ScoPo’s Powerplays: For healthcare, a case of nerves ahead of reporting season
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Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 25 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
There’s some nervousness in the market heading into quarterly reporting season, as inflation and interest rate hike fears weigh on the healthcare sector, Scott Power says.
“We really didn’t get that Christmas rally that we were hoping for in December,” Power said.
“And this year in healthcare, it’s started off a little bit mixed — although there’s been a couple of bright spots.”
For example, Immuron (ASX:IMC) closed Thursday at 13.5c, up 40.6 per cent since the start of the week, after announcing on Tuesday it had received $6.2 million in funding from the US Department of Defense to support the development of its traveller’s diarrhoea treatment.
The Melbourne-based gut health biopharma company will use the money to fund a 60-person clinical trial in the USA to develop a dosing regimen for Travelan more suited for military use.
PolyNovo (ASX:PNV) closed at $1.65, up 15 per cent for the week, after the Melbourne wound care company announced its second-quarter US sales had more than doubled to US$5.86 million, compared to a year ago.
There’s strong momentum for its NovoSorb regenerative polymer, Polynovo said, so the company is recruiting 10 more US sales representatives.
“They’re heading in the right direction — that’s very positive for them,” Power said.
Overall though the healthcare sector was down 1.3 per cent for the week after the close on Thursday, while the All Ordinaries had risen 0.3 per cent in the same period.
Sector heavyweight CSL (ASX:CSL) was down 0.3 per cent for the week despite a 1.9 per cent rise on Wednesday. “It’s sort of basically treading water,” Power said.
Quarterly reporting season kicks off next week, and while Power is expecting “reasonably positive” results for many companies in the sector, there are also some big-picture headwinds.
“If you look at the macro picture, there’s a bit of concern around Covid stuff at the moment, and potentially rising interest rates… I think the overall mood is one of caution or nervousness.”
That makes it especially important to find companies that are producing quality results, Power said.
He pointed to an announcement last week from medical technology company LBT Innovations (ASX:LBT) that it had completed its acquisition of Clever Culture Systems, buying out its former joint venture partner Hettich AG Switzerland.
“That really streamlines the company and cleans the structure up,” Power said. “I think that’s very positive for the company moving forward.”
Clever Culture Systems manufactures an automated microbiology culture plate reader that relies on artificial intelligence to interpret and sort culture plates.
“We’re coming into a seasonably stronger part of the year for them,” Power said of Volpara. “What they said in their recent newsletter was that a major radiology conference in December, they had pretty good leads coming out of that.”
Power’s pick for the week is Virtus Health (ASX:VRT), whose shares closed Thursday at $6.66.
The fertility company on December 14 received an unsolicited, non-binding takeover offer from private equity company BGH Capital at $7.10 a share, a bid Virtus’ board is currently assessing.
“I think there’s upside there still, because that was the first takeover offer, which is usually not the last,” Power said. “I would suspect they’re going to have to pay a little more. ”
The Australian IVF industry is also generally doing “very well”, Power said, with cycle numbers looking very solid.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
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