• The ASX healthcare sector rebounds on back of $20 billion Ramsay Healthcare takeover bid
  • Volpara founder and CEO steps into new role as female CEO takes the reins
  • Medlab Clinical shares soar after UK trade deal for probiotic for patients with depressive disorders

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.

Feel like eating veggies, dairy, fish, a juicy steak? Or perhaps you have cravings for potato chips or a sugary treat?

We decide what we feel like eating on a daily basis but new research shows those choices may coming from our gut rather than our head.

The University of Pittsburgh research on mice shows that the microbes in their gut influence what they choose to eat, producing substances that prompt cravings for different foods.

“We all have those urges — like if you ever you just feel like you need to eat a salad or you really need to eat meat,” Department of Biology in the Kenneth P. Dietrich School of Arts and Sciences Assistant Professor Kevin Kohl said.

“Our work shows that animals with different compositions of gut microbes choose different kinds of diets.”

Go with your gut. Now you know it really does make sense.

To Markets….

Appetite for health stocks has been better this week, driven by news US investing giant KKR has put in a $20bn bid for private hospital operator Ramsay Healthcare (ASX:RHC).

The takeover if successful would rank as the largest private equity-backed buyout of an Australian company and sent the Ramsay share price up ~29%.

By 12:30pm (AEST) on Friday The S&P/ASX 200 index was up 1.52% in the past five days, while the S&P/ASX 200 healthcare index, was up ~4.01%.

Power said M&A activity is certainly heating up in the healthcare sector at the moment, particularly among private equity groups.

Aged care provider Japara was taken over in 2021 by non-for-profit aged care, retirement living and hospital provider Calvary in a deal worth ~$380 million.

Equity firms CapVest and BGH are also currently in a bidding war for fertility company Virtus Health (ASX:VRT).

“We have the Virtus tussle and the Ramsay bid has arrived so the theme is private equity is looking for strategic prized assets,” he said.

“In Japara’s case they owned all their property, while Ramsay own most of their property in Australia.

“Virtus has a dominant market position and that’s again seen as quite strategic.”

Who is next on the M&A trail?

Power said he often gets asked who will be subject to a takeover bid and he’s willing to call out some names.

“Again on the IVF side I’d call out Monash IVF Group (ASX:MVF) and Healius (ASX:HLS) which has some strategic holdings in radiology and pathology,” he said.

“I think they could both be subject to potential takeovers.”

Volpara founder and CEO changes roles

Health imaging company Volpara (ASX:VHT), which specialises in the early detection of breast cancer, saw its share price drop ~2.25% on Thursday to 87 cents after the company announced founder Ralph Highnam was stepping back as CEO and moving to a chief scientific and innovation officer (CSO) position.

Current VP strategic development Teri Thomas, who has been with Volpara for ~18 months, has been elevated to the CEO role.

As CSO, Highnam aims to focus on leveraging the extensive data set of ~60 million images from ~5.5 million women as the company moves closer to the goal of personalised breast care for women, such as monitoring changes over time, predicting who is likely to get breast cancer and preventing its impact.

“Although we were surprised by the move, after speaking with both Ralph and Teri we believe the transition will be smooth,” Power said.

“The move towards profitability as called out in the recent quarterly remains a key objective.”

Power said Volpara has also noted a desire to target larger customers including integrated health delivery networks (IDNs). It is also focusing on upselling within the existing customer base through a dedicated customer success team.

Furthermore, Volpara announced a strong Q4 FY22 cashflow report this week, with a record quarter in cash receipts of NZ$8 million, up almost 50% on previous corresponding period and NZ$28.5 million for 12 months.

Universal Biosensors in $25 million capital raise

Medical diagnostics company Universal Biosensors (ASX:UBI) announced it was raising $25 million to fund new product development, manufacturing capability and provide working capital. 

The funds are being sought through an entitlement offer and placement. Power said it’s a good sign for the predominantly growth sector, which has been out of favour with investors of late during market volatility.

“That’s been quite interesting as there hasn’t been too many capital raises this year in the sector,” he said.

“The fact companies can still raise money is a good sign.”

ScoPo’s Powerplay

Biotech Medlab Clinical (ASX:MDC) saw its share price jump ~26% in the earlier part of the week to 12 cents after announcing it had secured a deal with the former contract manufacturer of its patented probiotic, NRGBiotic, for patients with major depressive disorders.

The three-year trade deal with UK-based Cultech Limited is for NRGBiotic to initially enter the giant UK health pharmacy sector.

“It’s good news for them and our view is that there should be a fair amount of news coming through between now and the end of the year for this company because they are doing a range of medicinal cannabis and getting ready for a phase 3 trial,” he said.

“Like so many of these companies it has been marked down significantly but if we are right hopefully we have seen the bottom.”

Morgans have put a 12-month target price of 30 cents on Medlab Clinical.