ScoPo’s Powerplays: Taps on again with ASX health stocks in BIG capital raises

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.

Several ASX health stocks have announced successful capital raises during the week
Mayne Pharma announces the sale of Metrics Contract Services for $679 million
Heavily shorted Nanosonics surges ~80% since June but Power thinks time to trim holdings

Don’t feel like doing the household chores or exercise? How about catching up with family and friends?

You may want to reconsider with a study by researchers at Sichuan University in China and published by the American Academy of Neurology finding physical and mental activities, such as household jobs exercise and visits with family and friends, may help lower the risk of dementia.

The 11-year study involved 501,376 people from a UK database without dementia and an average age of 56, looking at the effects of these three activities, along with mental activities and use of electronic devices in people both with and without higher genetic risk for dementia.

Participants filled out questionnaires at commencement of the study, including one on physical activities. They were also asked about household chores, job-related activities, and what transportation they used.

Participants completed another questionnaire on mental activities and were asked about their education level, whether they attend adult classes, social interactions and how often they use electronic devices such as playing computer games, watching TV, and talking on the phone.

Additionally, participants reported whether they had any immediate family members with dementia to help researchers determine if they had a genetic risk for Alzheimer’s disease. At the end of the study, 5,185 people had developed dementia.

After adjusting for factors such as age, income, and smoking, the researchers found most physical and mental activities studied showed links to the risk of dementia.

People who were highly engaged in activity patterns including frequent exercises, household chores, and daily visits of family and friends had 35%, 21%, and 15% lower risk of dementia, respectively, compared to people who were least engaged in these activities.

To markets… capital raising tap back on

After modestly being up for the week at close on Thursday by 12.30pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) had fallen ~1.1% in the past five days, while the S&P/ASX 200 (ASX:XJO) index was up 0.7%.

Power said the theme for the week seems to be capital raising among the health sector. Leading the capital raises has been eye disease specialist Opthea (ASX:OPT) which went into a trading halt on Thursday.

The AFR is reporting Opthea is asking investors for a $US70 million equity injection, which it needs to secure for a $US240 million ($344 million) funding deal. According to the report Opthea has told investors that Carlyle Group (Nasdaq:GC) will inject $US120 million into the company, with an option to increase by another $US50 million.

Mesoblast (ASX:MSB) has announced it had raised US$45 million (~A$64.5 million) through its private placement. Mesoblast issued 86.7 million shares at 75 cents/share to commercialise its lead product remestemcel-L, which aims to treat children with steroid-refractory acute graft versus host disease. The company’s shares are up ~7% in the past five days.

Medical Developments International (ASX:MVP) will have $20 million more in its coffers after completing the placement and institutional entitlements components of its fully underwritten $30 million capital raising.

The placement and institutional entitlement offer raised ~$20 million with a retail entitlement offer which opened on Thursday and will close on August 25 to raise a further $10 million.

“There is quite a bit of interest coming back into the health sector,” Power said.

Companies refocusing priorities

There’s been no shortage of news in the health sector this week. Mayne Pharma Group (ASX:MYX) rallied ~12.54% in the past five days after announcing the sale of Metrics Contract Services for $679m.

Metrics provides a broad range of services from drug development through to commercial manufacturing, all from its facility in North Carolina. In an announcement MYX chair Frank Condella said the move is part of a plan to create a leaner and more focused business with financial flexibility to support its strategic objectives.

Power said the MYX deal is an example of health care companies reprioritising their focus and look for more innovative to ways to continue their progress.

“Mayne has sold off their clinical trials business which leaves them with a business focusing on women’s health and dermatology,” he said.

“Many companies are reprioritising and undertaking strategic reviews.”

Power said LBT Innovations (ASX:LBT) is another example having reviewed their technology and linking up with major distributors including Thermo Fisher.

LBT’s intelligent imaging and machine learning software is aimed at automating the imaging, analysis and interpretation of culture plates following incubation.

Positive trial news

Neuren Pharma (ASX:NEU) announced its Phase 2 clinical trials of NNZ-2591 in children with each of Phelan-McDermid syndrome (PMS) and Pitt Hopkins syndrome (PTHS) are now open for enrolment.

The first subjects are expected to enter the trials imminently at Rush University Medical Center in Chicago.

A new drug application (NDA) was submitted to the US FDA for NEU’s Rett syndrome treatment through its partner, Acadia Pharmaceuticals. The company’s trofinetide investigational drug is aimed at treating the syndrome in adults and pediatric patients two years of age and older.

The submission has triggered a milestone payment of US$10 million following acceptance of the NDA for review by the FDA.

“The milestone payment was very important to them for the product they out-licensed to Arcadia and they’re awaiting an approval from the FDA and then potentially licensing out the rest of the world rights,” Power said.

Shares in Neuren are up 0.37% in the past five days to $5.47.

Imugene (ASX:IMU) was up 9% on Wednesday after announcing that it has dosed the first patient in cohort 3 in the Phase I clinical trial of oncolytic virotherapy candidate, CHECKvacc.

The Phase 1 trial is recruiting patients with triple negative breast cancer (TNBC) and will be conducted at LA’s cancer research centre, City of Hope.

“Imugene is making good progress,” he said.

ScoPo’s Powerplays – Time to trim positions on rallying Nanosonics

Heavily shorted Nanosonics (ASX:NAN) is Power’s stock of the week having come back from its lows in mid-June and going past Morgans’ 12-month price target of $4.86.

“It’s almost up 80% in six weeks,” Power said.

Nanosonics has developed and commercialised the trophon EPR device, a unique automated disinfection technology, which was the first major innovation in disinfection for ultrasound probes in more than 20 years.

The company has transitioned to a direct sales model in North America this year and is due to deliver its full year results on August 23, which Power thinks will be solid enough.

“It ran through our price target of $4.86 so leading into the result we think it’s an opportunity for investors to trim positions.”

“Nanosonics is quite highly shorted and one of the most shorted on the ASX being a high growth company and they have had a couple of hiccups in terms of perceptions of that growth which has clipped the company’s wings over recent times.

“We are looking for confirmation that growth is back on track which we are confident on but think it’s well and truly factored into the current share price.”

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. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.