- ASX health stocks rise 0.9% in past five days as broader markets lift 1.2%, despite Friday selloff
- ImpediMed’s latest quarterly result shows sales momentum building for Sozo device
- Cold-cathode X-ray machine developer MicroX makes progress across all divisions in Q4 FY24
Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplay.
While there have been numerous breakthroughs, the elusive elixir of youth has long evaded scientists.
But new research published in Nature could further advance the human quest for greater longevity.
The researchers from the Medical Research Council Laboratory of Medical Science and Imperial College London in collaboration with Duke-NUS Medical School administered an anti-IL-11 antibody (a drug inhibiting IL-11s effects) to mice aged 75 weeks (~55 human years).
The researchers found the anti-IL-11 antibody extended the median lifespan of mice by 22.5% in males and 25% in females. The treated mice lived an average of 155 weeks compared to 120 weeks for untreated mice.
The treatment also reduced cancer-related deaths and diseases associated with ageing, such as fibrosis, chronic inflammation, and poor metabolism, with minimal side effects.
Previously, scientists have suggested IL-11 is an evolutionary remnant in humans, essential for limb regeneration in some animals.
However, after age 55, IL-11 production increases and is linked to chronic inflammation, fibrosis, metabolic disorders, sarcopenia, frailty, and cardiac fibrosis – all signs of ageing.
The researchers say the study opens the possibility that anti-IL11 might work to extend human healthspan and lifespan.
Healthspan is the period of a person’s life they remain free from chronic disease or disabilities, while lifespan is the number of years from birth to death.
To markets…
ASX healthcare stocks were looking quite healthy this week until a broad selloff on Friday. The Aussie bourse followed US markets downwards with the benchmark S&P/ASX 200 (ASX:XJO) down and the S&P/ASX 200 healthcare index (ASX:XHJ) falling 1.23% at 11am (AEST).
There were several reasons for the selloff but mostly it followed the old saying – ‘When the US sneezes, Australia catches a cold’.
“The Friday selloff was driven by a tech selloff in the US with the NASDAQ down 2.3% reflecting more cautious commentary coming from some of the larger companies like Amazon,” Power says.
“Amazon gave cautious guidance for Q3, saying consumers are trading down to cheaper options, causing the shares to fall 5% in afterhours trading.”
Eddy Sunarto explains more in this morning’s Market Highlights.
However, despite the ugly Friday, the XHJ was up 0.9% for the past five days and finished up ~4.7% for a solid July performance.
The XJO was up 1.2% for the past five days and finished up ~4.2% for July.
“July is seasonally a stronger month of the year and we haven’t been disappointed,” Power notes.
ResMed 4Q FY results in line with consensus
A leader in obstructive sleep apnoea and other sleep-related respiratory disorders ResMed (ASX:RMD) has reported its Q4 FY24 results with quarterly revenue up 9% to US$1.22bn and broadly in line with consensus.
Morgans healthcare analyst Derek Jellinek says that NPAT of US$306m was up 30% and in line with consensus and a touch ahead of Morgans at US$304m.
Jellinek says revenue of US$1,223m, was up 9% and 10% on a constant currency basis and also was broadly in line with consensus.
RMD’s full year revenue rose by 11% on a constant currency basis to US$4.7bn.
Importantly, Jellinek says there seems to be little impact from so-called weight-loss wonder drugs, which were considered a threat to companies exposed to obesity conditions like RMD.
“GLP-1s aren’t turning out to be the near-term threat they were made out to be with an expanding RMD data set of >810k patients on the drugs showing 10.7% higher use of PAP (positive airway pressure) therapy versus patients not on GLP-1s along with higher resupply rates at 1 year (+310bp) and 2 years (+530bp),” he says.
RMD declared a quarterly cash dividend of US 53 cents/share, up from US 48 cents/share the previous year.
Sales build for ImpediMed’s SOZO device
Power says Impedimed posted a Q4 FY24 cashflow result which demonstrates sales momentum is starting to build with its new leadership starting to deliver.
However, he says IPD’s share price has not reacted positively to the news, down more than 8% in the past five days.
IPD designs and manufacture medical devices employing bioimpedance spectroscopy (BIS) technologies for use in the noninvasive clinical assessment and monitoring of fluid status and tissue composition.
The company’s SOZO device is the only FDA-cleared BIS solution for the clinical assessment of lymphoedema.
BIS for prevention of breast cancer-related lymphoedema is now included in the globally referenced National Comprehensive Care Network (NCCN) guidelines and the Multinational Association of Supportive Care in Cancer (MASCC) guidelines.
Morgans says as a result and with US insurers in the process of updating their medical policies it expects the installed base of the 570 SOZO units to increase across the US hospital network.
During the quarter, IPD sold 38 SOZO units of which 23 were sold in the US. This compares with 18 units sold in the previous quarter, of which 13 were sold in the US.
A total of 68 units were sold in FY24 and Morgans forecast this will grow to 200 units in FY25.
“We expect subsequent quarters to show strong growth,” Power says.
IPD recorded unaudited total revenue of $2.9m for Q4 FY24, up from $2.6m for Q3 FY24.
The core business total contracted value (TCV) signed during the quarter was $3.4m compared with TCV of $2.2m signed during Q3 FY24.
After a volatile 2023, IPD has a new board and management team. In its Q4 FY24 results announcement IPD says the new executive team “remains laser-focused on driving growth through targeted sales and marketing execution”.
