Medical Developments International Limited

Positive Study Results to Aid Future Growth:Medical Developments International Limited (ASX: MVP) is an Australian company providing emergency medical solutions. The company is a leader in emergency pain relief and respiratory medical devices & manufactures Penthrox®, a trauma and emergency pain relief product. On 22 October 2019, the company announced that it has received multiple positive results from the recent European clinical trials of Penthrox® for the treatment of acute trauma pain across Europe.

FY19 Performance Highlights for the year ending 30 June 2019: MVP announced its full-year financial results wherein, the company posted gross revenue from ordinary activities at $21.4 million, up 19.3% on y-o-y basis and reported net profit at $1.04 million, up 326.8% y-o-y.On a year-on-year comparison, Penthrox® reported a 401% growth in sales across Europe while global sales grew by 47%. Australia and UK delivered sales growth of 38% and 68% on y-o-y basis, respectively. MVP reported 27 regulatory approvals across Europe, followed by the addition of 400 new customers from the region. During the year, the business signed an exclusive deal with China for Penthrox® and received $20.8 million in an upfront cash payment. In the respiratory medical devices segment, on year-on-year comparison, the company reported sales growth of 111% and 62% in Asia and the USA, respectively. During the year, the company raised a total amount of $24.5 million through Institutional Placement and Share Purchase Plan.


FY19 Financial Highlights (Source: Company Reports)

Outlook: Going forward, the management expects strong sales growth across Penthrox® and Respiratory Devices in the coming years. Also, it is planning for the commercialisation of the company’s first continuous flow technology for Lidocaine, which has the potential to reduce a cost of API manufacturing as compared to batch processing. Alongside, the company is also eyeing regulatory approvals for development program in China, USA and Russia.
Stock Recommendation: The stock of MVP is quoting at $5.790 with a market capitalization of ~$339.19 million. 52-week trading range of the stock stood at $3.480 and $6.500, and currently, the stock is trading near the upper band of the range. The stock has generated negative returns of 13.99% and 6.04% during the last three-months and six-months, respectively.  The stock is available at a price to earnings multiples of 321.12x on trailing twelve months (TTM) basis as compared to the industry median of 13.4x. The stock is available at an enterprise value (EV) to sales of 13.8x as compared to the industry median 10.3x. The company expects robust sales growth from Penthrox®. The product has depicted an impressive growth in the recent past, adding 400 new clients across Europe and an exclusive deal in China. Considering the aforesaid developments along with the relative valuations, we are of the view that the stock is currently trading at stretched levels. Hence, we recommend an ‘Expensive’ rating on the stock at the current market price of $5.790, up 11.992% on 22 October 2019, as a consequence of positive study results from Penthrox®.
 

Volpara Health Technologies Limited

Integration of MRS aids Growth in Volpara and MRS Businesses:Volpara Health Technologies Limited (ASX: VHT) provides clinical functions for screening clinics and providing feedback on breast density, compression, dose, and quality, while its enterprise-wide practice software management helps with productivity, compliance, reimbursement, and patient tracking.

Q2FY20 Operating update for the period ending 30 September 2019: VHT declared its second quarter results for FY20, wherein the company reported cash receipts from customers at NZ$4.9 million, representing a strong growth of 190% on y-o-y basis. At the end of the quarter, the company reported annual recurring revenue (ARR) at NZ$15.7 million, including NZ$14.9 million from breast cancer software sales and NZ$800 K from lung cancer software sales. VHT reported cash in hand at NZ$40.2 million during Q2FY20. Operating cash outflow for the year stood at NZ$4.2 million as compared to NZ$3.0 million during the previous quarter.

Forecasted Cash Outflows: As per Q3FY20 estimates, the company expects total cash outflows of NZ$8.97 million, including NZ$1.35 million for research and development, NZ$1.10 million for product manufacturing and operating costs & NZ$0.35 million for advertising and marketing. Furthermore, the company expects to incur staff costs of NZ$4.9 million and administration & corporate costs of NZ$1.25 million in the quarter.


Q3FY20 Estimated cash flow (Source: Company Reports)

Stock Recommendation: The stock of VHT is trading at $1.655 with a market capitalization of ~$354.35 million. The stock is trading at the upper band of its 52-week trading range of $0.924 to $1.932. During the last three-months and six-months, the stock has generated returns of 1.56% and -7.30%, respectively. In Q2, the company reported successful integration of MRS, acquired at the end of June. The integration has enabled growth across both Volpara and MRS businesses, providing VHT with a much stronger U.S. presence and accelerated sales through cross-selling opportunities. Going forward, the company aims to deliver new integrated products at the Radiological Society of North America (RSNA), its upcoming trade show in Chicago. The company is also looking forward to the upcoming breast density announcement from the FDA. Considering the above factors and current trading levels, we recommend a ‘Hold’ rating on the stock at the current market price of $1.655, up 1.846% as on 22 October 2019.

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