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Whistling a happy tune for investors

May 2018

Fairview Equity Partners

About Fairview

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.


Medical developments

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:


  • Scourge The opioid-based painkiller abuse epidemic in the USA is escalating rapidly. Unfortunately a great proportion of this is sourced from prescription pain relief drugs that have found their way, through illicit channels, onto the streets. The Economist, in an excellent article in January 2018, suggested that the four-fold increase in total drug overdose deaths in the USA (to a staggering 64,000 people) between 1999 and 2016 was primarily caused by abundant supply.1 These drugs are more readily available than ever.
  • Possible solution Unlike the readily available opioids, Penthrox’s key differentiator is that it is not addictive; nor does it cause constipation or nausea, and it is much faster in relieving pain than morphine. The US Food and Drug Administration (FDA) has become very interested and a series of meetings were held between MDI and top level FDA executives in 2017. Whilst MDI has clinical data for 235,000 individual patients in 75 clinical trials, we would expect that FDA will demand further trials. This is due to the active ingredient in Penthrox. This ingredient was used as a general anaesthetic in surgical procedures until it was banned by the FDA in the 1970s due to side effects. However, it should be noted that a typical green whistle dose is 90 times lower than the anaesthetic doses 40 years ago.
  • Market analysis In recent presentations the company has estimated that the potential peak global Penthrox sales for acute trauma pain to be US$2billion. This seems to be the most logical first labelling claim to tick. However further potential indications include:


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.


Important Information

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 or by calling 1300 738 355.

NCP and ACP are members of the group of companies comprised National Australia Bank Limited (ABN 12 004 044 937, AFSL 230686), its related companies, associated entities and any officer, employee, agent, adviser or contractor therefore (‘NAB Group’). Any references to “we” include members of the NAB Group. An investment in any product or service referred to in this publication does not represent a deposit or liability of, and is not guaranteed by NAB or any other member of the NAB Group.

The information in this publication has been provided to us by Fairview, it comprises their opinion and judgment at the time of issue and are subject to change. We believe that the information herein is correct and reasonably held at the time of compilation. However, neither NCP nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy or accept any responsibility for errors or omissions in this publication. Where information contained herein includes information obtained from third parties, we believe to the best of our knowledge, necessary consents have been obtained.

Any reference in this publication to a specific company is for illustrative purposes only and should not be taken as a recommendation to buy, sell or hold securities or any other investment in that company. The Fund may not hold securities of, or any other investment in, any company mentioned in this publication before, at or after the time of publication.

Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market. Any projection or other forward looking statement in this publication is provided for information purposes only. Though reasonably formed, no representation is made as to the accuracy of any such projection or that it will be met. Actual events may vary materially.

This publication may constitute general advice. It has been prepared without taking account of your objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs.

This publication is directed to and prepared for Australian residents only.