MoneyTalks: Get your portfolio in rude health with these 3 ASX life science stocks
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MoneyTalks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Pac Partners equity analyst Michael Yassa.
Yassa’s industry background includes senior positions within retail pharmacy and co-funding a regional health service while practising as a pharmacist.
His passion for finance grew from early investments in industrial equities and later in the healthcare space.
He says while there has been a broad and widespread sell-off of non-profitable and pre-revenue life science stocks since November last year, it doesn’t reflect the underlying technological and regulatory development.
“The sell-off is more to do with the fact that these stocks are risky, given the current macro-economic trends with rising inflation, rising interest rates and the geopolitical situation with Ukraine,” he says.
“I think investors are more keen to get rid of what they perceive as ‘risky’ despite any underlying technology.”
Over the last few weeks, Yassa says there has been a decoupling of the S&P/ASX 200 Health Care (XHJ) index from the S&P/ASX Small Ordinaries (XSO) index.
“They tend to track each other quite closely but we’ve seen the life sciences stocks bounce back, which could be indicative of having hit the bottom.”
“With the current trends and the way the stock market is going, investors are looking for short term news flow options, or opportunities to trade in and out and I think NEU has the closest time horizon in terms of significant news flow,” Yassa explains.
“They have just submitted an NDA to have their drug and development approved by the FDA – the outcome of which we will know in six months.
“The share price has flatlined and gone horizontal in the last year while everything else has dropped off about 50, 60 or 70pc in the sector.
“The stock is quite well regarded, it has good prospects of succeeding and getting regulatory approval – if trofinetide (which is their drug) gets approval, then who’s to say that the share price won’t go through the roof.”
Back in May, RHY filed for Australian Register of Therapeutic Goods (ARTG) listing for its ColoSTAT test, the final step required to secure market access in Australia.
The ColoSTAT test is a simple blood test developed by Rhythm for the detection of colorectal cancer.
“There are a few other competing products out there, but they are significantly more expensive so from a public screening perspective, the test that RHY has developed is very attractive,” Yassa says.
While the stock is a little more sporadic and volatile, he says there is very good opportunity to trade in.
“They have just submitted the second piece of their regulatory filing so again, short term news flow, and there’s significant potential upside given the size of their addressable market.”
VHT has developed clinically validated AI powered software for personalised screening and early detection of breast cancer.
“The company has 40% of the market share in the US, which is the world leader in terms of the volume of mammograms taken and they have a full suite of AI covering the whole life cycle of the screening process – no one else has that sort of market coverage at the moment,” Yassa explains.
“They have also taken on new management and about two weeks ago signed their largest contract which sees Radnet implementing Volpara Analytics and Volpara Risk Pathways software across Radnet’s 350+ sites in the US.
“To pull that into their revenue base is quite a significant announcement and achievement for new management – so the business is now in a more commercial direction.”
Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.