ScoPo’s health powerplays: The transition to greatest
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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.
Now investors are inured to bad COVID-19 news — for now at least — the news driving market volatility is around vaccines and therapeutics.
On Monday Moderna, a small, pre-revenue biotech in the US led global gains when it said eight people in a 105-patient phase-one trial for an experimental MRNA developed antibodies, the proteins that fight pathogens, two weeks after the second dose.
The study also found that 45 patients developed binding antibodies against the virus, so-called because they identify and bind to viruses but do not attack them, within two weeks of receiving the first dose.
Markets were buoyant for the rest of the week but Power says declines are equally possible if, or when, these types of announcements are followed up with failures.
That’s because drug making is a risky business and MRNA in particular is “very much at the pioneering stage”.
The clinical risk is high because MRNA is an untested method of making a vaccine. An optimal dose must be established first to balance protection with using as little vaccine as possible to limit safety issues and stretch out what will be limited supplies.
Add the fact that most drugs don’t make it past the second and third phase trials into the market, and you have a great catalyst for the market but not so great for Moderna shareholders if it doesn’t work.
“It’s interesting that the market is assuming there will be a successful vaccine or therapeutic, and that’s lifting the broader market not far off its highs,” Power said.
“Morgans is sticking to a cautious stance, recognising that the market has had a big run up and now coming into a news vacuum ahead of the reporting season.”
News like Moderna’s could add to volatility in a market starved of news.
As US President Donald Trump is apparently “transitioning [America] to greatness”, the Australian healthcare sector is actually transitioning as structural changes are setting new companies up for success.
Power says supply chain security for medical products and digital health are two areas he is watching.
“The companies that are going to benefit from supply chain sovereignty are Micro X (ASX:MX1) with its portable xray machines, and Fisher & Paykel (ASX:FPH) and Resmed (ASX:RMD) with ventilators. While the ventilator market is oversupplied in the short term, the broader principle of securing supply of medical equipment stands,” he said.
“And the whole telehealth thematic has just moved forward a number of years.”
There wasn’t much down this week.
Antisense (ASX:ANP) announced very positive results for its Duchenne Muscular Dystrophy (DMD) phase two clinical trail, meeting its primary endpoints for safety and tolerability and exceeding a number of secondary endpoints including functional capacity such as grip and pinch strength.
The next steps for the company is to prepare an application to start a phase 2b trial in Europe and the US.
Antisense will also look at other potential diseases including those that are not adequately controlled by corticosteroids.
“The expectation is this data pack will enable them to get information which has implications for other inflammatory conditions. They are looking at Multiple Sclerosis, arthritis and others,” Power said.
Mach7 (ASX:M7T) extended a contract in the Middle East as it continues its transition into a profitable company, a move that will happen this year, it says.
Opyl (ASX:OPL) announced to the market that it had signed new contracts and promptly went into a trading halt in order to fill in the gaps around revenue for said contracts.
“What they’re telling the market is they’re signing deals and going to be cash neutral or better for this quarter,” Power said.
“What we find is companies that move from loss making to breakeven is they come onto the radar of a lot more investors and are worth watching.”
Imagion (ASX:IBX) is another one. The company did a deal with Siemens this week to further develop protocols around putting its cancer-detecting nanoparticles into the body and the share price shot up 18 per cent.
Power says to keep an eye on Anitsense and Opyl.
He is also watching breast density digital health company Volpara (ASX:VHT) as it’s due to release full year results in the coming week.
While all of its numbers have been well flagged, Power says he’s keen to see how the last eight weeks have impacted on the company.
He is eyeing tier 2 health companies, such as those in the IVF sector, which haven’t benefited from the COVID-19 healthcare share price bounce but might with the return of elective surgeries.