally. Execution and capital management have been abysmal and it doesn't seem to be getting any better.

Another example of an Australia health company that cannot turn a great product into a viable business. So disappointing. This slide tells you all you need to know:

good luck to anyone still holding !

I got high on the green whistle today while getting my wisdom teeth extracted, while high I seemed to have become a shareholder in MVP again. I've now got a week off work to regret my decision and do a deeper dive on MVP. On a high level though:

The good things happening with MVP:

• Demand is growing in Australia, and prices are to be increased in Australia
• UK paediatric trial - submission expected Q3 FY24.

The concerning things happening with MVP:

• Australia still seems to be golden country for Penthrox.
• Penthrox is still the crown jewel of this company with limited diversification.
• The "US Re-entry" is STILL being played out - FDA has cleared Penthrox for a clinical trial.
• Exit of China market - need to look into this further but it seems like a missed opportunity? Poor execution?
• Review of Europe model and scale back of spend in France due to "market conditions"
• Revenue up 47% but EBIT (-$18.3) and NPAT (-$5.6m) still at a loss. Capex is still large, approx 24% of revenue
• I last exited MVP at $8.70 in 2020 - 4 years later the share price is now $0.835

Disclosure: Held IRL.

Another strong move leading up to the New Year.

Up something like 45% in barely over a week. The last move, which was almost identical, fizzled out pretty quickly. Hopefully this one has more legs and is backed by imminent positive news.

23 Half Year Results - Results

MVP announced it's half year results last week, at a high level revenue up 45% to 13.9 and a net profit of 2,658. However this was only due to a refund from the termination of the China contract. Taking out that revenue and impairment net profit sits at -8,864 which is an 8% increase on the PCP.

Overall, mixed results. Not the growth required in the pain management and a surprise 80% growth in the respiratory business. After listening to their announcement below is my take on the good, bad and progress based on my watch list.

The good

1. Increasing prices in December for Australia resulting in higher gross margins
2. Gross profit margin increased to 71% from 67.9%
3. 29% Growth in UK and Ireland with the current distributor even with a deferred shipment in UK. Revenue is only recognised when shipment is made so this will flow into the FY results.
4. Positive feedback from all customers, CEO mentioned he has never heard a negative thing about the product
5. Re-launched in Canada with a new partner
6. 80% growth in respiratory and expected double digit growth in US moving forward

The bad

1. 24% growth in France is well behind the > 50% they needed to achieve 110k units. Current run rate is at 60k units which is the same run rate presented for Jun-22 quarter. Effectively meaning no growth from June quarter.
2. Negative growth in pain management units in Australia by 6k
3. Expenses increased by 16% on PCP and 27% on the last half.

H1 / FY Total Revenue

Good growth in revenue, slightly beating H120

The split based on franchise

Continued penetration of Penthrox in France

At FY22, MVP were targeting ~110k units sold in France. Currently they are tracking on a run rate of 60k units. Well short of expectations.

Management have expressed multiple reasons which include

1. Retaining / Recruiting: MVP uses a contract sales organisation in France. They are seeing issues retaining staff as they are going to companies which are offering permanent roles.
2. Hospital Staff Shortages: Staff shortages in hospitals have made it harder to get the right decision makers on-board to add the green whistle to the hospital
3. Bed Closures
4. Budget Constraints

At a high level I get the sense that for pain management, they have to invest a lot of time in education. As this is a new product to majority of French hospitals there is effort in education to promote the benefits - ease of use and quick pain relief. I would imagine after time this education will reduce as this becomes the standard of care.

Market entry planning for Germany, Italy & Spain

Not much news on this apart from the next market they would target would be Germany sometime in FY24.

With the cash bleed at the moment, it does make sense to focus on growing and learning from France before spending more in entering another market.

Direct in-market sales capability in Australia

Slight decrease in Australia units sold in the pain management section. However promising that they have on-boarded 2 ED's in Australia since October. Interestingly the indication in Australia is wider than anywhere else in the world. Overall not much of an improvement here with the direct sales team so expecting more.

