• Dark clouds continue to hover over ASX health stocks
  • Health imaging company Volpara’s FY22 results in line with expectations
  • Fight for fertility company Virtus enters another round

Healthcare and life sciences expert Scott Power – a senior analyst with Morgans Financial for 24 years – on what the movers and shakers have been doing in health and which ASX health stocks make Scott’s Powerplays.

Scientists have made a breakthrough for combating middle-aged memory loss and a possible early intervention for dementia.

Our brains rarely record single memories but rather store memories into groups so that the recollection of one significant memory triggers the recall of others connected by time. But as we age, our brains gradually lose the ability to link related memories.

However, UCLA researchers have discovered a key molecular mechanism behind memory linking and also identified an already US Food and Drug Administration (FDA) approved drug for HIV treatment to restore this brain function in middle-aged mice.

“Our memories are a huge part of who we are,” said David Geffen School of Medicine at UCLA Professor of Neurobiology and Psychiatry Alcino Silva.

“The ability to link related experiences teaches how to stay safe and operate successfully in the world.”

The UCLA team focused on a gene called CCR5 that encodes the CCR5 receptor, the same one that HIV uses to infect the brain cell and cause memory loss in AIDS patients. Silva’s lab demonstrated in earlier research that CCR5 expression reduced memory recall.

In the current study, Silva and his colleagues discovered a central mechanism underlying mice’s ability to link their memories of two different cages.

Boosting CCR5 gene expression in the brains of middle-aged mice interfered with memory linking. The mice forgot the connection between the two cages.

But when scientists deleted the CCR5 gene, the mice were able to link memories that normal mice could not.

Silva had previously studied the drug, maraviroc, which the FDA approved in 2007 for the treatment of HIV infection, discovering that maraviroc also suppressed CCR5 in the brains of mice.

“When we gave maraviroc to older mice, the drug duplicated the effect of genetically deleting CCR5 from their DNA,” Silva said.

“The older animals were able to link memories again.

“Our next step will be to organise a clinical trial to test maraviroc’s influence on early memory loss with the goal of early intervention.”

To markets…..

And we all might need a little help remembering the good times of ASX health stocks.  By 12.30pm (AEST) on Friday The S&P/ASX 200 index was up 0.23% in the past five days, while the S&P/ASX 200 healthcare index had fallen 1.65%.

“It is another fairly dark week for the market and healthcare sector and I think we still have a few heavy dark clouds hanging over us,” Power said.

This week saw the start of an ALP Government in Australia, which Power said should not really impact the healthcare sector substantially.

“We might see a bit more money pumped into aged care and GP clinics but nothing too much should change.”

Volpara targets larger US customers

Health imaging company Volpara Health Technologies (ASX:VHT), which specialises in the early detection of breast cancer, posted its FY22 result which Power said was in line with expectations.

The company reported revenue of NZ$28.7m, including operating revenue of NZ$26.1m up 32% on pcp and grant revenue of NZ$2.6m, slightly ahead of expectations. 

It was the first major results delivered by new CEO Terri Thomas. The experienced healthcare executive took over  from founder Dr Ralph Highnam who is transitioning to chief science and innovation officer.

Highnam is now focusing on leveraging data collated from the company’s analysis of mammogram images and breast composition to develop the next wave of innovative AI enhancements and strengthen Volpara’s portfolio for its extensive customer network.

“The transition has been well planned internally and Thomas did her first presentation to the market and came across really well,” Power said.

“The result was well flagged so there was no surprises but the change in focus is they are really trying to target the large breast clinics or health delivery networks which they are known as in the US.

“Volpara believes that will be a much more profitable customer base to target.”

Morgans has an Add rating and 12 month target price of $1.94 on Volpara, which is trading at 74 cents.

“It has terrific technology and is doing all the right things but because it’s still losing money and in the health tech space it’s been out of favour for 12 months or more, but we are positive on its long-term outlook,” Power said.


Nanosonics on track with transitions to direct sales model

Nanosonics (ASX:NAN) has provided a business update on the transition to a direct sales model in North America. Customers originally with GE Health will now transfer over to Nanosonics.

