ScoPo's Health Powerplays: Biotechs hitting it out of the park

A number of companies got a nice share price boost after positive announcements this week
Starpharma and Kazia Therapeutics launched capital raisings, showing biotechs are having no trouble raising money
There could be turbulence in October but the outlook is positive past the US election

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 for the week

It’s been a phenomenal week for quite a few ASX biotech companies, Scott Power tells Stockhead.

“There’s a number of companies who have really hit the ball out of the park, as far as having positive announcements and the market responding strongly,” he says.

Power spoke to Stockhead, we should note, on Thursday — before the Food and Drug Administration handed Mesoblast (ASX:MSB) a major setback on Friday, asking for another clinical trial before approving its stem cell treatment for remestemcel-L (Ryoncil) for steroid-refractory acute graft-versus-host disease in children.

Still, for a number of other companies it was a pretty good week.

Antisense Therapeutics (ASX:ANP) shares soared after the Melbourne biotech company announced its drug candidate had been designated in the US as a possible treatment for a rare pediatric disease.

Under a law designed to incentivise companies into researching treatments for such ailments, that means if Antisense’s drug candidate is approved, the company would likely receive a “golden ticket” of sorts it could sell to a major pharmaceutical company for millions of dollars.

“They’re looking very interesting, some real upside,” Power said of Antisense. “They’ve been delivering in spades so that’s great.”

Micro-X (ASX:MX1) meanwhile announced the first order for its second product, a mobile medical X-ray imager called the Rover. The $1.4m contract was facilitated by the World Health Organisation to a number of Pacific island nations.

Power called it a “very good announcement” and thinks there’s further upside for the company with a possible grant from the Australian Stroke Alliance.

Brisbane-based medical software company Impedimed (ASX:IPD) rebounded a bit from a recent share price slump after announcing that AstraZeneca would use its SOZO digital health platform to track patient fluid volumes in an upcoming pharmaceutical clinical trial focused on heart failure and kidney disease.

The contract is expected to generate more than $2m in revenue over the next 18 months, Impedimed said.

4DMedical (ASX:4DX) was up after announcing that its lung ventilation analysis software had been approved for sale in Australia, “which was terrific,” Power said.

Atomo Diagnostics (ASX:AT1) said it would expand a partnership with Access Bio, giving it the rights to market Access’ COVID-19 rapid antigen test in Australia, New Zealand and India under an Atomo brand.

“They’re continuing to do well in terms of getting their rapid tests for COVID out there,” Power remarked.

Rhythm Biosciences (ASX:RHY) announced it had validated the final biomarkers for its ColoSTAT test for colorectal cancer, which it hopes will replace the current faecal tests.

The young company has been developing the tests for several years.

“They’ve reached the point where there is light at the end of the table,” Power said. Rhythm is also well-capitalised after a $6m capital raising.

“That’s a pretty interesting play,” he said.

Neuren Pharmaceuticals (ASX:NEU) has submitted its drug candidate NNZ-2591 to the European Union for orphan drug designation to treat three serious neurological disorders. The drug has already received that status in the United States.

More capital raisings

Nanoscale polymer company Starpharma (ASX:SPL) completed a $45m placement, while Kazia Therapeutics (ASX:KZA) launched a $25m capital raising to fund a pivotal study of its drug candidate paxalisib to treat the brain cancer glioblastoma.

Kazia chairman Iain Ross said the company was at an “inflection point for Kazia,” and expected the study would place paxalisib “on a direct path toward commercialisation”.

“That appetite for capital is still there,” Power said. “There’s plenty of interest out there.”

October uncertainty

While it’s been a strong week, Power expects turbulence ahead.

“We need to sort of make the point that October is traditionally a volatile month, and certainly going into the US elections, that volatility is going to be increased,” he said.

A win by Donald Trump would be a positive for the market, he said, while the market would react negatively if Joe Biden wins and the Democrats gain control of the Senate, increasing the likelihood of higher taxes.

But Power is hoping America will avoid what happened at the turn of the century, in the 2000 US presidential election, where it took a Supreme Court decision to stop a recount in Florida and clear George Bush as the victor.

“I think the worst would be if it’s very close and there’s no clear-cut outcome,” Power said. “The market won’t like that uncertainty. What the market will be looking for is some kind of certainty post-election.”

But looking past the election, Power is still optimistic about the future in the medium term.

“I think economies are starting to open up. There is more confidence about the vaccine,” Power said.

“So I think once the election is out of the way, and providing there’s not that imbalance — that logjam, the market will either be stable or move ahead.”

ScoPo’s powerplays

Its shares haven’t moved much lately, but Power remains keen on Volpara Health Technologies (ASX:VHT) — also his pick for the previous two weeks.

The Kiwi company makes software that can detect if a woman has dense breasts and a mammogram would be less accurate. The US Food and Drug Administration is considering requiring that women with dense breasts be told of such when they get a mammogram.

With lockdowns ending, Power is also bullish on the IVF sector. The two listed IVF plays are Virtus Health (ASX:VRT) and Monash IVF Group (ASX:MVF).

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.