Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.

 

Themes of the week

Earnings season is in full swing, and there have been some hits and misses – but mostly hits, Scott Power says.

“This reporting season has been pretty kind to the health care and life sciences space,” he told Stockhead.

But ultrasound probe sterilisation company Nanosonics, which Power had pegged as a potential miss last week, indeed fell short, announcing that its next-generation disinfection device would be delayed, in part because of the impact of COVID-19 on project milestones.

“Commercialisation of the new technology is no longer expected to be in FY21 but will likely be in FY22, with the ultimate launch timing continuing to be dependent on the necessary technical milestones being met as well as the timing of individual market regulatory approvals,” Nanosonics said.

Nanosonics (ASX:NAN) shares fell from almost $7 to just above $6 on the news.

“We think it’s a really good entry point,” Power says. “We’re happy to use this weakness as a buying opportunity.

Nanosonics is a high-margin business with a unique product that made over $100m in revenue in FY2020, Power said.

Monash IVF (ASX:MVF), meanwhile, got a bump after reporting its full-year adjusted net profit after tax was $14.4m, beating the $14m guidance provided on June 29.

“That went well for us,” with the share price moving from 58 to 62c, Power said.

“We’re happy with this, we think the cycle market will continue to be strong for the next couple of months.”

Monash appears to be benefiting from pent-up demand following the recommencement of IVF services in Australia.

Also this week, medical imaging software company Mach7 Technologies (ASX:M7T) announced its full-year revenue was up 102 per cent to $18.9m, with its net profit after tax up 102 per cent to $200,000.

Power called those a “really solid set of numbers” following its strategic acquisition of rival company Client Outlook. “Their pipeline of new opportunities is looking very strong,” he said.

 

What’s up next

Power is watching Starpharma (ASX:SPL), which has jumped on the COVID-19 treatment bandwagon with a nasal spray it is testing against SARS-CoV-2.

Starpharma shares went from about $1 last week to over $1.40 this week.

“That’s been a terrific performer,” Power said.

Brain cancer research company Kazia Therapeutics (ASX:KZA) meanwhile has a “had a couple of pretty good announcements,” including its treatment for malignant gliomas being given orphan drug designation in the US.

“Their share price has done really well,” Power notes. It’s more than doubled since early August.

Power is watching for catalysts for medical software technology company Impedimed (ASX:IPD), whose stock has been quiet as of late, and likes the look of Antisense Therapeutics (ANP:ASX), which recently requested orphan drug designation from the US Food and Drug Administration (FDA) for its potential gene treatment for Duchenne muscular dystrophy.

He’s also a fan of Micro-X (ASX:MX1), whose lightweight X-ray machine was recently approved by the FDA, and is looking for orders from the US military.

Morgans has the company rated as a speculative buy with a price target of 32c, nearly double its current price.

Elsewhere in the sector, Power sees Abbot Labs’ receiving emergency use authorisation from the FDA for its $5, 15-minute COVID-19 test as a negative for laboratory company Sonic Healthcare (ASX:SHL), which has been heavily involved in COVID-19 testing there.