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Why the Medical Developments share price is up 50% since October

Share price soaring higher

Investors in Medical Developments International Ltd (ASX: MVP) have had a lot to be happy about over the last couple of months. Since mid-October, the Medical Developments International share price shares has soared 50% higher, and Medical Developments shares were valued at $7.24 at today’s open.

Why is the Medical Developments share price soaring?

The gains have come on the back of a series of positive announcements, mainly concerning its pain medication Penthrox. Penthrox is a rapid onset, non-opioid analgesic which has been in used in Australia for over 40 years, particularly in trauma settings like hospital emergency departments. It has also been historically used by the Australian Defence Forces and Ambulance Services.

In October, MVP announced that clinical trials in Europe had demonstrated that Penthrox was superior to standard pain treatments such as intravenous morphine and paracetamol for patients in acute trauma settings. Crucially, it was a common finding of the trials that Penthrox “exceeded patient/clinician expectations and or resulted in a high degree of treatment satisfaction from patients and health care professionals.”

That’s a pretty glowing endorsement of a medical treatment. And so it’s really no wonder that this positive announcement was followed by a flurry of others. The first came just the next day, when the company announced that Penthrox had been launched in Italy. And the day after that, MVP announced that Penthrox had been entered into the European Society of Emergency Medicine guidelines relating to the management of acute pain in emergency situations. It was being recommended as the first line of treatment for trauma patients experiencing moderate to severe pain.

At the time, MVP CEO John Sharman stated that “the inclusion of Penthrox as a recommended first line trauma medication across Europe is a quantum step forward for Penthrox’s ability to develop a market leading position.”

But that wasn’t the end of the good news. In late November, MVP announced that the Chinese National Medical Product Administration had approved the company’s request to conduct a series of clinical trials to test the efficacy and safety of Penthrox for Chinese patients. And just last week, MVP announced that the Russian Ministry of Health was also reviewing a marketing application for the sale of Penthrox in Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan.

It should be noted that, despite these latest positive announcements, the actual sale of Penthrox in both China and Russia could still be more than 12 months away, and there is always the risk that the healthcare regulators of the 2 nations might still find reasons to block Penthrox. However, both activities still represent significant steps forward for MVP and continue to demonstrate the growing acceptance of Penthrox among the international medical community.

All of this has now snowballed into positive financial results for MVP, with John Sharman recently stating to shareholders that “the trading performance for the first three months of FY20 has delivered a sales result well above budget and [the company] is on track to deliver another record year.”

Foolish takeaway

The great thing about MVP is that, while Penthrox is driving most of the positive market sentiment towards the company right now, it is actually only one part of MVP’s business.

The company also develops medical devices for the treatment of respiratory illnesses. And it is progressing strongly on this front too: its respiratory devices are being distributed by US retail giant Walmart in 4,600 stores across America, with the first shipment expected to be invoiced early in 2020.

But while this is all very exciting for shareholders, it is still worth keeping in mind that an investment in MVP is quite speculative. Its FY19 net profit was only a little over $1 million, and it doesn’t have anywhere near the global pedigree of ASX-listed healthcare blue chips like ResMed Inc (ASX: RMD), CSL Limited (ASX: CSL) or Cochlear Limited (ASX: COH). However, it is starting to notch up some significant wins, which definitely makes it at least one to watch over the next year or two.

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Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia owns shares of and has recommended Medical Developments International Limited. The Motley Fool Australia has recommended Cochlear Ltd. and ResMed Inc. 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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