ScoPo's Powerplays: Stress eases as ASX health stocks enjoy much needed rally

ASX health stocks extend weekly gains on Friday as markets rally on back of promising US inflation figures
Wound care company Avita rises 24% and biotech Antisense is up 18% for past five days
Fertility company Monash IVF provides solid H1 FY23 trading update at AGM on Friday

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplays.

Feeling stressed and want to improve your sleep? Switching up your diet may help. APC Microbiome Institute at the University College Cork in Ireland have found a diet high in prebiotic and fermented foods can help lower a person’s perceived stress levels and improve sleep quality.

Principal investigator in the APC Microbiome Institute and lead author of the study published in Molecular Psychiatry, Dr John F Cryan, said his research team had been working on the relationship between stress and gut microbiome for more than 15 years since discovering animals that were stressed in early life had an altered microbiome.

“Mice that grow up without microbes have an exaggerated stress response, and certain strains of bacteria can alleviate stress in mice models,” Dr Cryan told Medical News Today.

He said while previous research had shown stress and behaviour are also linked to our microbiome, it has been unclear until now whether changing diet — and therefore our microbiome — could have a distinct effect on stress levels.

Time for some kombucha.

To markets….

And less stress for ASX health care stocks up for the week to Thursday and then experiencing a solid Friday rally. By 3pm (AEDT) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 5.60% in the past five days, while the S&P/ASX 200 (ASX:XJO) rose 3.76%.

“Markets have roared ahead on Friday after the US inflation data for Oct was 7.7% down from 8.2% in Sept, giving confidence that inflation coming under control,” Power said.

“We still have confidence in a Christmas rally and last week’s stock of the week Nanosonics (ASX:NAN) is up 7.8%.

“The sector is looking better and I think we sort of hit rock bottom and are bouncing on what has been a pretty terrible 12 months for the sector.”

Ansell flags tough FY22 but expecting improvement

Operating in the personal protective equipment space (PPE) space Ansell (ASX:ANN) maintained FY23 guidance at its AGM this week.

However, ANN flagged the result is “more likely to be in the lower half of the range, with downside risk to revenue being partly offset by a more favourable outlook on costs”.

The company said the external environment remains challenging. ANN said its industrial business was enduring softer sales in Europe and the US as orders were cut back amid a slowing economy.

ANN’s larger single use medical gloves, surgical suits and PPE business, which soared during the first two years of the Covid-19 pandemic, is now grappling with oversupply and falling margins.

The company said the higher USD is significantly unfavourable to its USD reported earnings and exit from its Russian production operations will mean the loss of earnings from that business.

“Exit from Russia will mean that $9m EBIT (and 5.8¢ EPS) in FY22 will not reoccur in FY23,” ANN said in its AGM presentation.

The company maintains FY23 EPS guidance range of US115¢ – US135¢ while noting that the final EPS outcome is more likely to be in the lower half of this range.

“There are still positives though with Ansell that the outlook is improving and they are a global player in PPE which gets used in both health and industrial settings,” he said.

“A lot of comments were actually favourable and quite constructive.”

Avita jumps 24% in past five days

Wound care company Avita Medical (ASX:AVH) has seen its share price rocket ~24% higher in the past week.

AVH this week announced achievement of co-primary endpoints as a result of updated analysis of data from its clinical trial evaluating the safety and effectiveness of its RECELL System for soft tissue repair.

The study met two co-primary endpoints based on pairwise comparisons where each subject received both RECELL treatment and standard of care treatment (control).

One endpoint had a hypothesis of superiority for donor skin sparing and the other co-primary endpoint had a hypothesis of non-inferiority for healing.

RECELL achieved statistically significant donor sparing over control (p<0.001) and statistical non-inferiority for healing versus control (p<0.025).

The company also reported its Q3 FY22 revenue on Friday morning. AVH reported total revenue was $9.1 million, compared to $7 million in the pcp. Gross profit margin was 83%.

During the quarter, Avita also received a Breakthrough Device designation from the US FDA for the RECELL System for soft tissue repair and vitiligo.

Antisense rallies ~18% in five days

Antisense Therapeutics Limited (ASX: ANP) has rallied in the past five days on no news.

ANP announced in September it had commenced dosing in the combination therapy trial of ATL1102 to treat Duchenne muscular dystrophy (DMD).

The company will be investigating the mouse model of DMD to assess the clinical utility of ATL1102 when used in combination with dystrophin restoration drugs (those that are approved in the US for the treatment of DMD).

“Antisense will hold its AGM next week and we should get a bit of an update on how that clinical trial is progressing,” Power said.

Power said ANP has a new chief commercial officer Dr Anthony Filippis to drive strategy.

Impedimed extends contract with AstraZeneca

Medical software technology company ImpediMed (ASX:IPD) has announced details of the third contract extension related to its SOZO Digital Health Platform in a clinical trial being conducted for AstraZeneca.

The Phase IIb trial is using the platform to track patient fluid volume in a pharmaceutical study focused on chronic kidney disease.

The trial has been extended from 21 to 29 months, with 210 SOZO devices being used in the extension. The contracts will generate more than $6.7 million in revenue across the trials. IPD has recognised ~$5.7 million in revenue up to September 30, 2022 under the contracts.

The company said the remaining $1 million of revenue will be recognised throughout the remainder of FY22.

IPD has reached a milestone of 500,000 patient tests performed with SOZO. With over 1,100 devices in use globally, including over 500 in the US core business, the pace of patient testing continues to accelerate with 100,000 patient tests performed in just the past six months.

ScoPo’s Powerplay – Monash IVF provides solid H1 FY23 guidance

Fertility company Monash IVF (ASX:MVF) is Power’s stock of the week after giving a solid trading update at its AGM on Friday.

A key measure analysts look at is stimulated cycles for IVF companies. MVF said its stimulated cycles were down 4.9% on pcp, which compares to industry volumes as per Medicare stats that were down ~8.5%.

“July was weak as previously flagged down 10.1% on pcp but cycles improved in August to October, down 3.3% on pcp,” Power said.

MVP re-affirmed FY23 underlying NPAT growth greater than 10%. The company noted that NPAT growth is expected to be skewed towards H2 FY23 given impacts of weaker July period.

The company said full half year contributions for acquisitions will also be in the second half along with improvements in its ultrasound business and international recovery.

“We think this is a strong trading update and will provide reason for consensus upgrades to full year underlying NPAT growth,” Power said.

“MVF continues to remain well positioned to the structural growth drivers in the IVF sector.”

MVF has a 21% market share in the IVF market in Australia with 13 permanent fertility clinics, eight satellite clinics, 17 ultrasound practices, and two specialised diagnostics laboratories and two day hospitals.

MVF will bring 15 new fertility specialists into its network. The MVF share price is up 0.22% in the past five days.

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