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Fairview Equity Partners (Fairview) is an Australian smaller companies equities specialist fund manager based in Melbourne, Australia. It is the investment manager of the Fairview Equity Partners Emerging Companies Fund (Fund) issued by responsible entity, Antares Capital Partners Limited. The Fund aims to provide long-term capital growth and some income by investing primarily in a diverse portfolio of smaller companies listed, or expected to be listed, on the Australian Securities Exchange.
International (MDI) is a Melbourne-based pharmaceutical producer. MDI manufactures Penthrox, a fast-acting pain relief product that, importantly, is not an addictive opioid. The company has sold this to state-based Australian ambulance services for 40 years. Penthrox is best known as ‘the green whistle’ and is seen regularly on the TV show, Bondi Rescue.
Why we invested
Fairview took a position in MDI in September 2015 after the company announced a European licencing deal with the giant privately owned Mundipharma Pty Ltd, a global leader in opioid pain relief. Since that time Penthrox has been approved for use in 10 European countries including the UK and France (as at the 6 March 2018), with another 16 countries imminent. Undoubtedly, bullishness has crept into the stock price as analysts start to forecast significant sales of Penthrox in Europe. However, in the short-term it is tricky to forecast exactly when the initial launch will be and any following sales. So we believe sales in FY18 and FY19 will be lumpy. We prefer to take a long-term view based on the following:
|Indication||Peak sales pa|
|Breakthrough pain||US $6bn+|
|Minor surgical procedures, e.g dentistry||US $2.3bn+|
|Home use||US $3bn+|
Source: ‘Presentation history’, MVP, ASX website. *Based on company estimates including assumptions around pricing, market penetration and reimbursement levels.
The medical industry is conservative in changing prescribing habits so we assume a ‘ramped up’ opportunity is at least 5 years away. Conservatively assuming a 20% probability of successful US market entry which the company expects in 2020, we calculate that MDI will trade at a 74% discount to the S&P/ASX Small Industrials Index on that time frame. The company also has a suite of ventilation products as well as novel technology developed in conjunction with the CSIRO that could allow it to manufacture other generic compounds at low cost using a continuous flow process. We currently ascribe little value to these assets, it all depends on Penthrox. However society’s need for this proven product is immense.
While we’re excited about the prospects of MDI, they depend on some key developments, which only time will tell if they play out the way we expect.
1 ‘America’s opioid epidemic is driven by supply’, The Economist, 29 January 2018.
This publication is provided by nabInvest Capital Partners Pty Limited (ABN 44 106 427 472, AFSL 308953) (‘NCP’) as service provider of Antares Capital Partners Limited (ABN 85 066 081 114, AFSL 234483) (‘ACP’), responsible entity of the Fairview Equity Partners Emerging Companies Fund (ARSN 133 197 501, APIR code ANT0002AU, ASX mFund code FEP01) (‘Fund’). ACP has appointed Fairview Equity Partners Pty Limited (‘Fairview’) as investment manager of the Fund. Before making any decision about investment in the Fund, you should consider the product disclosure statement (‘PDS’) of the Fund available from nabam.com.au/fepecf or by calling 1300 738 355.
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