Cash Burn

MVP cash position is now 37m, free cash flow for this half was -11,604. Management still expect break-even / cash-flow positive in FY25.

For the US trials, they are currently assessing a funding plan. Currently the group has no planned capital investment activities and plans to seek partner or third party funding.

23 Half Year Results - Watch list

MVP announced it's half year results will be on Feb 24th. Thought I would do a straw on items I'll be looking out for in those results. All my watching is on the pain management side of the business (The Green Whistle) as I believe that is where the greatest opportunity lies (not in respiratory). 

Progress to their strategic priorities in FY23

From the FY22 report, below are the strategic priorities for FY23

• Continue penetration of Penthrox in France
• Market entry planning for Germany, Italy & Spain
• Investment in direct in-market sales capability in Australia to drive penetration of Penthrox in hospital ED and the ambulance segment
• Further investment in platform capability to support growth

Continued penetration of Penthrox in France

France has a population size of roughly 65 million, as of FY22, MVP had 720 units sold per million population in France. This compares to 11,577 units per million population in Australia. There is considerable growth opportunity available, as part of this strategy management is expecting to sell circa 110k units in FY23, more than doubling FY22 sales (49k) but well short of the penetration of Australia. 

Market entry planning for Germany, Italy & Spain

I’m not expecting too much here as the word “planning”. However there is opportunity for MVP in these markets. The population of these four is ~260 million, taking out France of ~65 million there leaves 195 million in the remaining 3 markets. 

With Australia’s benchmark of 11,577 units per million population If these 3 markets get to that then that would be an extra 2.25 million units sold per year. 

Direct in-market sales capability in Australia

MVP have now hired a direct sales team after taking the distribution rights back from Mundipharma in December 2020. I'll be watching to see how this translates to sales and turning around the recent decline in sales, two ways it might:

• Lock downs & Sell Through Over: The decline can be attributed to lock downs and Mundipharama selling through it's stock levels so hopefully they can get the levels back to FY20.
• 
• Penetration in Emergency Departments: Secondly, MVP have said they want to target emergency departments. Currently the ambulance segment makes up around 75% of AU sales, roughly 223k units based on FY22 sales of 298k units. MVP believes the ambulance segment makes up roughly 31% of the market opportunity however there is 45% opportunity in Public ED departments.

Cash Burn

Cash burn, currently MVP has roughly 50m in cash. Management have expressed that they believe they will be cash flow positive in FY25 and the recent capital raise will get them to 2025 (with the options exercised). Study costs for the US trials will be around 12m.

China Exit

Lastly, my two cents on the recent decision to cease planned trials in China. I think this is a good idea to allow the company to focus on growth in existing markets. China is a very difficult market to get into with Medical Devices, not only is the registration time for foreign companies longer with the China FDA but China has a 2025 made in China vision (Article 104). Although I’m not certain article 104 would apply to MVP, if it does, manufacturing would have to be set up in the country which adds its own costs and risks. 

The real potential here is the drug methoxyflurane and its penetration into the US and Europe. 

A quick primer on the product:

Methoxyflurane provides rapid short-term analgesia using a portable inhaler device. Its primary role is in acute trauma but it might also be used for brief procedures such as wound dressing or for patient transport. It is a non-opioid alternative to morphine and is easier to use than nitrous oxide.

Methoxyflurane is a volatile anaesthetic originally used in the 1960s until it was found to be nephrotoxic at anaesthetic doses (typically 40–60 mL). Since the 1970s it has been used in Australia in lower doses for acute analgesia (up to 6 mL), largely by paramedic services.

Methoxyflurane is supplied with an inhaler device (Penthrox inhaler), which patients use to self-administer. It can be used by conscious haemodynamically stable patients, under supervision.

