Scopo's powerplays: Feeling bullish for end of 2020

With hopes for more stimulus and a coronavirus vaccine, as well as the recent cut in the cash rate, Scott Power is bullish on the market once there’s certainty on the US election
It’s been a good week for the healthcare sector with positive news from Telix, ResMed, Nanosonics and Micro-X
Power’s pick for the week is bioimpedance spectroscopy company Impedimed

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

When Stockhead spoke to Power, on Thursday afternoon, US ballot-casting was still ongoing but things were looking good for Democrat Joe Biden – as well as Republican chances to keep control of the Senate.

“I think the market is going to very quickly look through the election and we’re seeing that already,” he said.

Healthcare stocks had outperformed for the week, gaining three per cent, versus 2.6 per cent for the broader market, Power said.

Once we have certainty on the US election, the market looks set up nicely for the rest of the year, Power said.

“The broader background is the RBA has dropped the cash rate again and there’s expectations of more stimulus coming into economies around the world,” Power said.

Pfizer has said it could apply for emergency use authorisation for its COVID-19 vaccine in November and other companies’ vaccines are progressing as well.

“If that happens, this will be a real shot in the arm for the market, pardon the pun,” Power said.

As far as individual company news, it’s been another good week for ASX health care firms.

“It’s been very very busy,” Power said.

Telix Pharmaceuticals (ASX:TLX) shares were trading at $2.24 on Thursday, up from around $1.65 last week, after the nuclear medicine company announced a $400 million partnership and licensing deal with Hong Kong-based China Grand Pharma for the Greater China market.

“That was very good news for them,” Power said. Grand Pharma is investing up to $US65 million ($90 million) for the development of Telix’s therapeutic products in the region, and is taking a $US25 million ($35 million) stake in Telix.

“That’s some very attractive funding for them,” Power said, adding that Telix chief executive Dr Chris Behrenbruch has done a very good job with the company.

A previous Power pick, Micro-X (ASX:MX1) jumped from 18c to 24c after the X-ray imaging company announced it had received two contracts with the US Department of Homeland Security to build an airport self-service baggage scanner and security system.

“Winning that contract is potentially a real game-changer for them,” Power said.

The contracts are for a total $US4 million ($5.6 million) but if the prototypes are successful there’s a potential $US1.5 billion market opportunity there to build airport scanners across the United States, Morgans estimates.

The brokerage has maintained its speculative buy rating on Micro-X, with a 32c price target.

Nanosonics (ASX:NAN) shares rose from around $5.10 to $5.60 this week after the infection prevention company announced that sales had recovered from the pandemic and in the first four months of FY2021 had been up compared to the same time last year.

Morgans has a $6.86 price target on the company, which is getting ready to launch its next-generation disinfectant products for hospitals in FY2022, Power said.

ResMed (ASX:RMD) shares hit an all-time high of $29.43 on Thursday, following the medical devicemaker’s announcement last week that it had grown revenue for the eighth straight quarter.

Ventilator sales had increased as a result of the pandemic, offsetting reduced demand for its sleep apnoea devices, ResMed said.

Morgans has a price target of $30.99 on ResMed, Power said.

There was positive news for the ASX’s two fertility companies, Virtus Health (ASX:VRT) and Monash IVF (ASX:MVF), with word that IVF treatments had rebounded from the lockdowns, with over 5,000 cycles per month in the last quarter.

“That’s up quite significantly on the preceding period, and there’s an expectation that it’s still a strong pipeline coming through,” Power said.

Lastly Pharmaxis (ASX:PXS) shares were trading at 12c on Thursday, up from 8.9c last week, after the US Food and Drug Administration approved its inhaler to treat cystic fibrosis.

The move means the Sydney biotech company will be owed $US10 million ($14.3 million) from its launch partner.

“A very positive week,” Power said.

ScoPo’s powerplay

Power’s pick for the week remains Impedimed (ASX:IPD), his pick from last week and three weeks ago. Its shares were trading at 8.6c on Thursday and haven’t moved much from a 7c to 9c range since May.

But Power expects that we’re very close to getting the Brisbane company’s metadata analysis, a series of research pieces that could show how ImpediMed’s devices measure lymphedema, or limb swelling.