READ:ImpediMed’s new leadership team looks to grow the company
IPD has a cash balance at the end of Q4 FY24 of $24.6m with growth in the installed base forecast to see the company achieve break-even within two years.
Morgans maintains a speculative buy recommendation and 20 cent target price with Power noting the share price has not reacted as he’d have thought to the update:
“We are surprised with where the share price is trading at the moment but we maintain a positive stance on ImpediMed.”
Progress across all divisions for Micro-X
Power says similarly Micro-X (ASX:MX1) – an Adelaide-based cold cathode X-ray machine developer for health and security markets globally – has also been quite weak despite posting a steady Q4 FY24 result with progress across all divisions.
“The Micro-X share price has been weak for quite a while now and again they are on the verge of what we think is a pretty significant year for them,” Power says.
Morgans says although the cash position at June 30 is modest at $3.2m, the company receipts totalling $7.5m from R&D tax rebate, licensing and milestone payments will provide the necessary working capital to continue with the commercial launch of its bomb-detection unit Argus.
During the quarter MX1’s first commercial Argus order for use in national security applications was signed in the UAE, with a further six demonstration units to be built for customer trialing.
“Their Mobile DR or X-Ray business has posted a solid year and generated over $7m in sales and in our view will grow by 10-15% for the next year” Power says.
“Then they have some other projects including their airport self-check-in project which is also tracking to time and budget and is being funded by the Department of Homeland Security (DHS) in the US.”
MX1’s says during the quarter its Head CT project also progressed towards the next Australian Stroke Alliance (ASA) milestone of using a test bench of its miniature Head CT device to generate CT images of an x-ray phantom, which will trigger a $500k milestone payment.
Delivery of the key milestone will provide the final piece of information required to submit an application for ethics approval before human imaging trials start as planned in 2024.
“Micro-X has what we believe is world-leading cold cathode technology and they are building commercial applications which we expect to develop considerably over the next 12 months.”
Morgans maintain a speculative buy recommendation on MX1 and 12-month target price of 21 cents.
Mach7 exceeds FY24 guidance
In a note to clients Morgan’s healthcare analyst Iain Wilkie says health-imaging company Mach7 Technologies (ASX:M7T) met and exceeded FY24 guidance of sales orders hitting $61.3m ($60m guidance). The company achieved FY24 guidance to be cashflow positive.
He says the Q4 FY24 cash report was solid with cash receipts of $10.5m, ($34.9m YTD) and net operating cash inflow of $2m inflow ($3.2m inflow YTD).
He says Q4 FY24 has traditionally been a strong operating cash flow quarter for M7T given a higher proportion of historical customer payment cycles falling in the period.
The company reported sales orders of $4.4M (total contract value) in Q4 FY24, up 37% on pcp.
FY24 sales orders of $61.3m, were up 52% on FY23.
Contracted annual recurring revenue (CARR) of $27.9m at June 30, 2024, was up 35% the same time last year.
M7T closed Q4 FY24 with a cash balance of $26.2m with no debt.
“We’re very happy with this result,” Wilkie says.
Morgans has an add rating on M7T with a 12-month target price of $1.56.
EBR Pivotal study published in JAMA
EBR Systems (ASX:EBR) announced this week that SOLVE-CRT, the pivotal study of its wireless stimulation endocardially for cardiac resynchronization (WiSE-CRT) device, has been published in the prestigious cardiology journal JAMA.
The study also included an accompanying interview with Dr Jag Singh, the trial’s principal investigator, as well as commentary from Dr Kusumoto from the Mayo Clinic.
EBR focuses on treating heart failure patients with ventricular dyssynchrony, where the right and left sides of the heart are out of sync.
In these patients, the right side of the heart beats, but the left side lags.
The standard treatment involves placing a lead outside the left ventricle to pace both sides simultaneously, but these leads can sometimes fail.
EBR’s WiSE system is the only leadless device for pacing the left side of the heart in heart-failure patients.
The tiny device – literally the size of a cooked grain of rice – is implanted via a leg vessel, like in heart catheterisation. It has no battery and is powered remotely using ultrasound.
“Great to see the publication of SOLVE-CRT in one of the highest-ranking journals in the cardiology field and to hear favourable comments by Dr Kusumoto from prestigious Mayo Clinic,” Jellinek wrote in a note to clients.
“Beyond increasing scientific interest, publications have power to impact medical practice, drive treatment decisions and impact patient outcomes.”
With an FDA filing imminent, and enough cash in the kitty to get to potential approval and beyond, we continue to view EBR as well placed to build a profitable medical device business in the CRT space.”
ScoPo’s Powerplay – Avita to report next week
Power says US-headquartered wound care company Avita Medical (ASX:AVH) is due to report its latest quarterly results next week.
AVH announced in May it had received pre-market approval (PMA) by the US FDA under its Breakthrough Device Program for RECELL GO for use in burns and full thickness skin defects.
RECELL GO is AVH’s next-generation autologous cell-harvesting device that harnesses the regenerative properties of a patient’s own skin to treat thermal burn wounds and full-thickness skin defects.
Power says the approval marks a significant milestone for the company, with management expecting the device to increase adoption of the technology amongst clinicians.
“That’s probably the stock where we are going to probably see some share price movement, assuming it’s positive,” Power says.
“We think it is undervalued.”
The company has an add rating and 12-month target price of $5.50 on the stock.
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Disclosure: The author held shares in Mach 7 at the time of writing this article.