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Here’s why analysts rate this ASX biotech share a ‘buy’

The Medical Developments International Ltd (ASX: MVP) share price is up 3.65% today, but Medical Developments shares have not been spared by the current market volatility, plunging more than 50% since mid-February.  

Here’s why analysts rate this biotech stock a great value buy.

What does Medical Developments do?

Medical Developments specialises in emergency pain relief and respiratory products used in various medical settings. The company operates in 3 segments including pharmaceuticals, medical equipment and veterinary equipment.

The pharmaceuticals segment produces Medical Developments’ flagship Penthrox “green whistle” product. Penthrox is a fast-acting, non-opioid analgesic that is used for patients with trauma or for surgical procedures. The product is approved for sale in over 40 other countries around the world, including the UK, Europe and is pending FDA approval in the lucrative US market.

How has the pandemic impacted Medical Developments?

Last month, Medical Developments released an update informing the market that it believes the negative impact of the COVID-19 pandemic on the company will be limited.

In the update, Medical Developments advised investors that despite some raw materials being imported from China, the company had sufficient stock to maintain production throughout the year. Medical Developments maintained that the company has not experienced a decline in demand for its pharmaceutical or medical products.

Medical Developments did inform the market that sales of veterinary equipment to China had been negatively impacted. Veterinary equipment contributed approximately 3% to Medical Developments FY19 revenue.

Why are analysts bullish on Medical Developments shares?

Recently, equity analysts from research firm Philip Capital released a report on Medical Developments. In the report, analysts cited the company’s flagship Penthrox product will experience reduced demand due to populations being in lockdown and sport and leisure activities cancelled. As a result, analysts downgraded their forecast for Penthrox sales by 35% for FY20. However, in light of the coronavirus, analysts forecast that Medical Developments will see an increase in sales of its respiratory products.  

Despite revising sales for Medical Developments, analysts maintained a ‘buy’ rating on the company. Analysts cited a number of catalysts and see value in the Medical Developments share price, which has fallen substantially in the past 4 months.

Over the next 6 to 12 months, analysts see progress in Medical Developments receiving regulatory approvals for its products and launching in more countries. In addition, the company has a possible licensing deal for its new ‘continuous flow’ drug manufacturing technology. Respiratory sales for Medical Developments were also upgraded, as asthma patients may upgrade their masks and spacer following the COVID-19 pandemic.

Analysts also placed a $7.80 target on the Medical Developments share price over the next 12 months.  

Should you buy?

Medical Developments serves as an example of the great value and opportunity investors can expect in the recent market turmoil.

Although a research report does contain quality information, it would be prudent for investors to exercise caution before making any investment decision.

I think a prudent strategy would be to keep the Medical Developments share price on a watchlist and wait for share price consolidation.  

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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.