Scopo’s health powerplays: Markets are getting back to normal
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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.
Victoria has gone backwards with its COVID-19 lockdowns and suburban barricades, but the states are back to fighting with the feds, investors are still frolicking on the ASX, and the sound of quiet chest beating is returning among companies.
It’s all looking very… normal, says Scott Power.
“People say things are still uncertain, but the news this week feels like things are getting back to more normal levels,” he says.
“Economies are opening up, business is getting back to normal and even during the last dip the Australian market only fell 2.5 per cent. The market feels like it just wants to keep going up.”
Power is pointing to the lack of tax loss selling before June 30 and the increasing numbers of positive updates from companies which had battened down the hatches in March.
For example, Monash IVF (ASX:MVF) said it had strong cycle numbers for women undergoing fertility treatments in the last two weeks of May and all of June, and the outlook for the next quarter “looks pretty good”.
It gave profit guidance of $14m for the year and will pay the deferred interim dividend in October, giving the company a 3.5 per cent yield on that metric alone.
“It’s the same for Virtus (ASX:VRT), the outlook is also looking pretty reasonable. When people are returning to elective surgeries and health treatments, it feels like a return to normal,” he said.
And there is still support for capital raisins which are still being announced.
“Mach7 (ASX:M7T) completed its raise yesterday which was well supported by institutions and existing shareholders,” Power said.
“The issue price was 68c and it bounced up to $1 this week, proving how good some of these capital raisings have been for investor returns.”
The market is still vaccine-sensitive though.
On Wednesday night overseas markets bounced after Pfizer and BionNTech said their PFE/BNTX vaccine, based on a technology called messenger RNA and similar to the design of Moderna’s leading candidate, showed promise in early human trials.
There are 178 COVID-19 vaccines candidates in various stages of development, with at least 14 currently in human trials.
The Pfizer vaccine was shown to generate antibodies that prevented the virus from functioning, but patients did need a second injection and half had low-level adverse effects.
“If these studies prove successful, those two companies say they could produce up to 100 million doses by the end of 2020 and 1.2 billion doses by the end of 2021 for global distribution,” Power said.
The other bit of international news was the US buying up the global supply for the next three months of antiviral drug remdesivir, but early trials suggest it only works in advanced COVID-19 cases and isn’t an all-round treatment.
Instead, CSL’s (ASX:CSL) plasma therapy could instead be the treatment that might deserve that kind of rush.
“While the world waits for the development of an effective vaccine against COVID-19, therapeutics from antivirals and antibody cocktails focused on specific symptoms can act as a ‘bridge’ such as convalescent plasma from recovered patients,” Power said.
Plasma giants CSL and Takeda, and an alliance of plasma specialists known as the CoVIg-19 Plasma Alliance, are working on a hyperimmune globulin, a purified version of this treatment, for COVID-19 infection.
“A hyperimmune treatment could come faster than a vaccine as the number of convalescent patients is increasing exponentially during this pandemic,” Power said.
“So it then boils down to getting convalescent patients to donate plasma and use that plasma for the production of the hyperimmune treatment.”
But they’ve got to get the plasma donation soon after recovery as plasma antibodies dissipate quickly. The alliance anticipates starting a clinical study in COVID-19 adults in the near term, which would lay the groundwork for a regulatory submission, and is targeting a drug being available before the end of 2020.
The movers for the week were of course Parkinson’s play Alterity Therapeutics (ASX:ATH), which put out a benign announcement about a meeting with the US Food and Drug Administration (FDA) but shot up 2300 per cent on Wednesday.
“It came back to earth on Thursday. But you get these companies that say something, and it’s involved in Parkinson’s which is an interesting space, and for some reason a group of investors have given it a mighty shove which then brings day traders in,” Power said.
It was followed on Thursday by DorsaVi (ASX:DVL), which rose 523 per cent after saying it had signed a deal with insurance company QBE.
Power’s telehealth theme was in play this week as ResApp (ASX:RAP) — a company he says is right in the sweet spot for all things tele — launched an at-home sleep apnoea app that will record a person while they’re sleeping and tell them, the next morning, whether they are a sufferer or not.
It also fully signed on with Coviu and was launched on the Phenix telehealth app.
Telix Pharmaceuticals (ASX:TLX) received “breakthrough therapy status” from the FDA for its renal cancer imaging device.
“It’s an accelerated process through the FDA which helps streamline the review process for approval. It’s for products which are a big improvement on the current standard of care,” Power said.
The only slightly negative news was with private hospital Ramsay Healthcare (ASX:RHC) saying its deal with the WA government to make private hospital space available for COVID-19 patients was over. The stock still went up though, as investors piled back into healthcare stocks.
Power is watching the sentiment in pre-quarterly announcements and quarterly reports as good news is being rewarded handsomely.
“For multi-baggers like DorsaVi and Alterity you need small market caps in companies that are doing something interesting and which have a tight shareholder base,” Power said.
“Ones that fit that profile include Opyl (ASX:OPL), which told the market it’s expecting a positive cashflow quarter for the first time and has an interesting story in the digital social media space. It has the potential to move high fast.
“Impedimed (ASX:IPD) looks like it wants to go higher on the back of the release of their metadata analysis, which is a series of research pieces that back their story on lymphedema.
“And Volpara (ASX:VHT) said this quarter they’re looking for a positive result after reeling in strong cash receipts and successfully winning a state-based screening program due to start shortly. They could potentially move fast.”
Power says European regulatory guidance is the next milestone for increasingly popular stock Antisense (ASX:ANP), which is treating Duchenne’s muscular dystrophy. That will allow it to start the next clinical trial, which will potentially be the last before formal drug approval.
And portable xray machine maker Micro-X (ASX:MX1) is hovering around all time lows but the next milestone is FDA approval for a military rover xray, which should come in the next two and a half months.
“Orders for the civilian Nano machine will materialise into sales in the coming quarters but what will move the needle is when they get the clearance from the FDA for their Rover, a more rugged military application of the portable xray machine,” he said.
“The FDA submission turnaround time is usually 90 days and they submitted about three weeks ago. That’ll change things as they’ve said the US defence force has indicated early orders once that approval has been received.”
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