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Medical Developments International Ltd (ASX:MVP) shares rocket on China expansion plans

One of the best performers on the market on Monday has been the Medical Developments International Ltd (ASX: MVP) share price.

In late morning trade the healthcare company’s shares are up over 14% to $5.60. At one stage its shares were up as much as 19% to $5.84.

Why are Medical Developments International’s shares rocketing higher?

This morning the company announced that it has entered into an exclusive distribution and license agreement with Japan-based Daiichi Sankyo Company for Penthrox in China, Thailand, and Vietnam.

Daiichi Sankyo Company is a global pharmaceutical company and the second largest pharmaceutical company in Japan.

According to the release, the agreement will see Daiichi Sankyo Company pay Medical Developments International up to US$32.5 million (A$45.8 million), including US$15 million upfront (A$21.1 million), and sales-based milestone payments.

In addition to this, the two parties will enter into a master service agreement with Japan’s leading full clinical and regulatory service provider, EPS International, to get Penthrox approved for sale in China.

Medical Developments International will fund the approval process up to US$10 million and will own the intellectual property generated from the program. The company will also be the owner of the “Drug Import License” once Penthrox is approved.

CEO, John Sharman appears to be pleased with the latest expansion of the “green whistle” product. He stated that: “We are delighted to partner with Daiichi Sankyo, one of Japan’s biggest pharmaceutical companies. Daiichi Sankyo shares our vision for the potential of Penthrox in China, Thailand and Vietnam.”

He added that: “Acute pain in trauma and minor surgical procedures is undertreated in the Chinese healthcare system. MVP believes there is an important place for Penthrox in pain management in China. Penthrox, with its fact acting, non-addictive, non-opioid characteristics will be an important tool for pain management in the Chinese, Vietnamese and Thai markets.”

Should you invest?

I can’t say I’m surprised by the share price reaction today. If the company can achieve regulatory approval for the product in China and is able to successfully penetrate the market, it could be a game-changer.

However, I would suggest investors keep their powder dry for now and wait to see if approval is achieved. Especially given the issues the company is having getting Penthrox approved by the U.S. FDA.

In the meantime, I would suggest investors consider industry peers CSL Limited (ASX: CSL) and Mayne Pharma Group Ltd (ASX: MYX).

Alternatively, this buy rated growth share could be even better. Do you own it?

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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.

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