ScoPo's Powerplays: Calmer week for ASX health stocks with some alarming stats about how many people drink instant coffee

During latest period of volatility many health stocks have seen their share prices remain quite stable
Several ASX health stocks have rallied this week on positive news including Polynovo on $5 million sales month
Telix Pharmaceuticals rallies more than 22% regaining heavy recent losses while Mayne Pharma is also up

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.

As someone who limits their caffeine intake it seems I may have a good excuse to change my mind. Drinking two to three cups of coffee a day is linked with a longer lifespan and lower risk of cardiovascular disease compared with avoiding coffee, according to research published in the European Journal of Preventive Cardiology.

Baker Heart and Diabetes Research Institute in Melbourne and study author Professor Peter Kistler said in the large, observational study, ground, instant and decaffeinated coffee were associated with equivalent reductions in the incidence of cardiovascular disease and death from cardiovascular disease or any cause.

“The results suggest that mild to moderate intake of ground, instant and decaffeinated coffee should be considered part of a healthy lifestyle,” Kistler said.

The study examined associations between types of coffee and incident arrhythmias, cardiovascular disease and death using data from the UK Biobank, which recruited adults between 40 and 69 years of age. Cardiovascular disease included coronary heart disease, congestive heart failure and ischaemic stroke.

The study included 449,563 participants free of arrhythmias or other cardiovascular disease at baseline. The median age was 58 years and 55.3% were women.

Participants completed a questionnaire asking how many cups of coffee they drank each day and whether they usually drank instant, ground (such as cappuccino or filtered coffee), or decaffeinated coffee.

Participants were then grouped into six daily intake categories consisting of none, less than one, one, two to three, four to five, and more than five cups per day.

The usual coffee type was instant in 198,062 (44.1%) participants, ground in 82,575 (18.4%), and decaffeinated in 68,416 (15.2%). There were 100,510 (22.4%) non-coffee drinkers who served as the comparator group.

Coffee drinkers were compared to non-drinkers for the incidence of arrhythmias, cardiovascular disease and death, after adjusting for age, sex, ethnicity, obesity, high blood pressure, diabetes, obstructive sleep apnoea, smoking status, and tea and alcohol consumption. Outcome information was obtained from medical records and death records. The median follow up was 12.5 years.

A total of 27,809 (6.2%) participants died during follow up. All types of coffee were linked with a reduction in death from any cause. The greatest risk reduction was seen with two to three cups per day, which compared to no coffee drinking was associated with a 14%, 27% and 11% lower likelihood of death for decaffeinated, ground, and instant preparations, respectively.

Kistler said caffeine is the most well-known constituent in coffee, but the beverage contains more than 100 biologically active components.

“It is likely that the non-caffeinated compounds were responsible for the positive relationships observed between coffee drinking, cardiovascular disease and survival,” he said.

To markets….

Where health stocks could still do with a shot of caffeine. By 1.20pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 3.08% in the past five days, while the S&P/ASX 200 (ASX:XJO) was up 5.19%.

Power said markets remain very reactive to news on inflation and interest rates with the release of key data points seeing large swings either up or down.

“We’ve had so much negativity over the last couple of months and if you think back we had a very weak period to the end of June before a July rally, then the market started to peel off in reporting season when interest rates started to jump up and inflation numbers were stubbornly high,” he said.

“Then the RBA comes out and pushes rates up by a quarter of a per cent when everyone thought it would be half a per cent and then next thing we know markets are rallying again.”

Power said during this recent period of volatility many health stocks have seen their share prices remain quite stable.

“It’s almost saying there’s a little bit of early buying interest starting to creep back in and now it’s just about spotting the target among the noise and uncertainty,” he said.

“There remains a tussle between the bulls and the bears at the moment in terms of which way the market is going and hard to know whether this is a bear market rally or we’ve started to clip the wings of inflation and interest rate rises might start to moderate.

“It’s still a wait and see scenario.”

Polynovo shares rally on first ever $5 million sales month

Tissue regeneration developer Polynovo (ASX:PNV) saw its share price rally more than 23% yesterday following news it recorded its first ever $5m sales month and record first quarter sales of $12.5m up 73.3% on STLY of $7.2m. This includes a record month in September of $5.4m.

Growth also accelerated in US, with the company achieving a record quarter sales result of $10.4m up 71.3% vs. STLY (in US$7.3m up by 61.3% vs. STLY), whereas sales ROW at $2.1m grew by 84%

“That’s a very good outcome for them and the market has rewarded them so it’s another good new story in amongst all this volatility,” Power said.

Telix share price regains losses

Telix Pharmaceuticals (ASX:TLX) has rallied ~20% this week, regaining heavy falls when the company withdrew its application to market its Illuccix product in Europe.

The withdrawal came as Danish regulators requested additional data that Telix said it couldn’t deliver within the requested time period.

“Telix had a massive fall two weeks ago when the European application was pulled but if you look at it this week it’s up more than 20% so prices are whipping around on newsflow,” Power said.

“It got to a point where value emerged very quickly and all of a sudden it’s rallied and I think we will keep seeing that pattern.”

Good news for Immutep and Impedimed

Immutep (ASX:IMM) this week announced it had been granted Fast Track designation by the US FDA for efti in combination with pembrolizumab in 1st line non-small cell lung cancer.

Efti is the company’s first-in-class soluble LAG-3 clinical stage candidate which activates antigen presenting cells (APC) to engage both the innate and adaptive soluble LAG-3.

The latest approval marks the second Fast Track designation issued by the FDA for eftilagimod alpha, offering the potential for expedited development and review.

ImpediMed (ASX:IPD) also had good news this week announcing it had signed a global strategic commercial partnership and pilot program with GenesisCare.

The pilot program will consist of an initial rollout of 5 SOZO units to establish lymphoedema screening services for breast cancer patients in centres across the US.

Upon successful completion of the pilot program, GenesisCare will evaluate a staged expansion to additional sites in the US and globally.

GenesisCare is a global care leader with more than 6,000 highly trained healthcare professionals employed at more than 300 locations across four countries.

Mayne Pharma rallies after selling contract research group

Mayne Pharma (ASX:MYX) rallied ~12% in the past five days after announcing the sale of Metrics Contract Services for $772m.

Metrics provides a broad range of services from drug development through to commercial manufacturing, all from its facility in North Carolina.

In an announcement MYX chair Frank Condella said the move is part of a plan to create a leaner and more focused business with financial flexibility to support its strategic objectives.

“Mayne Pharma is an interesting story having sold their contract research group for almost the market cap of the company so they’re left with a lot of cash and clean generic pharmaceutical business,” Power said.

“They are sitting on a lot of cash and some will come back to shareholders.”

ScoPo’s Powerplay: Mach 7 Technologies

Health imaging company Mach 7 Technologies (ASX:M7T) is Power’s stock of the week. 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.

Power said M7T posted a strong FY22 result, with another year of record revenue up 42% on pcp, as well as a strong sales order pipeline which will drive growth in FY23 and beyond.

Over the year, the business mix has trended towards more SaaS based deals (60/40 split) with customers increasingly open to transitioning from capital to subscription contracts.

“We view this as a positive trend with the market valuing SaaS contracts more highly, and we have rolled forward our model, made no changes to our forecasts, and our DCF valuation remains unchanged at $1.34 with Add maintained,” Power said.

He said Mach 7 has cash on balance sheet of $25.3 million, no debt and positive EBITDA. The Mach 7 share price is up more than 10% in the past five days.