ScoPo’s powerplays: Searching for gems as healthcare sector languishes
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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.
It’s been another down week for the healthcare sector – its eighth losing week in a row, in fact. Late Friday afternoon, the sector was down 3.0 per cent for the week, while the All Ordinaries was down just 0.33 per cent.
“We’ve still got a rotation out of healthcare,” Power says. “That sort of thematic has continued for a couple of weeks now.”
In part that’s due to the stronger Aussie dollar, as well as weakness by blood products giant CSL (ASX:CSL), whose shares have been dragged down over concerns of plasma collection rates in coronavirus-ravaged United States.
On Friday CSL shares were trading for $268.955, down 2.2 per cent for the week and 9.3 per cent this month.
“That’s certainly when you want to start accumulating in Australia’s largest listed company,” said Power. “We’re almost quite enthused with the weakness in the share price.”
Power is also watching Ramsay Health Care (ASX:RHC) and Cochlear (ASX:COH), large caps that have also been underperforming. Morgans has price targets of $62 and $195.30 on them, respectively; they were trading for $59.60 and $190.65 on Friday.
“That’s more attractive as well,” Power said of Cochlear. “Both of them are sitting in hold territory.”
Managing director Paul Brennan said that in the short-term, sales would be challenging “particularly in the US,” with the company’s wound-healing synthetic polymer not expected to see accelerated adoption until hospitals have more capacity.
“Their share price has been under a fair bit of selling pressure,” Power said.
Morgans has been recommending fertility companies Monash IVF (ASX:MVF) and Virtus Health (ASX:VRT), as recent Medicare figures show Australian women opting for more IVF cycles now that the lockdowns have eased.
“They certainly look very interesting as far as where their share price is sitting,” Power said.
MVF was trading at 73c on Friday, down 23.4 per cent for the month, while VRT was changing hands for $5.31, up 17.5 per cent in January.
One big winner this week has been Antisense Therapeutics (ASX:ANP), whose shares were trading for 20.5c on Friday – up 10.8 per cent for the day and 159 per cent for the month.
The failure of a competitor’s clinical trial testing a Duchenne muscular dystrophy treatment is behind the price rise, Power said.
“That’s a positive for Antisense,” Power said. “Its treatment targets a different pathway.”
Corporate Connect analyst Marc Sinatra raised his price target on ANP to 43c after Sarepta’s drug failure.
Meanwhile it was a good week for Mesoblast (ASX:MSB), whose shares gained 8.9 per cent for the week to $2.46 (as of 3pm Friday), after the company announced follow-up data from its phase 3 trial of rexlemstrocel-L stem cell injections to treat chronic heart failure.
But as Power noted, that was “off a low base”. MSB shares traded for as high as $5.05 in November.
Neuren Pharmaceuticals (ASX:NEU) gained 3.2 per cent for the week, to $1.465, after being granted three orphan designations for its drug candidate NNZ-2591 by the European Commission to treat three rare neurodevelopmental disorders.
Power called that “very positive for them”.
Pro Medicus (ASX:PME) was up 17.8 per cent for the week, to $38.02, after signing a seven-year, $40 million deal with Intermountain Healthcare, the largest healthcare provider in the US state of Utah.
Orthocell (ASX:OCC) finished the week up 22.3 per cent to 57.5c after gaining regulatory clearance in the US for its dental membrane.
He also circles back to Monash and Virtus.
“We’re really very keen on the IVF players, given that their share prices have come under some pressure,” he says.
While healthcare is suffering as traders switch into energy, resources and retailers – the “reopening thematic” – that just means there’s buying opportunities out there.
“There’s good companies out there; we’re always looking for the gems.”
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