ScoPo’s powerplays: Look to Mach7, Volpara and IMEXHS as quarterly reports near
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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.
The healthcare sector finished the Easter-shortened week down 1.4 per cent, snapping its three-week winning streak, while the broader market was flat.
“It’s been a pretty volatile week,” Scott Power said. “Sort of continuing that rotation, back into the more cyclical stocks and out of the high-priced tech names and some of the healthcare names. That continues to provide good opportunity, we think.”
US President Joe Biden this week unveiled a $US2 trillion infrastructure and jobs package, which would further bolster the American economy, Power said.
Cleanspace (ASX:CSX) was the big mover this week, plunging 58.6 per cent to finish Friday at $1.89 after the powered respiratory facemask company said North American sales had been lower than expected.
“That was the major news for the week,” Power said. “There were delays around the orders that were coming through out of the US; there was a pretty significant realignment of expectations. That saw the share price take a big step down.”
Morgans doesn’t formally cover the company, so Power said he didn’t feel comfortable saying whether this was a buying opportunity or not.
Cleanspace listed on the ASX in October after a $131 million IPO at $4.41 a share, and mostly traded from the high $6 to low $7 level until February – so IPO investors who didn’t take profits then are no doubt kicking themselves.
Kazia Therapeutics (ASX:KZA) finished the week up 10 per cent to $1.595 after the cancer biotech licensed its lead drug candidate, paxalisib, in Greater China.
Kazia will receive an upfront payment of US$11 million ($14.2 million) in cash and an equity investment from Simcere Pharmaceutical, plus milestone payments of up to $US281 million ($362 million) if the phosphatidylinositol-3-kinase (PI3K) pathway inhibitor is successfully developed as a treatment for the brain cancer glioblastoma.
“That business is doing really well,” Power said. “They’ve had pretty good results in clinical programs so far, so the fact that they’re now getting some serious interest from organisations around the world — that company is in a very good position.”
Cynata Therapeutics (ASX:CYP) fell 1.6 per cent over the week to 62c despite the stem cell company receiving ethics approval to expand its MEND trial beyond just COVID-19 patients to include those with respiratory failure from other conditions.
Given how well Australia has controlled the pandemic, the expansion is expected to substantially increase the pool of potential subjects for the trial, Cynata said.
“That’s obviously good news for them,” Power said.
“Their share price looks quite attractive to us. It’s sort of come off its recent highs, and when you compare it to Mesoblast (ASX:MSB), it does look very attractive. They’ve got a couple shots on goal for different indications in the next six to nine months, so it’s worth keeping an eye on.”
With the first quarter done and dusted, companies will be announcing this month how they performed, and Power suggests investors position themselves in companies that they think will do nicely.
Mach7 has “been a key stock for us for the last 18 months that we’re very keen on. We think that this half and this good quarter, that there will be some good cash flow numbers coming through for them,” Power said.
Volpara operates on a March year-end, and seasonably their fourth-quarter is their strongest quarter, “so we are expecting a solid result from Volpara,” Power said.
The company was bolstered from a recent acquisition, which is already delivering some early gains for them in a recent contract win.
Morgans also expects good things from IMEXHS (ASX:IME), a Latin American next-generation medical imaging company, whose share price has done very well in the past month.
“It’s basically gone from $1.80 to $2.30, and again, we think they’re going to have a good third-quarter report.”
Last week’s pick, Impedimed (ASX:IPD), closed the week flat at 11.5c but never dipped below that level, and reached 13c on Tuesday and Wednesday.
Overall, Power said, vaccines are rolling out, stimulus packages are growing and interest rates remain low.
“It feels like that the market’s taking that all in, and we’ll just see a steady rise over time, so our positive stance continues.”
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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