Should you Buy, Hold, or Sell Medical Developments?

Richard Hemming


In the past 9 months we bought Medical Developments (MVP) at $4.60 (Issue 388, 26 March 2020). Two months later we took profits at $8.25 (Issue 397, 28 May 2020), bought in again at $5.24 (Issue 417, 15 October 2020), and now we’re again sitting on a profit, its stock being up 25% in two months! It doesn’t get much better than this. Join today to read in this week's report what we're going to do next. Take advantage of our Christmas Special and get a bonus 2 months free with your annual subscription.

Overview of MVP

MVP flagship product is Penthrox, which is an analgesic widely used by Australian medical professionals from GPs to dentists since the 1970s as a safe alternative to morphine to reduce pain. The drug has been gaining approvals in the UK/European markets. MVP is also in the process of preparing to file applications in the US market. There is a respiratory division, which produces an inhaler device called a "Spacer" for asthmatics.  

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Recent MVP updates

The trading update earlier this month simply re-iterated that sales are subdued due to COVID-19, which is a continuation of 1H20 (see our last note) as well as difficulties relating to the end of its distribution agreement with MundiPharma for EU rights to Penthrox, which means inventory levels are being run down.
 
On that front as we stated, costs would increase for MVP and despite the company talking up its strong balance sheet, this week it announced it has raised $25m at $6.50 a share from institutions and is doing a $5m SPP from retail shareholders, which opens tomorrow and closes Monday 18 January. It is eligible for shareholders on the register on 11 December 2020.
 
The raising is clearly opportunistic and coincides with a relatively new CEO Brent MacGregor and an incoming chair, ex-CSL executive Gordon Naylor, replacing David Williams (13.5% shareholder) who remains on the board.

What to do now

Clearly the company is going through a process of working out its strategy and the capital raising is designed to bolster its marketing/sales power. COVID has been tough on Penthrox sales and the end of the Mundi relationship puts that difficulty into sharp relief.

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About the Author

Richard Hemming

Richard Hemming (r.hemming@undertheradarreport.com.au) is an independent analyst who edits www.undertheradarreport.com.au, which provides investment opportunities in Small Caps that you won’t get anywhere else.

Under the Radar Report is licensed to give general financial advice only (AFSL: 409518). The author does not own shares in any of the stocks mentioned.

Under the Radar Report is licensed to give general financial advice only (ASFL: 409518). The author does not own shares in any of the stocks mentioned.

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