ScoPo’s health powerplays: 'We're buying any pullbacks'

The market looks set for a strong finish heading into the final quarter
There was plenty of good news in the life sciences space this week
Breast density software company Volpara Health Technologies (ASX:VHT) may be the beneficiary of an upcoming FDA rule

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 for the week

It looks like it’ll be a strong finish to 2020, Scott Power says.

“It’s pretty exciting, what’s happening out there,” he told Stockhead. “The market feels pretty buoyant. This week feels much more solid,” with Donald Trump talking about a coronavirus vaccine being available as early as October, and signs that the economic downturn isn’t as severe as first feared.

“That’s sort of giving the market more confidence, and caused continued interest in the healthcare and life sciences space, which is good for investors,” Power said.

“It feels like a good run into the end of the year,” he added. “We are buying any pullbacks.”

Lots of good news

There was also plenty of good news during the week, Power said, starting with cannabis company Zelira Therapeutics (ASX:ZLD) launching an insomnia treatment through Australia’s Special Access Scheme.

Also, Cyclopharm Limited (ASX:CYC) reported that a phase-three trial of its radioactive Technegas product had met its primary endpoint, putting the lung imaging agent on track for commercial sales in the US next year.

“That’s big news for them,” Power said. “That’s a terrific story.”

Rhinomed (ASX:RNO) got a boost after the airway technology company developed a prototype less invasive nasal swab that could be self-administered for flu and coronavirus strains.

Its shares jumped from 8c to 14.5c on the news and had only retreated slightly by late Friday, trading at 13.5c.

Medical imaging company Pro Medicus (ASX:PME) signed a $25m deal with a top New York hospital chain, NYU Langone Health.

“A very important contract for a company that has gold standard technology,” Power said.

On the downside, Dimerix (ASX:DXB) shares plunged after a phase-two trial of the biotech company’s chemokine receptor (CCR2) blocker DMX-200 failed to meet primary endpoints, with the investigation not showing a statistically significant difference over placebo in fighting diabetic kidney disease in the full 40-patient cohort.

The company plans to analyse the study further to see if the drug did prove effective for certain subgroups.

Power’s Powerplays

The Morgans expert said he and other analysts would be keeping a close watch on companies’ annual general meetings heading into AGM season in October and November.

With the impact of the coronavirus crisis, a lot of companies didn’t provide guidance during earnings season in August but said they would do so at their AGM.

“That’s really an exciting time for analysts, to look at a company and make a call on whether they have been able to rebound,” Power said.

He said Morgans would be looking at CSL (ASX:CSL) to see if Australia’s largest ASX-listed company had been able to solve complications around its blood supply chain in the United States, given the impact of the coronavirus there.

Morgans will also keep a close eye on New Zealand’s EBOS Group (ASX:EBO), Australasia’s biggest healthcare and pharmaceutical supplier.

“We’re looking for positive commentary out of their AGM in November,” Power said.

In addition, they’ll be keeping an eye on hearing implant company Cochlear (ASX:COH), which was hit in the second half of FY2020 by the pandemic.

“That will be an interesting company to see just how much elective surgery has come back, and what they’re able to say about that.”

Lastly, Wellington-based breast density software-as-a-service company Volpara (ASX:VHT) will be releasing quarterly revenue figures.

Also, the US Food and Drug Administration is expected to rule by the end of October on whether to impose a mandate that US women should be informed about their breast density during mammograms.

“It’s well expected, but it’s going to be a nice tailwind for them,” Power said

Morgans has Volpara as a speculative buy with a price target of $1.80.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.