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Medical Developments International Ltd shares wobble on mixed year, U.S. uncertainty

Penthrox-Combination-Pack-Med-Dev-photo

This morning Medical Developments International Ltd (ASX: MVP) the business behind the penthrox, or ‘green whistle’ emergency pain relief medical device reported its full year results for the period ending June 30 2018.

Below is a summary of the results with comparisons to the prior corresponding year.

  • Revenue of $17.93 million, down 5.2%
  • Profit of $243,000, down 86%
  • Earnings per share of 0.4c versus 3.1c in prior year
  • Final fully franked dividend of 2 cents per share
  • Penthrox secured regulatory approval in 23 new European countries, Canada and Mexico
  • Penthrox recommended for use in all UK ambulances
  • Application for approval in the ‘Holy Grail’ U.S. market remains “on hold” with regulator the FDA

This was something of a mixed year for Medical Developments that is reflected by a share price that surged above $8 in January 2018, but has since collapsed in half on the back of a May 2018 profit warning and the news that the U.S. regulator will be no pushover in getting Penthrox approved.

The FDA reportedly now wants Medical Developments to submit a second “Investigational New Drug” application, with further detail as to the merits of Penthrox.

Source: MVP Presentation

According to the company’s own forecasts above, U.S. FDA approval is not likely to happen until 2020 at the earliest if it does happen at all, and this news alone could weigh down the stock until then.

Still Medical Developments and Penthrox have excellent track records of growing elsewhere globally and the group is investing heavily to achieve its ambition of expanding Penthrox’s use into the home health, surgical and other medical spaces.

It also has a research partnership with the government-backed science agency CSIRO to expand its device’s potential.

Foolish takeaway

After the heavy share price falls over the past few months the company is now valued around $250 million, which is still high versus its trailing sales and profits.

As such it appears the market is still ascribing the business a premium valuation in anticipation of the fact that it will gain regulatory approval in the U.S. eventually. Given its success in multiple other leading healthcare jurisdictions this seems a fair assumption, but definitely not something to bet the house on.

The stock could be volatile in the 12 months ahead and looks a healthcare success story for the watch list. Other junior healthcare shares to follow include Somnomed Limited (ASX: SOM) and Zenitas Healthcare Ltd (ASX: ZNT).

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Returns as of 6th October 2020

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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