This healthcare share is ending the week deep in the red…
The post Why the Medical Developments International (ASX:MVP) share price is sinking 8% today appeared first on The Motley Fool Australia. –
The Medical Developments International Ltd (ASX: MVP) share price has come under pressure on Friday.
At the time of writing, the medical device company’s shares are down 8% to a 52-week low of $4.03.
This means the Medical Developments International share price is now down a very disappointing 40% in 2021.
Why is the Medical Developments International share price under pressure?
Investors have been selling down the Medical Developments International share price this morning following the release of an update on a balance sheet review.
According to the release, following its annual asset impairment review, the company expects to recognise a non-cash charge of $7.5 million to $8.5 million after tax in FY 2021.
Management advised that this charge relates to its respiratory business, which has been adversely impacted in FY 2021 by the COVID-19 pandemic. This has moderated its growth outlook, resulting in an impairment of the associated intangible assets.
While this is disappointing, management advised that it remains convinced that its Flow technology will deliver long-term value beyond the manufacture of Penthrox. Though, it acknowledges that it has failed to unlock this value at this point. Nevertheless, it will continue to pursue licensing and other opportunities for the technology.
One positive, though, is that the review strongly supported the carrying value of its key Penthrox related assets.
What impact will this have?
The release explains that based on its preliminary unaudited accounts, the company was expecting to post a loss after tax of $4.2 million to $5.2 million pre-impairment.
As a result, this will increase its loss after tax to a range of $11.7 million to $13.7 million for the 12 months.
Medical Developments International’s CEO, Brent MacGregor, remains positive on the future. He commented: “Since taking the role of CEO in November 2020, we have undertaken an extensive review of all aspects of the business to lay the foundation for future growth. Our European Penthrox market access strategy is now in place alongside a range of structural changes to support our growth aspirations. I am enthused about the opportunity ahead, and our ability to deliver on this opportunity.”
This sentiment was echoed by the company’s Chair, Gordon Naylor. He said: “I continue to be pleased with our progress. We are only a few months into the turnaround of the Company and our evaluation of the business is largely complete.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Medical Developments International Limited. The Motley Fool Australia owns shares of and has recommended Medical Developments International Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.