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Why the Medical Developments International (ASX:MVP) share price is tumbling lower

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The Medical Developments International Ltd (ASX: MVP) share price is on course to finish the week on a low note.

In afternoon trade the healthcare company’s shares are down over 2% to $5.30.

Why is the Medical Developments International share price under pressure?

Investors have been selling the company’s shares today after it released an update on its licensing agreement with global pharmaceutical company Mundipharma in Australia.

According to the release, Medical Developments International and Mundipharma have agreed to cease their distribution and licensing agreement in Australia.

This means Medical Developments International will take back the distribution rights for its pain relief drug Penthrox in the Australian market.

Why is the agreement coming to an end?

Management explained that since assigning the rights to Mundipharma just a year ago, the global Mundipharma organisation has gone through a significant re-organisation.

This has led to both companies reviewing their arrangements on a market by market basis.

Acting CEO, Max Johnston, commented: “The separation of the MVP business from MundiPharma is collegial and friendly. We thank MundiPharma for their willingness to assist with the hand back of materials and the business as well as the efforts they have put into growing our customer base. We will resume servicing the business from 1st December 2020 and plan a smooth and orderly transition.”

The company’s incoming CEO, Brent MacGregor, doesn’t see this as a negative event and believes it is actually a big positive.

Mr MacGregor commented: “Our aim is to take an urgent and much more direct and proactive role in the commercialisation of Penthrox to capitalise on our global footprint of market authorisations. This is an exciting development and opportunity for the business.”

This sentiment was echoed by the company’s chairman, David Williams. He believes a more direct distribution model fits better with the Australian market.

Mr Williams explained: “Taking back the Australian business is consistent with our reconsidered global go to market strategy. That strategy is a hybrid model of direct to market in some channels and geographies and using distributors in other channels and geographies.”

“In low touch high volume/value customers like Ambulance and Defence we will look to go direct. In high touch markets such as GP’s, dentists, etc we will look to use distributors and sometimes numerous distributors to best serve our patients and customers,” he concluded.

Medical Developments International will be responsible for Penthrox distribution in Australia from 1 December.

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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.

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