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Why the Medical Developments share price charged higher in October

The Medical Developments International Ltd (ASX: MVP) share price was one of the big gainers on the ASX last month.

The Aussie medical devices group had a huge month amid announcing a new CSIRO deal and several strong Penthrox updates.

Why did the Medical Developments share price charge higher?

The Medical Developments share price charged 17.7% higher to $5.85 per share by month-end. The big gains came in mid-October as the company updated the market on its Penthrox product.

Penthrox is an analgesic used by GPs, military forces and similar for emergency pain relief. It’s commonly known as the “green whistle” due to the appearance of its hand-held inhaler.

The biggest boost for the Medical Developments share price came on 22 October after a key product update. The company’s shares charged higher after Medical Developments reported strong Penthrox results from its European studies.

Just a day later on October 23, the Aussie company launched its signature product in Italy – the latest in a string of milestones.

This also triggered a US$2 million (A$2.9 million) payment from development partner Mundipharma which is expected in 2020.

In late October the company also signed a new Manufacturing Development Project with the CSIRO after 18 years of partnership. Medical Developments will invest up to $5 million over 5 years to develop new manufacturing technologies for pharmaceutical products.

Is November the time to buy?

The Medical Developments share price has outperformed the ASX 200 so far in 2019 after surging 39.44% higher.

The big red flag for me is just how expensive the company’s shares are for what you’re getting back in earnings.

The Medical Developments price-to-earnings (P/E) ratio is an astonishing 371x earnings, although these metrics can be flawed for growth companies.

Medical Developments has seen solid growth for the last 5 years as its shares have surged 371.43% to $5.94 per share.

However, I think I’d prefer to invest in a blue-chip name like CSL Ltd (ASX: CSL) given where we’re at in the cycle right now.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited. The Motley Fool Australia has recommended Medical Developments International Limited. 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.