• The ASX healthcare index has fallen this week as a strong reporting season comes to a close with outlook still positive for FY23
  • Clinuvel Pharmaceuticals (ASX:CUV) jumps up more than 14% this week on positive FY22 results including revenue rising 38%
  • Parkinson’s UK provide $5m to Pharmaxis to investigate its drug candidate PXS-4728 for treatment of people at risk of Parkinson’s disease

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.

The University of Cambridge researchers have created model embryos from mouse stem cells that form a brain, beating heart, and foundations of all other organs of the body in a new avenue for recreating the first stages of life.

Led by Professor Magdalena Zernicka-Goetz, the team developed the embryo model without eggs or sperm, instead used stem cells, which can develop into almost any cell type in the body.

The researchers mimicked natural processes in the lab and guided three types of stem cells found in early mammalian development to the point where they start interacting.

By inducing the expression of a particular set of genes and establishing a unique environment for their interactions, the researchers could get the stem cells to ‘talk’ to each other.

The stem cells self-organised into structures progressing through the successive developmental stages until the team saw beating hearts and foundations of the brain starting in the yolk sac where the embryo develops and gets nutrients from in its first weeks.

The result of more than a decade of research that progressively led to more and more complex embryo-like structures and reported in the journal Nature could help researchers understand why some embryos fail while others go on to develop into a healthy pregnancy.

Additionally, the results could be used to guide repair and development of synthetic human organs for transplantation.

To Markets… ASX health index down

And it’s a bit of a case of needing some repair to the ASX health sector along with markets in general this week.  By 1pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was  down  0.53% in the past five days, but faring better than the S&P/ASX 200 (ASX:XJO) which has fallen 3.60%.

“The drop has been driven partly by the big US Fed Jackson Hole meeting and chair Jerome Powell saying they’ll keep pushing interest rates higher to get inflation under control so the market took a negative read on that and has been down basically all week,” Power said.

“As broader markets moved down, the more defensive parts of the market where healthcare sits catch a bit of a bid, so that’s good.”

In August the health sector remained in the black according to latest figures released by credit rating agency S&P.

Making headlines  in the healthcare sector has been the appointment of administrators to the Australian arm of a Brisbane-based biotech private company Ellume that struck a $300 million deal to send Covid-19 home testing kits to the US.

A meeting of Ellume’s creditors is to be held later this month. Ellume’s US business is not affected.

“It was an unlisted company that raised a fair bit on money during the pandemic and it’s a very disappointing story for the market as they had won some very big companies in the US and built a facility in Brisbane,” Power said.

Reporting season comes to an end

The last of ASX reporting season for ASX health stocks is coming to an end with some solid results. Health imaging company and Power’s pick of the week Mach 7 (ASX:M7T) reported its most successful year, including record revenues of $27.1m for FY22, up $8.1m or 42% yoy. Bottom line EBITDA was $2.8m; up $4.6m or 253% yoy. 

M7T said it had record sales orders, revenue, cash receipts and operating cashflows.

M7T is a global provider of enterprise image management systems enabling healthcare enterprises to identify, connect and share diagnostic imaging and patient care information when and where it is needed.

Morgans said didn’t change its 12-month target price of $1.34/share and maintained an Add rating.

“We didn’t change any of our numbers and the commentary from the company was very upbeat in terms of FY23 so we think it definitely a company to watch,” Power said.

Fertility play Monash IVF Group (ASX:MVF) reported posted a solid FY22 result which was in line with expectations and sustained the high level of stimulated cycles on the bumper FY21 year.

“We are encouraged by the number of fertility specialists who have come across to the group so I think this year they’ve added 24 and the expectation is cycle numbers disrupted during the Covid-19 pandemic will show some improvements over the coming months,” Power said.

Health imaging and pathology provider Healius  (ASX:HLS)  reported a 23% in full year revenue to $2.34 billion.

Bottom line NPAT increased by 108% to $309 million, and a 6 cents dividend was declared.

“Not surprising, Covid-19 testing underpinned the result, while imaging and day hospitals went backwards on Covid-impacted elective surgery restrictions, lockdowns and increased costs,” Power said.

“While Covid-19 uncertainty continues to limit quantitative guidance, we believe well managed costs, ongoing efficiencies and growth initiatives, and strong B/S, not to mention some continued level of Covid testing and an eventual rebound in demand from the backlog in diagnosis and surgery, lays the groundwork for solid growth.”

Clinuvel Pharmaceuticals (ASX:CUV) also reported a solid result this week with revenue up 38% to ~$67m and profit rising 15.6% to ~$21m.  The company said its commercial operations were scaling up to meet treatment demand worldwide, while the group was pursuing R&D projects which aim to add value over the long-term.

“CUV is nicely profitable and it has been one of the real positive results for the week,” Power said.

CUV’s share price is up more than 14% in the past five days to $19.79.


ScoPo’s Powerplay – Pharmaxis (ASX:PXS) 

Pharmaceutical development company Pharmaxis is Power’s top pick for this week.  Power said PXS has a new collaboration, new trial and new commercial opportunity which are all positive for future growth.

 Parkinson’s UK, the largest European charitable funder of Parkinson’s research, is providing GBP2.9 (cA$5m) to investigate PXS drug candidate PXS-4728 for the treatment of people at risk of Parkinson’s and other neurodegenerative diseases.

Scientists from the University of Sydney and University of Oxford will collaboratively recruit 40 patients with Rapid Eye Movement Sleep Behaviour Disorder (iRBD), a strong predictor for the development of Parkinson’s disease and dementia, in a placebo controlled Phase 2 trial to evaluate whether PXS 4728 can reduce neuroinflammation.

Principal investigator, Professor Simon Lewis, director of the Parkinson’s Disease Research Clinic at the Brain & Mind Centre, University of Sydney said there are currently no disease modifying treatments for Parkinson’s disease and by the time patients are diagnosed they have already lost a significant number of brain cells.

He said targeting patients with iRBD offers us our best strategy for slowing cell death when it could be most impactful. He said the trial provides an unprecedented opportunity to study the effect of PXS 4728 and its potential role to act as a neuroprotective agent by reducing neuroinflammation in regions of the brain associated with progression to disease.

“It’s always good to see expanding clinical activity and broadening commercial potential especially when the majority of funding is paid for by someone else,” Power said.

“PXS is a bit of an oddity among its biotechnology peers, offering a solid, internally-derived clinical pipeline targeting cancers and inflammatory conditions, coupled with a revenue generating respiratory franchise, not to mention a strong register.”