Pain relief begins after 6–8 breaths and continues for several minutes after stopping inhalation. Continuous use of methoxyflurane 3 mL provides analgesia for up to 25 minutes; a second 3 mL dose can be administered if required for up to 1 hour's analgesia. No more than 6 mL should be given in 1 day. 

(from NPS.org.au)

From a medical perspective I see it as

- Safe (difficult to OD with minimal side effects)

- Effective

- Probably quite limited in its potential applicability

- Don’t have to be as worried about people stealing it as not typically abused

For over 10 years MVP have been probing its applicability into different settings and beyond prehospital it hasn’t really found decent traction.

This isn’t surprising to me as soon as you have IV access you likely have better / more familiar / cheaper options for acute analgesia. Essentially as a rule of thumb just assume anywhere an IV is likely to be in situ methoxyflurane isn’t going to be your first choice or even second choice (or your third choice if I’m honest) and this is in a country where it has been used for 30+ years. 

If I had to say where I say applicability reducing dislocations in ED and prehospital minor trauma. 

Therefore the company should focus on EDs and prehospital. Everything else is marginal at best and likely a waste of time and money. It could easily replace most nitrous oxide use in EDs and for quick pain relief and minor short procedures is a great option.

The reason I have become interested is management have been doing a lot of things that I like to see recently:

- Become more focused. Appears they have realized the value lies in the penthrox product so have ceased marginal business activities like a vet segment and an experiment in continuous flow manufacturing. These were unnecessary unprofitable distractions.

- Phase 3 clinical trial in US is actually approved and underway meaning a product launch in 2026 is a real possibility. The outcome of the trial, unlike many pharma trials is almost assuredly positive given its long history of clinical use in Australia and preexisting safety data.

- The company is well capitalized with $50mil in the bank which should get it through the trial and to US product launch.

- European expansion / distribution has been insourced and beginning to show real traction. 

- There is strong insider alignment with ongoing insider buying and participation in capital raise and mostly at much higher prices.

Why now?

Losses have been exacerbated by a blowout in employee wages as they hire to begin direct sales at the same time as revenue falls on account of the previous distributor winding down stock. That will likely begin to work itself out this year with accelerating revenue growth. As the business metrics turn around I expect the share price will follow.

Price Catalysts

- Revenue acceleration

- Some sort of underlying profitability inflection once trial costs are excluded

- Phase 3 trial conclusion expected 2025: We basically already know the outcome but will still be a big day.

Downside

- $50mm in cash currently and $130mm MC suspect downside could be as low as $40mm so SP of ~$0.50

Upside 

- More difficult but with growth in European segment and phase 3 US trial completion I can’t imagine a MC of less than $500mm due to the market size. Should equate to a share price of $5-6

I’m basically discounting the respiratory business as it appears only marginally profitable and if it were up to me I would look to sell it off.

A prudent approach from management (IMO) discontinuing the preparation for trials of Penthrox in China.

Whilst everyone looks to China with dollar signs in their eyes, I think this is a smart move due to the complex regulatory system and geopolitical risks associated with any activity in China.

Extract from announcement:

CEO Brent MacGregor said, “A commercial launch in China is not a strategic priority at this time. We are directing our resources into those projects that have greater capacity to generate shareholder value in the nearer term. “These projects include accelerating penetration of Penthrox in select European markets and in Australia. In the longer-term, we intend to deliver the next wave of growth through Penthrox entry into the US. Following the FDA’s lifting of the clinical hold, this process has already commenced"

Shares are essentially close to a 5-year low, whilst the business is quite different to what it was, I'm quite interested in the potential for Penthrox to further penetrate the European market, and the potential for this grow in the US.

Watching on the sidelines at the moment, not held in Strawman or IRL, but will take a closer look over coming days and may enter with a small parcel here first to wet my appetite.

Interested to hear others thoughts on the business.

Hey @ValueDownunder On the subject of MVP director buying, just to play devils advocate for a moment,

What do you make of the fact that despite the share price being very depressed David Williams hasn't bought any more shares here for years now meanwhile he has been maniacally buying up his other large positions such as PNV.

