ScoPo’s health powerplays: How to invest in COVID-19
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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.
There are three ways to invest directly in COVID-19: vaccines, treatments, or diagnostics.
Vaccines still get all the headlines but treatments are likely to be a way out and diagnostics will keep us there, says Scott Power.
“I think vaccines are going to take some time to develop and then I think the trick with vaccines is to try and scale it up and get it across the population,” he says.
“Even if we had a vaccine by Christmas, to actually scale that up and get it across the population you’re probably still looking at another 12-18 months, so you’re a couple of years away in terms of having some impact.
“A treatment will be much quicker and easier to scale up.”
A possible vaccine by Pfizer and German biotech BioNTech grabbed the headlines as they started delivering doses to the US ahead of a clinical trial.
And the big news in Australia was CSL’s (ASX:CSL) experimental hyperimmune immunoglobulin therapy treatment, for which it’s collecting plasma from people who have recovered from COVID-19.
The treatment will provide passive immunity instantly, in contrast to vaccines that provide active immunity which takes a bit longer.
“CSL makes a lot of sense in terms of ramping up the immune system, taking the plasma from those patients that have had COVID-19, extracting the antibodies and then pushing that back into some of the sicker COVID-19 patients. That has got some merit,” Power says.
From vaccines and treatments, the next step is diagnostics.
Atomo Diagnostics (ASX:AT1) has a rapid test for COVID-19 — hence why it was able to successfully get an IPO away in April.
“I think one thing we can be sure of is this virus is going to be here for a couple of years and we’re going to have to keep testing. The Atomo system is proven and they’ve adapted it to COVID-19,” Power says.
“And on Thursday they announced another 422,000 sales to French diagnostics company, NG Biotech.”
What’s out are, counterintuitively, companies which haven’t raised money now we’re entering the seasonally slow May-June end of financial year period.
“Companies that have not raised money are probably looking a little vulnerable. In a period of weakness, what’s out are companies with stretched balance sheets,” Power says.
Most companies that needed to in the healthcare sector have raised money, but none of the aged care operators have. With a Royal Commission preparing, bar any further delays, to report in November, that could be a risk.
Power says this year investors need to be “light on their toes”.
“You’re not going to get massive runs in share prices where something is really popular, now it’s more going to be a gyration in share price,” he says.
“It’s worth reminding investors to sell into strength and cut losses if milestones aren’t hit.”
What’s in is, still, the tenacious telehealth sector although it’s still hanging on by its teeth.
Now we’re through the mad ramp up that occurred in March and the Medicare rebate rejig, the sector is still looking attractive as doctors and patients find it easier to organise a phone call than trek all the way to the clinic, Power says.
“I think most GPs would say they still need a fair degree of face-to-face, but increasingly it’s becoming a much more efficient way to deliver services,” he says.
However, the improved Medicare rebates are still not as good as those for a face-to-face consult.
Nanosonics has a high-level disinfection device for ultrasound probes, with about 24,000 installs around the world.
It’s a technology that has broader application, and everyone is waiting for a clue as to the next application, Power says.
The news is about six months overdue, as Nanosonics has been waiting on regulatory sign-off, which has been held up by the pandemic. Power expects the news to drop anytime in the next three months.
Volpara is the smallcap, a breast density imaging service that is in use around the world but, critically, in the US.
“Anytime I see or hear of technology or a company coming out of New Zealand my ears prick up,” Power says. “I don’t know whether it’s the research there or a more international outlook but these companies usually have some interesting stuff behind them.
“Volpara’s original technology has its origins in Oxford University but the CEO, Ralph Highnam, moved his family to Wellington.
“The sales side of the business is in the US and is doing very well, and it raised money recently to buy key acquisitions. It’s been one of our key picks for a long time.”
The company raised $28m and opened a $7m offer to retail shareholders last week, as it’s got its eye on two possible acquisitions.
“If either of those comes to pass that will be amazing,” Power says.