ScoPo’s Powerplays: ‘We’ve gone from a boiled lolly to a prize-winning chocolate in the space of a week’
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.
In solidarity with friends in Ukraine, beer, cider, wine, spirits and even non-drinkers are being asked to raise a glass for the Red Cross humanitarian relief effort.
Initiated by a small team of European beer industry experts, the campaign hopes to leverage the goodwill of drinkers and brewers with a set of tools and directions for how people can fundraise and make donations to the Red Cross.
Donations have begun pouring in from around the world to support the cause. The Drinkers for Ukraine campaign has even released an open-sourced recipe for a fundraising solidarity “anti-imperial stout” called Resist.
A worthy cause in more than one way. Cheers.
Hopes are pinned on peace as Russia and Ukraine continue negotiations to put an end to the bloodshed. The war combined with economic pressures has had investors globally on edge in recent times.
Investors woke on Thursday to news the US Fed had increased its cash rate by 0.25%, signalling six more rate hikes to follow.
It was the first time in three years the Fed had increased rates as the US consumer price index for February hit a new high of 7.9% year-over-year, the highest in 40 years.
Fed Chairman Jerome Powell said hikes will keep going until rates are between 1.75% and 2% by end of the year.
But the Fed’s vow to control inflation, combined with renewed hopes of peace in Ukraine and China’s pledge to stabilise its recent tumultuous bourse, seemed to reassure jittery markets.
The ASX health sector has seen a much-needed rally. At the start of trade on Friday morning, the S&P/ASX 200 healthcare index was up ~3.03% for the past five days, passing the S&P/ASX 200 index which was up 1.68%.
Power said he was confident the worst might be behind the local health sector and it could be on the way up again.
“The Fed rate hike was widely anticipated and priced into the market and we’ve seen it rally both here and overseas since the announcement,” he said.
“We’ve gone from a boiled lolly to a prize-winning chocolate in the space of a week.”
Heavyweights led the gainers with the share price of blood products giant CSL (ASX:CSL) rising ~3.51% in the past five days to ~$264.
Hearing solutions giant Cochlear (ASX:COH) saw its share price up ~4.81% to ~$224.46 for the week. Pathology provider Sonic Healthcare (ASX:SHL) was up ~1.08% to ~$34.72 and medical supplies company Resmed (ASX:RMD) rose $6.95% to $35.07.
One of the big stories in the health sector this week was the board of in-vitro fertilisation (IVF) company Virtus Health (ASX:VRT) agreeing to a takeover offer from UK private equity firm CapVest for $706 million.
CapVest had been in a battle with Aussie private equity firm BGH Capital for Virtus. Under the deal, CapVest will acquire 100% of Virtus shares by a scheme of arrangement. The offer values Virtus at $8.25 cash per share.
“The share price has come up a lot since its lows of $5 in December,” Power said.
“They did a placement in September at $6.80 raising $35 million for the Adora Fertility acquisition which was blocked by the ACCC until they had done further work which saw the share price fall and then not go through.
“It’s now trading with a mid-price of $8.25 so it’s been worth holding on for shareholders.”
Health imaging tech company Mach 7 (ASX:M7T) has rallied ~7.79% in the past week to 83 cents.
Power has been talking up Mach 7 in recent weeks as the company continues to win contracts and moves into a growth phase. Morgans forecasts revenue of $14m and EBITDA of $1.2m for Mach 7.
“Investors are starting to ask more questions about Mach 7 and it’s a profitable company with a growing revenue base,” he said.
“They will do well as hospitals replace old software systems and they’ve been in Australia doing roadshows for the past couple of weeks and investor reaction has been positive, reflected in their share price and more trading volumes.”
Clinuvel Pharmaceuticals (ASX:CUV) rallied ~6.60% to $20.50 after releasing positive preliminary results from its pilot study in arterial ischaemic stroke (AIS).
The trial, called CUV801, focused on the safety of multiple afamelanotide doses and patient recovery over 42 days, using the National Institutes of Health Stroke Scale and brain imaging.
“They’ve had some good news with their stroke study which was received positively by the market,” Power said.
He said medtech LBT Innovations (ASX:LBT) was also worth noting this week after its share price rose 17.11% to 8.9 cents in the past five days after announcing the first purchase order placed by Thermo Fisher for five APAS Independence instruments.
Under the terms, the instruments are expected to be shipped progressively over the next four months, with full order shipment expected no later than July 31.
“Thermo Fisher is a big international company so that was good news for them and they’ve worked hard over the past couple of years to put proper distribution in place and do the required testing and are reaping the rewards,” Power said.
But it wasn’t all good news with Brisbane surface chemistry company AnteoTech’s (ASX:ADO) share price plunging by ~40% to 9 cents in the past week on no news, which has led to an enquiry by the ASX.
“The one which has fallen out of bed is AnteoTech which was beneficiaries of the Covid pandemic with testing and diagnostic equipment,” Power said.
“Their market cap at one point was over $600 million so it’s really fallen from grace and this week alone is down more than 40% – and they’ve announced some board changes.”
Power’s stock of the week is Neuren Pharmaceuticals (ASX: NEU) which has seen its share price rally ~8.57% in the past five days to $4.56 after announcing approval from the Human Research Ethics Committee for its Phase 2 clinical trial of NNZ-2591 in Angelman syndrome (AS).
The approval covers the three sites in Australia that will conduct the trial: Queensland Children’s Hospital, Sydney Children’s Hospital, and Austin Health in Victoria.
There are currently no approved medicines for AS, which is characterised by severe developmental delay and learning disabilities that become noticeable by the age of 6–12 months.
“They are getting some positive commentary from the FDA and you can see their share price start to motor along in expectation of what we think is potential licensing deals for the rest of the world,” Power said.
“Currently the product is licensed to Acadia Pharmaceuticals for North America but the rest of the world is up for grabs with opportunity for either Acadia to take out the rest of the world rights or someone else to come in,” he said.
“Neuron is attracting a lot of attention and we are getting lots of calls on the stock and the share price against all this market volatility has remained solid and now there’s a bit more optimism it’s starting to move up. ”
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