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

Clinical trials are coming back online after a hiatus caused by COVID-19.

Neuren Pharmaceuticals’ (ASX:NEU) phase three study for its treatment trofinetide against Rett syndrome, led by US partner ACADIA, is recruiting again.

“Now we’re starting to see examples of clinical trials restart, which is important for companies that have only one or two trials running,” Scott Power said.

Cynata (ASX:CYP) is another one, they are getting ready to start their stem cell and osteoarthritis trial and expect that to start soon.”

With the cost of trials running into the tens of thousands and the total process of getting a drug from wow! to go costing into the millions, delays are a costly problem for a cash-strapped small biotech.

“The expense of delays isn’t the only problem. Some of these delays are potentially going to impact the statistical significance of the results or the trial outcomes. If patients couldn’t get to hospital to be treated or measured, that can have a material impact on the outcome,” Power said.

Around the time of the worst of the panic, 527 clinical trials in Australia and New Zealand were suspended, terminated, withdrawn or moved to ‘not recruiting’ status in March and April. Globally, that figure was 10,174 of the clinical trials registered with the US government site ClinicalTrials.com.

Power has noticed a shift in sentiment towards stem cell companies: people like them again, but only if they’re working on something COVID-19-related.

These biotechs can thank Mesoblast’s (ASX:MSB) very publicised trial of its stem cell trial for acute respiratory distress syndrome (ARDS) in COVID-19 patients which catapulted that stock up past $4.

“Mesoblast is pregnant with a lot of news over the next 12 months but Cynata also has a series of trials on the table,” Power said.

“It is setting a clinical trial for ARDS, there’s the osteoarthritis one and a graft- versus-host-disease phase two trial due to finish by the end of the year in partnership with Fuji.”

Other stem cell plays on the ASX are Regeneus (ASX:RGS) and Orthocell (ASX:OCC).

COVID-19 was back on the agenda this week after a flair up in Beijing and in some US states, and World Health Organisation (WHO) trial results suggested an old steroid, dexamethasone, reduced death by a third for people on ventilators, and by one fifth for those on oxygen.

“In the US they haven’t seen the end of the first wave yet so it’s premature to talk about second waves. It’s concerning in certain states that the rate of transmission is rising and we really haven’t seen the impact from the demonstrations yet,” Power said.

“That happens in 20 days time so that’s a watch and wait scenario.”

Markets are still reacting strongly to COVID-19 news — US investors sold out a week ago as higher case numbers in Arizona, Texas, South Carolina, North Carolina, Oregon and Florida shocked traders out of their forward-looking optimism.

“Markets are still volatile. They move up if investors sense that a vaccine, like this week’s news of CureVac’s human trial approval or AstraZeneca’s one-year protection shot, or treatment is getting closer, or if the US Federal Reserve Bank will do some more spending, but will move down on fears of increasing outbreaks,” Power said.

“What we’re still seeing is investors still looking 12-18 months ahead and thinking everything will be OK. That and with interest rates at zero, it’s better to be in than out.”

 

What’s up what’s down

It was less what’s up and down this week and more what’s up, and what’s OK.

Healius (ASX:HLS) finally sold its medical centre business, for $500m to private equity fund BGH Capital. The deal refocuses Healius on its pathology, imaging and day hospital divisions and, most importantly, could hold further takeover bids at bay.

However, “while a concurrent trading update indicates a recovery across the business, we view the transition to a specialist diagnostic and day hospital operator is far from complete, with risk around GP referrals, work remaining to optimise the cost base and uncertain growth initiatives to drive market share gains and earnings growth,” Power said.

Cough monitor Resapp (ASX:RAP) has done a deal with telehealth company Phenix Health, following a similar deal by Respiri (ASX:RSH) in April.

The software licensing agreement for its ResAppDX-EU cough diagnostic test was first announced in March with a price of $5-10 per test. CEO Tony Keating is expecting first commercial revenues in the coming months through the agreements with Phenix Health and Coviu.

And Proteomics International (ASX:PIQ) had “highly significant results” from a pivotal study on the predictive power of PromarkerD, Power said.

“The company has a test for predicting diabetic kidney disease. It’s always known that the PromarkerD test has strong performance statistics, but to replicate these in a globally recognised clinical cohort is exciting,” Power said.

The key result was that patients predicted by PromarkerD to be at high-risk of chronic kidney disease were 13.5 times more likely than the low-risk group to develop the disease.

 

Hot picks

The constant slew of capital raisings hasn’t slowed and this means a few companies might see a share price bounce this coming week, now the shadow of raising money isn’t hanging over them.

Power was involved in Mach7’s (ASX:M7T) $23.4m raise last week and this week it was Medlab Clinical’s (ASX:MDC) turn on the catwalk.

The pot stock raised $5.4m in a private placement to fund its NanaBis cancer pain marijuana drug through phase three trials. Results for a phase two depression treatment trial are due in July.

Noxopharm (ASX:NOX) raised $7.919m.