The Medical Developments International Ltd (ASX: MVP) share price returned from its trading halt and zoomed higher today.
The healthcare company’s shares were up as much as 14% to $7.15 at one stage.
At the time of writing the Medical Developments International share price has given back a good portion of these gains but remains up a solid 6% to $6.63.
Why is the Medical Developments International share price zooming higher?
Investors have been fighting to get hold of the company’s shares this morning after it announced an agreement with the Mundipharma network in Europe. This agreement will see it take back the distribution rights for its pain relief drug, Penthrox in all 27 member states in the European Union.
According to the release, Medical Developments International plans to have a hybrid model selling direct in some countries and using distributors in others.
In preparation for this, the company has already set up a European office and appointed a Head of Europe – Stefaan Schatteman. Mr Schatteman is a 15-year veteran of the Mundipharma network in Europe, having established its operations in Belgium before moving to France as General Manager. Through these roles he knows Penthrox and its market entry plans very well.
A turning point.
The company advised that it will be able to buy back the EU rights because of a significant reorganisation of Mundipharma’s business in Europe.
Mundipharma has significantly scaled back its EU staff and presence. As a consequence, Medical Developments International will buy back its rights for an amount 3 million euros, which is payable in staged instalments over the period of transition. It also includes a 5% royalty on sales capped at a maximum of 5 million euros. This will commence on 1 September when the company starts booking the sales revenue.
The company’s chairman, David Williams, believes this is a pivotal moment in the company’s history.
He said “This buyback is a turning point in the history of MVP. We are the beneficiaries of the enormous effort and expense Mundipharma has invested in pre-marketing activities, marketing approvals, patient trials, clinical data and initial market launches.”
“Mundipharma is going through a significant reorganisation. As a result of these unusual circumstances we are able to access the local European experience of well-qualified staff and all of the work and materials relating to our business,” he commented.
Acting CEO, Max Johnston, added: “Mundipharma has expended a very significant amount of funds in the pre-marketing phase and initial market entries and have done an excellent job on the preparing and seeding of the market. The separation of the MVP business from Mundipharma is collegial and friendly. Both companies are focused on building on the enormous amount of work already done and serving the needs of patients and customers.”
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Returns as of 6th October 2020
James Mickleboro 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.