I am not concluding anything just an observation.

Sep 7th update - David Williams ASX announcement this morning shows he also went in the raise. As you would expect given the large offer discount at the time.

Placement at $2 then a proposed Retail SPP

Passing the hat around!!

I think anybody that has been paying attention to MVP knew this one was coming. A Capital Raise has been announced, the important info - 1 share issued for every 9.5 held at a price of $2 a share. Options will also be issued at a price of $2.80, 1 share for every 2.5 of the new shares issued expiring on the 30th of September 2024.

Total funds to be raised is $30m with the money directed to go towards Australian expansion and European growth. An update was also given on guidance;

• revenue: A$22.4m; +37% on prior corresponding period (PCP)

o Penthrox revenue: A$13.7m; +29% on PCP

o Respiratory revenue: A$8.2m +53% on PCP

• underlying EBIT1: A$(14.7m)

• EBIT: A$(15.9m)

• cash at bank: A$20.4m

Personally I hate this new trend of options that come with capital raises. If one like the business then buy more shares instead of this nonsense but I'm sure others opinion differ for a variety of reasons. I will be taking up my allocation in full as I hold this company IRL and still believe in the product and have used it first hand (I'm sure plenty on strawman members have). The real question is if management have the capability to execute their growth in Europe and North America so shareholders will be rewarded which still make this a high risk company to be invested in as that answer seems less than straight forward.

Endo International plc to distribute Penthrox in Canada

• Release Date: 10/05/22 15:35
• Summary: MVP signs new Penthrox licensing agreement in Canada
• Price Sensitive: Yes

I thinking the share markets were bearish in May 2022..So MVP could get some momentum going forward..

FDA clears US Penthrox clinical trial

MVP have just announced the US Food & Drug Administration (FDA) have lifted it's clinical hold on Penthrox. Effectively opening the way for Medical Developments to begin Phase III US clinical trials later this year on it's green whistle. MVP are expecting a 2 year trial commencing late 2022.

A big win for MVP as Penthrox has been banned in the US preventing trials and ultimately sales of the green whistle. Large market opportunity if trials are successful especially with the opioid crisis in the US.

14-Oct-2020:  Appointment of CEO - Brent MacGregor   and   Appointment of Non-Executive Director - Gordon Naylor

I don't hold MVP shares, however I note the market liked today's news because MVP's share price rose +12.21% today, making them one of today's MVPs.  This is the "green whistle" company by the way (Penthrox).

About Penthrox®

Penthrox is a fast onset, non-opioid analgesic indicated for pain relief by self-administration in patients with trauma and those requiring analgesia for surgical procedures. Penthrox is now approved for sale in more than 40 countries and has been used safely and effectively for more than 40 years in Australia with more than 7.0 million units sold. There is growing interest in Penthrox being used in patients undergoing investigatory procedures, as well as operational procedures such as colonoscopy.

About Medical Developments International Ltd

MVP is an Australian company delivering emergency medical solutions dedicated to improving patient outcomes. MVP is a leader in emergency pain relief and respiratory products. The Company manufactures Penthrox®, a fast-acting trauma and emergency pain relief product. It is used in Australian Hospitals including Emergency Departments, Australian Ambulance Services, the Australian Defence Forces, Sports Medicine and for analgesia during short surgical procedures such as Dental and Cosmetic surgery as well as in other medical applications. MVP is expanding internationally and manufactures a range of worldleading Asthma respiratory devices.

30-June-2020:  Phillip Capital: MVP: Updating our view: Accumulate (from Buy)

Recommendation: Accumulate (downgraded from Buy), Risk Rating: High, 12-month Target Price: (AUD) $7.80 (No change).

05-May-2020:  Penthrox approved - Netherlands and Bosnia and Herzegovina

28-Apr-2020:  Penthrox is approved in Thailand

Go the Green Whistle!   MVP perhaps not today's Most Valuable Player, but up +8.62% nonetheless.