Medical Developments International Limited

MVP Details

Update on Penthrox: Medical Developments International Limited (ASX: MVP) operates a pharmaceutical drug and medical & veterinary equipment business. Recently, the company announced that US Food and Drug Administration (FDA) has unconditionally lifted the clinical hold on Penthrox.

• This indicates that the company can commence preparations for its Phase III US clinical trial on an immediate basis.
• The company would conduct the trial on a targeted trauma and associated pain patient group. MVP is likely to initiate recruitment for the 2-year trial in late 2022.

Insights of 1HFY22:

• For the half-year ended 31 December 2021, the company reported revenue (net) from the sale of goods and customer contracts of ~$9.59 million as compared to ~$12.57 million in 1HFY21.
• MVP posted a net loss after tax of $7.3 million against ~$1.13 million in 1HFY21. As a result, basic loss per share rose to -10.35 cps as compared to -1.73 cps in pcp.
• MVP closed 1HFY22 with cash and cash equivalents of ~$28.27 million as compared to ~$33.46 million as on 31 December 2020.

Cash Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s operational and financial performance could be impacted by the rising market share of peers in the industry. In addition, the business could also be impacted by the failure of clinical trials.

Outlook: Looking forward, the company would be focused on realising value from the CSIRO API continuous flow development program. In addition, it will focus on its pain and respiratory businesses.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MVP has a 52-week low and high levels of $3.21 and $6.25, respectively. The stock has provided positive returns of ~19.15% in the past six months. The stock has a support and resistance level of $3.703 and $4.804, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price with a correction of low double-digit (in % terms). The company can trade at a slight discount to its peer’s median EV/Sales multiple, considering the consistent losses in business and COVID-19 uncertainties. For the purpose of valuation, peers such as Starpharma Holdings Ltd (ASX: SPL), Arovella Therapeutics Ltd (ASX: ALA), Little Green Pharma Ltd (ASX: LGP), and others have been considered. Considering the expected correction, losses in business, volatility in market, current trading levels, and key risks associated with the business, we give a ‘Sell’ rating on the stock at the current market price of $4.66 as on 03 March 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

MVP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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