ScoPo’s Powerplays: Health stocks strap in for a ‘skittish’ ride
Healthcare and life sciences expert Scott Power – a senior analyst with Morgans Financial for 24 years – on what the movers and shakers have been doing in health and which ASX health stocks make his Powerplays.
Just like an old piece of machinery, ageing can cause breakdowns and problems in us humans. Many age-related diseases share a common feature – the mitochondria of cells begin to malfunction.
But Buck Institute scientists have discovered a new mechanism of how mitochondria start to go wrong, which in turn could help researchers reverse the problem.
Mitochondria give our cells the energy they need to keep working, so they’re a big deal. They help us fight disease, heal and metabolise.
If they get wonky, we get all sorts of diseases and afflictions that we associate with ageing – such as cancer, obesity, cardiovascular problems.
It’s complicated – all science is – but basically Buck Fellow Chuankai (Kai) Zhou’s team took the approach of looking at how mitochondria are produced, and in turn, maybe identify the process that creates better mitochondria.
The fuller story is here, but what’s important is that Zhou’s team found a molecule on the surface of mitochondria called Tom70 was playing a large part in regulating the formation of new mitochondria. By messing with the Tom70 levels, they enabled mitochondria to stay healthier, longer… in fruit flies.
Yes, some fruit flies were harmed in bringing you this possible secret to everlasting youth.
At least, Zhou hopes so. “We discovered a new function for this protein and we provide a mechanism of how Tom70 can do good things to the cell,” he said.
“Now that we have this different hypothesis of why mitochondrial dysfunction happens during ageing and age-related diseases, we open a completely different way to think about, measure, mitigate and reverse that process.”
“Additionally, if our hypothesis proves to be true, it will naturally lead to products, such as supplements or drugs. It just takes time.”
The future. A time when you won’t have to worry about how long it takes for your health stocks to come out of a bear market.
To markets, which could do with a little bit of reversal after what Power described as another “skittish” week, making a change to our favourite term of late, “volatile”.
By 1pm (AEST) on Friday The S&P/ASX 200 index was up 0.95% in the past five days, while the S&P/ASX 200 healthcare index, had fallen 0.77%.
“It’s been a very choppy week with some down days and up days which is not giving investors a huge amount of confidence to step into the market,” Power said.
However, in some positive news Power said shares in life sciences companies haven’t seemed to have fallen too much even with weakness in the broader market, perhaps finally reaching a floor.
“Stocks that have been absolutely walloped are finding a floor and holding ground which is an interesting observation across the sector,” he said.
“We might stay on the floor for a while but there’s been a lot of price erosion in the sector and it’s not as if we haven’t felt any pain.
“As confidence starts to return hopefully in a couple of months or toward the end of the year we will see renewed interest.
Making news this week, fertility company Monash IVF (ASX:MVF) has announced the acquisition of PIVET Medical Centre in Perth and Fertility Centre in Cairns for $9.4 million funded by cash.
Power said while small, the acquisitions were positive and would expand its presence in WA and bolder market share in North Queensland. The company has an Add rating on the stock and target price of $1.26 per share.
“We think it’s quite a stragetic move and in Perth the business has an 8% market share which over time they can build upon to around 20% so it will be an important revenue generator,” he said.
Shares in Monash rose ~5% in the past five days to ~$1.10.
Immuno-oncology company Immutep (ASX:IMM) saw its share price rally ~16% to ~40 cents after announced it had appointed new talent to its Clinical Advisory Board (CAB).
The board serves as a strategic resource to Immutep as it continues to advance its pipeline of LAG-3 programs, including combination therapy programs for lead product candidate eftilagimod alpha (efti of IMP321).
Immutep recently presented new biomarker and exploratory analysis data from its Phase IIb AIPAC trial at ESMO’s Breast Cancer Congress in a poster presentation.
The AIPAC trial evaluated efti in combination with paclitaxel chemotherapy, compared to placebo plus paclitaxel, in 227 patients with HER2-negative/HR positive metastatic breast cancer.
“This is one of those oncology companies that potentially has some big upside over the next few years so we are very keen on,” Power said.
Rhythm Biosciences (ASX:RHY) has filed for an Australian Register of Therapeutic Goods (ARTG) listing for ColoSTAT, its game-changing simple blood test to detect colorectal cancer.
The ARTG filing is the final step required to secure market access in Australia, with launch expected later this year. ColoSTAT is aimed at global mass market screening and has the potential to ultimately provide an alternative to an invasive colonoscopy.
“Applying for regulatory approval in Australia is a good step forward for Rhythm,” Power said.
Despite the good news, Rhythm’s share price fell ~5% in the past five days to ~$1.15.
Dementia fighting company Actinogen Medical (ASX:ACW) saw its share price drop ~11% this week to ~7.4 cents. The company is working on treatment for the early stages of Alzheimer’s disease.
Actinogen has announced following positive results for attention and working memory in its recent double-blind XanaMIA Part A trial, where it had conducted a reassessment of its priorities and planned expenditures.
As a result of the reassessment, the company announced it will prioritise its Alzheimer’s Disease and major depressive disorder clinical programs for Xanamem, where cognition is the primary focus.
“They are progressing to do a Phase 2 trial for Alzheimers which is obviously a huge market with very few treatments available,” Power said.
“If they even get this half-right the market cap will be significant higher than it is at the moment.”
Private hospital operator Ramsay Healthcare (ASX:RHC) is Power’s stock of the week. The company is currently the subject of a US$20bn takeover bid by US investing giant KKR.
Ramsay shares are currently trading ~$78.71 compared to an indicative takeover price of $88 per share.
“Because the market is still quite volatile and skittish or whatever words you want to pull out I thought there’s still quite a bit of upside at its current price if the deal goes through,” he said.
“There’s still a few hoops to jump through but it comes back to the theme of private equity chasing quality asset-based companies.
“Ramsay has a dominant market position as a private hospital operator in Australia and also have their overseas operations in France, the UK and other parts of Europe so are a quite a strategic play for private equity.”
He said assuming the deal goes through, investors could make a tidy little profit.
“I think if you’re a betting man there’s better than a 50% chance of the deal going through.”