Monday, August 10, 2020

Why this underperforming ASX healthcare company could still light up the market in 2020 and beyond

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Like many companies, junior ASX healthcare company Medical Developments International Limited (ASX: MVP) has had a volatile 2020.

After soaring to an all-time high of $11.78 in February, the Medical Developments share price was savaged in the sell-off in March, losing almost two-thirds of its value in the space of a single month. And despite climbing back up to closet at $6.52 this afternoon, those all-time high prices seem like a distant memory now.

So, what happened?

Back in March – possibly in an effort to halt its plummeting share price – Medical Developments’ management released a statement to the market trying to reassure investors that the damage to its business from the COVID-19 pandemic was limited. It claimed to have plenty of stock on hand to fulfil orders throughout 2020, and demand for its pharmaceutical products had remained robust.

But the market reaction in the intervening months has been lukewarm. There was a sharp recovery in April, with the share price quickly surging back up over $8. But the company has consistently failed to capture the same level of investor interest as it did earlier in the year, and over the last month, the MVP share price has slid nearly 15% lower.

What does Medical Developments International do?

Medical Developments International is a pharmaceutical and medical device company which specialises in pain management as well as treatments for asthma and chronic obstructive pulmonary disease. Its flagship product is a non-opioid analgesic named Penthrox.

2020 was shaping up to be another bumper year of expansive growth for the company, however the pandemic scuppered many of those plans. Despite its claims that COVID-19 had not had an adverse impact on existing demand for its products, Medical Developments did note that clinical trials of its products underway in geographies like China, the UK and South Korea were on provisional hold due to the pandemic.

For shareholders betting on Medical Developments gaining quick access to these potentially lucrative markets, this news may have been enough for them to jump ship.

MVP has still managed to gain a foothold in other markets, however. In April and May alone, Penthrox was approved for sale in Thailand, the Netherlands, Bosnia & Herzegovina, and Hungary. And although none of these regions carry the same weight as China or the UK, these approvals still show there is positive momentum behind the Penthrox brand.

Should you invest in Medical Developments International?

This has been a difficult year for many ASX healthcare companies. Market leaders like Cochlear Limited (ASX: COH) and CSL Limited (ASX: CSL), the former jewels of many investors’ portfolios, have lost a significant amount of their lustre. And the growth trajectories of many exciting emerging players like Polynovo Limited (ASX: PNV) and Opthea Limited (ASX: OPT) have stalled significantly.

However, this correction in the market can offer great buying opportunities. In the case of MVP, investors can look to the recent approval in Thailand as evidence that it can gain a foothold in the Asian region. The company has stated that it hopes this can be “a catalyst for a number of other country approvals in Asia.”

If so, it means that the expansion the market had priced in back in February hasn’t disappeared completely, it’s just been delayed. This means that right now, the Medical Developments share price could offer a great buying opportunity for new investors with the right risk appetite and a long-term outlook.

More reading

Rhys Brock owns shares of Cochlear Ltd. and Medical Developments International Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd., CSL Ltd., Medical Developments International Limited, and POLYNOVO FPO. The Motley Fool Australia has recommended Cochlear Ltd. and Medical Developments International Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why this underperforming ASX healthcare company could still light up the market in 2020 and beyond appeared first on Motley Fool Australia.


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