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Is now the time to buy ASX biotech shares?

With coronavirus absolutely smashing global markets, investors and the public are turning to biotech companies for a solution. Currently, there is a global rush of medical trials to find a vaccine or medical product that could halt the coronavirus epidemic.

Although there may be no publicly-listed Australian companies on the frontier of a vaccine, the ASX biotech sector could get a boost from the positive sentiment.

So, with that in mind, here are 2 ASX biotech shares to watch for a potential momentum swing.

Mesoblast Limited (ASX: MSB)

Mesoblast is a world leader in developing off-the-shelf (allogeneic) regenerative medicines for inflammatory diseases. The company has used its cell therapy technology to establish a broad portfolio of commercial products and has a large pipeline of therapies in late-stage development and testing.

At the moment, there are clinical studies being conducted in China studying the use of stem cells in treating patients infected with the coronavirus. There has been extended research on how the transplantation of mesenchymal stem cells (MSC) could improve the outcome of coronavirus patients suffering from pneumonia.

Mesoblast has one of the world’s largest stem cell production facilities located in Singapore. In addition, the company owns a stem cell product called Remestemcel-L which could be trialled for the treatment of coronavirus.

Mesoblast reported its half-year report in late February which highlighted a 43% increase in revenue to US$19.2 million. Revenue growth was driven by the company’s licence for its flagship steroid-refractory acute graft versus host disease (Ryoncil) product in Japan.

This year could be transformational for Mesoblast with its first US Food and Drug Administration (FDA) product approval in sight. Mesoblast is in the final process of filing its biologics licence application for Ryoncil and requesting a priority FDA review. If approved, Ryoncil is set to be launched in the US later this year.

Medical Developments International Ltd (ASX: MVP)

Coronavirus is a respiratory illness, with symptoms ranging from a mild cough to pneumonia. Medical Developments is an Australian company that specialises in providing emergency pain relief and respiratory products.

Medical Developments’ emergency medical solutions are used in emergency departments of Australian hospitals, the Australian Ambulance Service, the Australian Defence Force, and various other medical settings.

Although Medical Developments does not have any products that could directly cure coronavirus, the company could see higher demand for its innovative products. It recently reported a 17% growth in global growth sales, which was driven by growth within its pharmaceutical and medical segments.

Medical Developments’ flagship product Penthrox is a fast-acting, non-opioid analgesic used for patients with trauma or for surgical procedures. The product has been used in Australia for more than 40 years, with more than 7 million units sold. Penthrox is also approved for sales in 40 other countries, including Europe and the UK, and is pending FDA approval in the lucrative US market.  

Should you buy?

Although there may not be any Australian biotech companies on the precipice of discovering a cure for coronavirus, the sector could come under immense interest.

I think a prudent strategy would be to keep a watchlist of ASX biotech shares and wait for positive price action before making an investment decision.

In addition to biotech shares, here are 5 other ASX shares you should add to your watchlist.

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Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Medical Developments International Limited. The Motley Fool Australia has recommended 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.

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