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.

Themes of the week

Large cap healthcare shares have been under pressure this week with the strong Aussie dollar, which was holding near a two-year high on Friday.

The healthcare sector finished the week down 0.61 per cent — its fourth straight week of declines — while the ASX200 had gained 0.5 per cent for the week.

Power blamed the Aussie, which broke 76 US cents for the first time since early 2018 on Thursday and was holding there Friday.

“A bit of a headwind there, there’s been some selling pressure,” Power said. (A strong Australian dollar isn’t great for the larger names in the sector, many of which are looking to sell into the United States).

“But once you get outside the top 100 there’s plenty good happening.”

Pro Medicus (ASX:PME) was up 7.9 per cent for the week at $32.84, after the medical imaging company announced an $18 million contract with US hospital system MedStar Health.

“It’s the first contract that’s all in the cloud, and a sign of things to come,” Power said.

Antisense Therapeutics (ASX:ANP) had a good week with strong gains after Wilson Equity Research initiated coverage on Wednesday with a price target of 57c.

“That really sort of caught people’s attention,” Power said.

ANP shares, which closed Tuesday at 9.2c, traded as high as 16c by Thursday, although they had dipped back down to 12c by late Friday.

Shares in ultrasonic probe sterilisation company Nanosonics (ASX:NAN) shares gained 10.3 per cent for the week. They started the month at $6.66.

“There hasn’t been any news, but we are waiting for the release of their next product. It’s just showing the power of the market when it comes to quality growth names,” said Power, contrasting Nanosonics with a more speculative company like Antisense.

Nutritional Growth Solutions (ASX:NGS) dropped 12.5 per cent to the week, to 28c, despite the protein powder maker being granted a provisional patent in South Korea. Still the company’s shares are up significantly from 20c, the level they sold for in an October IPO.

Rhythm Biosciences (ASX:RHY) gained 3.2 per cent after the bowel cancer detection company secured a US patent for its ColoSTAT rapid blood test.

“That continues its upwards trajectory,” Power said of RHY shares, which are up sevenfold for the year. The US “is obviously a key market for them.”

Meanwhile it was a horror week for Mesoblast (ASX:MSB), whose shares fell 47.6 per cent for the week – going from $4.60 to $2.41 – after setbacks on its heart failure and COVID-19 clinical trials.

Privately held Brisbane diagnostic company Ellume had a much better time of it, with its home COVID-19 test being approved by the FDA for use in the United States. It’s the first at-home test that doesn’t require a prescription.

FDA Commissioner Stephen Hahn called the authorisation a “major milestone for in diagnostic testing for COVID-19”.

“That was a major achievement for them,” Power said of Ellume.

Also, capital raisings continued apace, with Acrux (ASX:ACR), Althea (ASX:AGH), Cynata (ASX:CYP), Patrys (ASX:PAB) and BOD (ASX:BDA) raising money over the week.

“That sort of fundraising momentum is just continuing, which is extraordinary,” Power said.

ScoPo’s powerplays

Power is admitting he was wrong about fertility company Virtus Health (ASX:VRT), which Morgans had downgraded to a hold back in late November, when its shares were around $5.45.

Morgans was looking for a buying opportunity at around $5 – but VRT shares have kept gaining and closed Friday at $5.78.

“That was really an error, to pull it to a hold,” Power said.

Morgans this week upgraded Virtus to an “add” with a target price of $5.82.

Power is also looking for catalysts from closed-loop media company Swift Media (ASX:SW1) and clinical trial support company Opyl (ASX:OPL), both of which could soon announce more contract wins.

Opyl also expects to be cashflow positive this quarter, he said.

As previously mentioned, he’s watching for a product announcement from Nanosonics – a “good, quality company.”

Morgans is also initiating coverage on IMEXHS (ASX:IME) with a $2.73 price target. Its shares closed Friday at $1.61.

The company makes medical imaging software and Power sees them as a “mini-Mach7 (ASX:M7T) or a mini-Pro Medicus” for smaller radiology practices.

“We like their story,” he said.

Overall, with just three and a half trading days left before Christmas, Power is still expecting a big Santa rally.

“It’s an exciting time, and I think we expect this to continue into the new year.

“What we can see clearly is that a lot of the healthcare companies are well capitalised and now it’s just a question of executing on key milestones – regulatory approval, clinical trials, first sales or licensing deals – but most of them are in good financial shape to deliver on that.

“It will be a good place to be invested, I think.”

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