The company said transition of customer accounts has started and on track for completion by end of June 2022. Nanosonics noted its Indianapolis warehousing and logistics operation has sufficient capacity to fulfill demand.

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.

Nanosonics’ share price has come under pressure since news of its move to a direct sales model in North America.

The company continues to build out sales and clinical applications teams to support the transition, with nine out of an anticipated 15 positions already started. Several staff members from the GE disinfection team have joined Nanosonics.

“We had colleagues go over and visit their facility in Indianapolis and met with senior management team and were impressed with what they heard,” Power said.

“Again they’re out of favour but operationally doing very well.”

Morgans has maintained its Add rating and target price of $5.43/share. It is currently at $3.68/share.


BGH back in ring as battle for Virtus takes on another round

Equity firms CapVest and BGH Capital continue their bidding war for fertility company Virtus Health (ASX:VRT).  BGH this week increased its takeover offer to $8.15/share with Virtus on Thursday informing the market it had received no response from CapVest to its request as to whether the company will increase its offer.

Australia’s latest BGH offer compares with London-based CapVest’s $8.15 or $8.10/share depending on whether a scheme of arrangement is approved.

Virtus said while mindful that the revised BGH offer is schedule to close on May 31, it had sought an updated opinion from Deloitte Corporate Finance in respect to the CapVest scheme of arrangement.

Virtus is Australia’s biggest IVF provider with operations also in Singapore, Denmark and Ireland.

“The Virtus battle continues to twist and turn and now it looks like BGH have bought a few more per cent in the company and increased their offer price so that looks pretty interesting to us,” Power said.

“BGH were the under bidder but now they have the superior bid and the scheme meeting which CapVest scheduled for June 6 looks highly likely to be defeated so they need to respond to the BGH offer.”

The Virtus share price is now at the latest takeover bid price of $8.15, having risen ~32% in the past year.

In other health care news

Adelaide-based cold cathode X-ray tech for health and security markets Micro-X  (ASX:MX1) reached a milestone during the week and is closer  to bringing its Passenger Self-Screen Checkpoints to North American markets after its concept design was approved by the US Department for Homeland Security (DHS).

“They’ve done a nice little prototype of the self-checking process for airports which they’re developing using their X-ray technology,” Power said.

Soft tissue regeneration company Aroa Biosurgery (ASX:ARX) is treading up this week after announcing positive full year FTY 22 results. Product sales of NZ$39 million represented 81% year on year growth.

The company has a strong cash balance of NZ$56 million and provided product sales guidance of NZ$51-$55m for FY23.

“Aroa is starting to do really well and is worth having a look at,” he said.


ScoPo’s powerplays – Nail biting time

This week’s Power has chosen clinical stage biotech Hexima (ASX:HXL) as his stock of the week. Hexima is investigating the application of plant-derived peptides in anti-fungal applications in human infections.

The lead product, Pezadeftide, is a plant-derived peptide being developed for the treatment of  onychomycosis (fungal nail infection). Pezadeftide is water-soluble and able to rapidly penetrate the nail and reach the nailbed to fight the fungal infection.

According to a Morgan’s research note on Hexima there is a significant unmet need for treatment of  fungal nail infection. There is a large addressable market estimated at US$3.7 billion in 2018 by Persistence Market Research.

There are 23 million people in the US suffering from fungal nail infection of which 20 million are untreated, with the remaining 3 million patients being treated by either a prescription product or an over-the-counter product.

The most effective product topical treatment is Jublia, which launched in late 2014 and in 2015 achieved sales in the US of US$330m.

Results from a Phase II clinical trial is expected before the end of June 2022. Subject to positive results HXL will look to initiate a Phase III trial in late CY22, which will require additional capital according to the company.

“Hexima is a company with a near term catalyst which we think is high probability, so we are happy to call it out,” Power said.

Hexima has a market cap of $47.92 million. Shares in the company have rise 76% in the past year to 30 cents.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.