ScoPo’s Powerplays: Green shoots appear among smaller ASX health stocks
Link copied to
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.
Have a habit of forgetting where you put your keys or mobile phone? You may want to go for a quick daily walk or yoga practice.
Researchers at the University of California, Irvine and Japan’s University of Tsukuba have found even short, light workouts can increase connectivity between parts of the brain responsible for memory formation and storage.
Using high-resolution functional magnetic resonance imaging, researchers studied brain function of 36 young healthy adults shortly after 10-minute exercise sessions. They found better connectivity between the hippocampal dentate gyrus and cortical areas linked to detailed memory processing.
Aussie shares follow Wall Street into the green on Friday, with the S&P/ASX 200 up ~0.52% by 1.30pm (AEST) and the S&P/ASX 200 healthcare index up 0.10%.
On Friday the Aussie bourse followed US stocks which rebounded slightly after two consecutive sessions of losses.
The S&P/ASX 200 index had fallen ~0.17% in the past five days, while the S&P/ASX 200 healthcare index, was up a healthier 0.16%
The US Federal Reserve continued its hawkish approach to rising inflation concerns, further hiking interest rates by 25 basis points. But Power said overall the smaller end of the healthcare sector was showing promising signs.
“A few green shoots are starting to sprout in the smaller end of the market with the big guys still driven by macro influences,” Power said.
“The rotation out of growth stocks and into value still remains the case so larger healthcare names are just treading water but things are starting to feel a little bit better at the smaller end of the market. ”
The takeover for fertility company Virtus Health (ASX:VRT) took another twist this week as the company entered a trading halt on Thursday amid a bidding war.
UK equity firm CapVest is preparing to increase its offer after a counter bid from private equity firm BGH, who already own a ~20% stake in Virtus. The company had received a series of offers from BGH and CapVest since December.
BGH made an off market, unconditional $8 per share cash bid for Virtus, which has operations in Australia and Europe.
CapVest is now expected to make a higher bid for Virtus. Its existing bid was a two headed offer at $8.13 for a scheme or arrangement of $7.98 for a takeover, existing of cash, capital return and special dividend.
“Keep watching this space as plenty of more to play out,”Power said.
“It also makes Monash IVF (ASX:MVF) look attractive as well.”
Wearable nasal and respiratory company Rhinomed (ASX:RNO) saw its share price rise ~5% to 20 cents this week after announcing it had signed a supply deal with BTNX Inc, one of Canada’s largest manufacturers of rapid antigen test (RAT) kits.
The deal covers the supply of Rhinoswab and Rhinoswab Junior for inclusion in BTNX’s range of Covid-19 RAT kits.
The agreement will require BTNX to purchase 22.5 million swabs during the 24 month agreement period staring in July.
The Rhinoswab Junior kit is one of the world’s first RAT kits designed for children.
“They are an interesting play in the covid space and have a nasal swab which is much less invasive,” Power said.
“On the back of that they’ve raised another $5 million.”
Shares in wound care company Polynovo (ASX:PNV) rose ~7% this week to $1.12 after the company announced a record (unaudited) Q3 FY22 with revenue of $12.26m, up 59.3% on the pcp.
Its YTD revenue is $30.42m, which includes $1m income from BARDA, along with a $0.1m from a Victorian State Government grant.
BARDA is the US Biomedical Advanced Research and Development Authority.
Polynovo’s NovoSorb is novel range of bio-resorbable polymers that can be produced in many formats including film, fibre, foam, and coatings.
It’s used as a dermal scaffold for the regeneration of the dermis when lost through extensive surgery or burn.
“That’s a real positive and the market has rewarded that,” Power said.
Gut health company Microba Life Sciences (ASX:MAP) failed to have a strong debut on the ASX when it listed on Tuesday.
Microba had an IPO of $30m at 45 cents per share. However, at one stage its share price fell back to 32 cents. It has since recovered and is up ~21% to 42 cents, but below its IPO price.
Microba has developed a technology for measuring the human gut microbiome. It’s focused on delivering gut microbiome testing services globally to consumers, clinicians, and researchers, along with driving discovery and development of novel therapeutics for major chronic diseases.
“You don’t like to see IPOs list below their share price,” he said.
“They work in the area of gut health which is an area which is an area we find interesting.”
Oncology company Telix Pharmaceuticals (ASX:TLX) has seen its share price drop ~2% for the week to $4.40 despite ~10% surge on Monday, when it announced its prostate cancer imaging agent Illuccix is now available for order in the US.
Patients are scheduled to receive the product in the US this month. Telix also announced a partnership involving the company and Monash University had been awarded substantial $23 million grant by the Federal Government.
“They’ve been quite a volatile stock but have had some good announcements this week,” Power said.
Rhythm Biosciences (ASX:RHY) is Power’s Stock of the week. With a market cap of ~$356 million Rhythm is working to replace invasive bowel cancer screening with a simple blood test.
The company’s shares jumped ~15% in early trade on Monday after announcing a clinical trial of its blood test product ColoSTAT exhibited very high accuracy for the detection of colorectal cancer.
The study showed statistically significant performance, recording 81% sensitivity, and a specificity of 91%.
ColoSTAT was also shown to be 35% more accurate than the market standard Faecal Immunochemical Test (FIT) for detecting cancer and advanced adenomas.
“They are working to replace the bowel cancer tests presently available with a much simpler test,” Power said.
“They are expected to make a TGA submission in the first half of this calendar year,” he said.
Rhythm’s share price is up 0.61% in the past five days to $1.66.