• Life science companies raised $387m in the third quarter, putting the total raised by the sector in capital raisings and IPOs at over $1bn
  • Micro-X stands to benefit from a backflip to the R&D tax credit, while Volpara, Telix and Ellume had good weeks
  • Power’s pick for the week is IVF company Virtus Health

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 for the week

“It was a busy week for the sector, and the market generally,” Scott Power says. “There’s still plenty of money being raised.”

In fact for the three months to September 30, $387m flowed into the sector in 32 capital raisings and two initial public offerings, Power says.

That’s in addition to $74m raised in the first quarter and $605m in the second quarter, for a total of $1.07bn flowing into the sector year-to-date.

“That is an indication that the market is still looking for opportunities and still looking to back high-risk plays,” Power says.

And it’s going to continue through the end of the year, he said.


Movers and shakers

In Australia, the sector was buoyed this week with news that the Morrison government had abandoned plans to reduce a research and development tax credit by $1.8bn, and instead add $200m in value to the incentive.

Power said Micro-X (ASX:MX1) would be among the big beneficiaries of the backflip, as the x-ray imaging company has high research and development costs.

“The stimulus for business generally is keeping the consumer in a positive frame of mind,” he said. Further stimulus measures will likely keep the market buoyant.

In the United States, the Food and Drug Administration announced it wanted to see at least two months of safety data and have an independent panel of experts weigh in before it approved a coronavirus vaccine.

“So no vaccine before election,” Power said.

But Brisbane-based flu diagnostic company Ellume announced it had been awarded $US30m ($41.8m) from the US National Institutes of Health to accelerate the development of rapid COVID-19 diagnostics.

The public, unlisted company has developed an at-home COVID test that works in conjunction with a user’s smartphone via a Bluetooth connection.

Power also highlighted data from Antisense Therapeutics (ASX:ANP), which announced on Friday more statistically significant data from a phase-two study of its drug candidate ATL1102, saying it looks like the antisense inhibitor injections could have a “profound” impact on the lives of boys with Duchenne muscular dystrophy.

Also, Telix Pharmaceuticals (ASX:TLX) announced on Tuesday it had been granted orphan drug designation for its brain imaging agent known as ^18F-FET. The designation makes Telix qualified for various drug development incentives.

Lastly, Volpara Health Technology (ASX:VHT) on Thursday announced its largest-ever second quarter for new sales, adding $NZ850,000 ($782,000) in annual recurring revenue (ARR) to take ARR to $NZ19.9m.

Power said it was a “very positive trading update” for the Kiwi breast density software company.


ScoPo’s powerplay

Power’s pick for the week is fertility company Virtus Health (ASX:VRT), which Morgans has a price target of $4.54 on. It closed at $4.33 on Thursday.

Morgans is predicting strong trading for the company in August and September following pent-up demand for IVF cycles as the coronavirus lockdowns ease.

Morgans reaffirmed its positive rating on the company on Thursday, saying it was “comfortable to sit at the top end of consensus” earnings estimates for Virtus.


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