ScoPo’s Powerplays: Which ASX health stocks are winners from the Federal Budget?
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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 ASX health stocks.
Good news for coffee lovers, particularly those who drink two to three cups a day, with new research showing it is not only associated with a lower risk of heart disease and dangerous rhythms but also with living longer.
Senior author of the study and head of arrhythmia research at the Alfred Hospital and Baker Heart Institute in Melbourne Professor Peter Kistler said because coffee can quicken heart rate, some people worry that drinking it could trigger or worsen certain heart issues.
“This is where general medical advice to stop drinking coffee may come from,” he said.
“But our data suggest that daily coffee intake shouldn’t be discouraged, rather included as a part of a healthy diet for people with and without heart disease.”
By midday on Friday the health index was up ~1.20% for the week, compared with the S&P/ASX 200 index at ~1.03%.
Power said cost of living pressures, the federal election and concerns about inflation had and would continue for some time yet to play on ASX health stocks.
“Health is still a growth part of the market so we are still not in favour compared to value stocks like resources,” he said.
“I think we need to get through the elections, have a couple of interest rate rises under our belt and get Covid behind us and then we will see risk appetite come back into play for companies delivering on what they say they will do.
“Most of the stocks in the life sciences space, no matter what they’re saying, the response is fairly muted but that will change.”
While health stocks may not be popular right now, Power said some parts of the sector could benefit from Treasurer Josh Frydenberg’s big spending, pre-election budget.
“If we look back over the past couple of months with all the volatility they’ve remained fairly stable.”
The Regis Healthcare share price rallied ~3.38% for the week to ~$2.14, while Estia Health is up ~1.56% to ~$2.28.
Virtus in March agreed to a takeover offer from UK private equity firm CapVest for $706 million.
Morgans has upgraded its target price for Monash to $1.29 despite weaker than expected Medicare billing numbers for IVF services in January and February, which was attributed to ongoing Covid-19 impacts, including suspension to elective surgery in Victoria.
“There’s just a deferment of IVF cycles and not cancellations so we forecast a pick-up,” he said.
Monash’s share price has fallen ~2.88% to ~$1.18 in the past week, while Virtus has also dropped ~0.37% to $8.03.
Small cap health imaging company Volpara (ASX:VHT), which specialises in the early detection of breast cancer, has seen its share price rally ~16% in the past five days to 89 cents.
“Volpara has been in the doldrums for nine months and I feel it is now starting to head higher and we’ve got evidence of that this week not only in terms of share price but the volume of shares being traded so that’s a positive for them,” Power said.
“Volpara has a March year end and typically their fourth quarter is seasonally a stronger quarter so we’d expect them to be solid when they report in late April.”
Another small-cap rebounding this week is Adelaide-based cold cathode X-ray tech Micro-X (ASX:MX1), up ~37% to 22 cents in the past month, recovering from a loss in the past year of ~31%.
“The market has not paid much attention to MicroX since probably last October and shares have come under a lot of selling pressure,” he said.
“There’s much more volume going through which is positive and they’ve had a couple of positive announcements including appointing a major distributor in the US for their portable X-ray machine called Rover which should help increase the units sold.”
The company has also achieved another milestone in its three-year early stroke detection project.
“Micro-X is is developing some excellent Australian X-ray technology which has applications for the health sector but they’re also doing work with bomb detection and airport security self check-in,” Power said.
Oncology company Telix Pharmaceuticals (ASX:TLX) is down ~0.7% in the past five days to $4.17 despite positive announcements of major breakthroughs with its lead drug candidates.
“They’ve been quite volatile and the share price has been up and down,” Power said.
Telix announced this week the US Food and Drug Administration (FDA) had granted Orphan Drug Designation (ODD) for Telix’s TLX66 for conditioning treatment before hematopoietic stem cell transplant (HSCT).
In another significant progress report, Telix has advanced its glioblastoma multiforme (GBM) therapy candidate TLX101 into the next stage of clinical development.
The company has also signed an agreement with Xiel for the distribution of Telix’s prostate cancer investigational imaging product, Illuccix, in the UK and Ireland.
Brain-focused health company Neuren Pharmaceuticals (ASX:NEU) has fallen 2.10% to $3.96. The fall comes despite Neuren announcing the US FDA has approved the Phase 2 trial of NNZ-2591 in a a rare condition called Pitt Hopkins syndrome (PTHS).
Small cap cannabis company Avecho (ASX:AVE) has seen its share price rally ~7.70% this week to 0.014 cents after announcing positive results from a Phase IIa study of its CBD topical gel to treat pain associated with arthritis of the hand.
During four weeks of dosing, the study demonstrated statistically significant daily improvements in hand pain, hand functionality, grip strength, finger stiffness and anxiety.
Hand osteoarthritis is a common, painful, and irreversible condition impairing hand strength and function. Current treatments are limited to symptom relief and preservation of hand function.
ResApp Health (ASX:RAP) has fallen back ~7% to 8 cents in the past five days after jumping 65% in a day last week when it announced positive results for its novel smartphone-based COVID-19 screening test.
In a pilot clinical trial of 741 patients (446 COVID-19 positive) in the US and India, the test was found to correctly detect COVID-19 in 92% of people with the infection.
ResApp’s proprietary machine learning technology could identify coughs from audio recorded using the smartphone’s in-built microphone.
“It is significant from the point of view if it gets approved of removing the need for rapid antigen testing,” he said.
“This technology came out of the University of Queensland so it’s very well validated and ResApp already have approval for certain respiratory conditions like pneumonia and asthma.
“What ResApp announced was probably the most significant event of the company’s history.”
Pharmaceutical development company Pharmaxis (ASX:PXS) is Power’s stock of the week. Pharmaxis has been hosting several presentations showcasing the company’s leading drug discoveries and their applications.
“This company has some interesting catalysts coming between now and the end of the year,” Power said.
“They are undertaking a scarring trial for their topical application run by Professor Fiona Wood in Perth for people with scars from trauma such as burns,” he said.
“They are also running another trial for myelofibrosis and they have started recruitment in Australia and South Korea.”
Data for both trials is expected later this year.
“The company only has a market cap of ~$50 million yet are undertaking two major trials and so we are always looking for the next Neuren and one of the stocks that springs to mind is Pharmaxis.”
The Pharmaxis share price has fallen ~3.4% in the past week to 8.5 cents but is up ~6.25% over a one year period.