The shares of Medical Developments International Ltd (ASX: MVP) were given a lift today after the healthcare company advised that it has received correspondence from the USA Food & Drug Administration (FDA) in relation to its Investigative New Drug (IND) application to have Penthrox approved for sale in the United States.
In afternoon trade the Medical Developments International share price has pushed 4.5% higher to $4.50.
What was in the correspondence?
For those that are unaware, the FDA suspended the clinical program for its Penthrox pain management in the USA in July due to outstanding issues and concerns. In its correspondence today the FDA has explained why.
“The FDA require MVP to identify an appropriate patient population for its suggested Phase I Study for whom the risk/benefit of Penthrox would be reasonable.”
In its IND application the company suggested an appropriate population would be Healthy Volunteers excluding patients who had previously developed hepatoxicity after administration of either methoxyflurane or halothane. The FDA doesn’t believe this to be adequate, but management believes it can identify an appropriate patient population.
“The FDA requested additional information and justification for the rare occurrence of idiosyncratic hepatoxicity.”
The company expects to be able to illustrate satisfactorily the rare occurrence of idiosyncratic hepatoxicity and the acceptability of this risk in respect to the overall benefit of Penthrox compared to dangerous opioid alternatives.
“The FDA has asked for clarification around a chloroform impurity which is a process element in the manufacturing of methoxyflurane.”
This is not expected to be an issue as the company’s new manufacturing technology meets the globally accepted standard for chloroform. It expects to be able to comply with the FDA’s acceptable limits.
There were a number of other smaller concerns, as well as other issues that do not form part of its “Clinical Hold” statement. Pleasingly, management believes it can satisfactorily respond to them all.
The company’s CEO, John Sharman, said: “We are currently consulting with our scientific team, USA and EU advisors on the development program needed to satisfy the FDA’s requirements. We will report back to the market as to the impact on costs and timeframes in due course.”
Should you invest?
While I have confidence that the company will be able to satisfy the FDA’s concerns and have Penthrox approved for sale in the United States, I feel it would be prudent to wait until this happens before investing. After all, its shares are trading on a sky high multiple and could take a tumble if the FDA rejects its application outright.
In the meantime, healthcare companies such as CSL Limited (ASX: CSL) and Mayne Pharma Group Ltd (ASX: MYX) might be better options for investors.
Alternatively, these exciting growth shares could be equally good investments in FY 2019.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.