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

We’re coming off a great month, says Scott Power (who we should note spoke to Stockhead on Thursday, before Friday’s sell-off).

“If we look at August, this was one of the strongest returns in about 30 years,” he said.

“The largest healthcare stocks didn’t contribute too much to that, but plenty of mid- to small caps did.”

Smaller healthcare stocks have been increasingly driven by catalysts, Power says.

Markets have always responded to news flow, of course, but small life sciences stocks have been hyper-responsive to announcements lately because of short-term traders, he said.

“There’s more money looking for news. There’a greater proportion of retail investors and they’ve got an appetite for it,” Power said.

For example, Opyl shares more than doubled on Thursday, going from 13c to over 33c, after the Melbourne-based clinical trial support company (ASX:OPL) said its clinical trial prediction tool had completed a major proof-of-concept by analysing which COVID-19 vaccines and treatments had the best possibility of being successful.

These 100 per cent swings have been increasingly common, he said.

“It’s a theme we’ve been pushing for a while.”

Biomedical Translation Bridge money

Another big theme for the week has been grant money.

This week MTPConnect, the nonprofit funded by the Federal Government’s Medical Research Future Fund, gave out millions in grants under its Biomedical Translation Bridge program.

Dimerix (ASX:DXB) received $1 million to support inclusion of its clinical drug candidate DMX-200 in a global study evaluating treatments for acute respiratory distress syndrome (ARDS) related to COVID-19.

Pharmaxis (ASX:PXS) was awarded $1 million to advance its work developing a treatment for Duchenne muscular dystrophy.

Starpharma (ASX:SPL) was given $1 million to develop its COVID-19 antiviral nasal spray.

Bard1 Life Sciences (ASX:BD1) got $372,654 to develop and commercialise liquid biopsy tests to detect and monitor breast cancer.

LBT Innovations (ASX:LBT) was awarded $750,000 to help develop its technology aimed at improving antibiotic susceptibility testing. Millions of such tests are undertaken in Australia each year, helping determine the course of antibiotic treatment for patients, LBT says,

Another eight projects by non-listed companies and organisations were also given grant money.

“What we’ve sort of hearing is the government is pretty keen to get money into the hands of companies that can generate money or employment,” Power said.

“Many grants have been put on the front burner.”

ScoPo’s powerplays

Power remains a fan of Micro-X (ASX:MX1), which is developing a mobile system for stroke detection in ambulances, a mobile X-ray unit for military hospitals and other imaging products.

Morgans has the company rated a ‘speculative buy’ with a price target of 32c.

Starpharma is not exactly a small-cap, with a market capitalisation of around $633 million, but it could benefit from its COVID-19 research, Power said.

The ASX300 component announced on Tuesday it had created a version of Gilead Science’s COVID-19 treatment remdesivir that could be administered by subcutaneous injection, rather than intravenous infusion.

Power thought Opyl‘s announcement about its clinical trial prediction platform was very interesting.

“If you look at the announcement there’s some very real substance behind what they’re trying to do,” he said.

Like many who pay attention to the Australian biotech sector, Power is closely watching Mesoblast (ASX:MSB) as a decision date for its graft-versus-host treatment looms. The US FDA must rule on the treatment by September 30.

“As a result, the share price is going to be very volatile.”

Lastly, Power thinks sleep apnea device maker ResMed (ASX:RMD) (also hardly a small-cap, with a market cap of $8.9 billion) can bounce back from its recent share slump following a disappointing earnings report.

“They’ve had multiple quarters of earnings growth,” he said. “Their last quarter was very good, but they said they can’t quite keep growing at this rate.”

Morgans has a price target of $29.33 on the company.

At Stockhead, we tell it like it is. While Dimerix and Opyl are Stockhead advertisers, they did not sponsor this article.