19 September 2015
by Jemima White
Blowing the whistle: how the CSIRO's gamble paid off
Johnathan Thurston gets relief from the 'green whistle'.
The green whistle, an emergency pain relief device developed in Australia and used by surf clubs, ambulances, defence forces and sporting clubs for 30 years, is heading to Europe.
The CSIRO-developed Penthrox green whistle is manufactured and licensed by ASX-listed Medical Developments International, which this week signed a deal to distribute the product in 39 European countries including France, Germany, Italy and Spain with Mundipharma.
Chief executive John Sharman says the deal is the first step in getting into major global markets.
"The US now is an absolute priority for us, and is considered by ever westerner as the holy grail," he said, adding that the company was seeking regulatory approval in the US which he anticipated would occur within 18 to 36 months.
Despite the ups and downs associated with listed biotech companies, the green whistle looks set to be among the CSIRO's more successful recent partnerships with business.
The CSIRO's involvement predates the company's ASX listing, but its breakthrough manufacturing technology was first mooted five years ago, just weeks after Mr Sharman had started as chief executive.
Mr Sharman said he recognised the potential of the new manufacturing method, but couldn't fund it without more scientific testing. So the CSIRO went back and proved up its theory.
"It's an interesting conundrum to have. We see a lot of opportunities but our funding only stretches so far. If we can accomplish something that could be a game changer for this company - the biotech sector is small and if they don't have the cash to fund us to do that project - then we do back ourselves and run with it," says Dr Paul Savage, CSIRO's program director of biomedical manufacturing.
"In this particular case we were convinced it was going to be a winner."
Shares in the company closed up 20 per cent this week at $3, after it told the market it had sealed the European distribution deal.
"People never believe it until it's done. The history of medical developments is it has had a longer term history of promising and missing," says Sharman, reflecting when he started at the company five years ago the shares were trading at about 25 cents.
Mr Sharman said the intellectual property was in the manufacturing process, developed by the CSIRO, though he declined to give details beyond the fact it was a liquid and didn't use the traditional method of batch processing.
He said the company had also recently received approval to build another manufacturing plant in Melbourne's Scorseby, which would allow it to meet demand and double its manufacturing staff, which currently are about 50 full time employees and 25 part timers, when the plant is up and running.
Under the distribution deal, Medical Developments will receive upfront and milestone payments of up to $US54.5 million, subject to approvals and sales targets. It will also generate revenue from selling the product to its new partner, and royalties based on net sales. Last year, the company's revenues rose 24 per cent to $11.6 million, and generated at net profit after tax of $1.5 million. Penthrox sales accounted for $7.1 million, and represented a 32 per cent increase on the previous year.
Mr Sharman said the company had invested nearly $10 million that it had generated through profits and retained earnings in developing the process.
Penthrox is already approved and is sold in New Zealand, South Africa, the UK, the United Arab Emirates, Qatar, Moldova and Kazakhstan and is awaiting registration in Israel, Singapore, Mexico, Malaysia, Iran and Iraq.
Its major shareholders include investment banker David Williams, who owns 40 per cent, and Challenger-backed NovaPort's micro-cap fund.