Health Check: Angry investors birch Telix shares after third US regulatory setback

• The FDA has refused Telix’s kidney imaging marketing application, sending shares into a $1.1 billion plus tailspin
• With Somnomed firing, investors (and patients) are sleeping easier
• Alcidion is back in black on UK hospital demand

Radiopharmaceutical leader Telix Pharmaceuticals’ (ASX:TLX) US regulatory horror stretch continues.

Today, the company said the US Food & Drug Administration (FDA) had knocked back its marketing approval application for its kidney cancer diagnostic, Zircaix  (TLX250-CDx).

Strictly speaking, the agency has issued a complete response letter, CRL, which asks for more information about drug manufacturing aspects.

The company remains confident of approval. But that didn’t stop investors wiping more than $1.1 billion off the value of the shares today.

Telix says the FDA has requested additional data “to establish comparability between the drug product used in the [supporting] Zircon phase III clinical trial and the scaled-up manufacturing process intended for commercial use.”

The agency has documented notices of deficiency issued to two third-party manufacturing and supply chain partners. This will require remediation prior to resubmission.

“We believe the outstanding matters are resolvable and that we can address the remaining FDA requests within a reasonable time frame,” Telix CEO Dr Christian Behrenbruch said.

Guidance unchanged

Telix says the latest setback won’t affect the company’s current-year guidance, which is based only on the approved products.

However, the company faces a delay getting Zircaix to market.

Zircaix would be the company’s third approved imaging agent, behind Illuccix and Gozellix for imaging prostate cancer.

In an investor briefing, one analyst suggested the company faced a six-month delay for re-submission and an overall one year slippage to approval.

“It’s a reasonable thesis but we are not giving guidance on timelines,” Behrenbruch said.

To be used with positron emission tomography (PET) screening, Zircaix is for diagnosing renal masses as clear cell renal cell carcinomas (or otherwise).

Third strike

While not the end of the world – the company could change manufacturers, for example – the setback is Telix’s third regulatory roadblock for the year.

In mid-July Telix revealed the US Securities and Exchange Commission had subpoenaed the company for disclosure-related information. This entreaty pertains to the company’s prostate cancer therapy program.

Telix dubbed the move a “fact finding request”.

In early May the FDA similarly issued Telix with a CRL. This related to the company’s marketing application for its glioma imaging agent, Pixclara.

In this case the FDA required “additional confirmatory clinical evidence”, but did not raise safety concerns.

Behrenbruch said the circumstances of both CRLs should not be “conflated” with each other.

The company notes that Zircaix has FDA breakthrough therapy designation and priority review status.

This acknowledges the importance of Zircaix “in addressing a significant unmet medical need and clinically demonstrating benefit over available diagnostics”.

Somnomed in “remarkable” earnings turnaround

While ResMed (ASX:RMD) continues to experience strong demand for its continuous positive airways pressure (CPAP) pumps and masks, Somnomed (ASX:SOM) shows there are cheaper alternatives.

While often overlooked by investors, Somnomed is the world’s biggest provider of oral appliance therapies to treat obstructive sleep apnoea (OSA, bad snoring).

Somnomed’s mouthguard-like appliances move the jaw and tongue forward, thus avoiding the incidence of potentially deadly “hypoxic episodes”.

Somnomed has been around since 2004, but its performance has been indifferent.

But the company today reported full-year earnings before interest tax depreciation and amortisation (EBITDA) of $9.2 million, a “remarkable turnaround” on the previous year’s token $900,000 effort.

The reported net loss narrowed to $3.45 million, from a $12.2 million deficit previously.

Revenue climbed 22% to $111.5 million, ahead of guidance of $105 million.

However, sales were more subdued in the June quarter, owing to a price increase.

In a report earlier this month, broker Morgans said Somnomed was in a much better position than in 2023, when it “appeared a challenge to dig itself out of a high interest facility while continuing to operate at a loss.”

Under refreshed management, the company has extinguished this debt.

The company cites an addressable market of 900 million people with obstructive sleep apnoea.

While GLP-1 ‘fat busting’ drugs could be seen as a headwind – thin people snore less – management says these Ozempic-style therapies have piqued interest in CPAP alternatives.

The company has guided to current year revenue of $119-126 million and EBITDA of $10-12 million.

Unusually, the company is run by co-CEOs and both are female: Karen Borg and Amrita Blickstead.

Alcidion defies UK health funding pressures

UK-focused hospital tech provider Alcidion (ASX:ALC) has defied the turmoil around the National Health Service (NHS) to produce a record result across “multiple key metrics”.

Alcidion’s key product, Miya Precision centralises patient and other data on a centralised platform, thus streamlining workflows and decision making.

Notably, Alcidion posted underlying EBITDA of $5.1 million, compared with a previous $3.4 million loss.

Revenue grew 10%, to $40.8 million.

The company has $34 million of contracted revenue to be recognized in the current year. Up to 2030, this number rises to $140 million.

“We expect to continue growing our contracted revenue during the year as new contracts are signed, as we demonstrated [last financial year],” CEO Kate Quirke says.

While the new-ish Labour government is restructuring the NHS, the company has been winning work from the NHS trusts that run the healing establishments.

Doctor care anywhere – but mainly in the UK

Speaking of the Old Dart, Doctor Care Anywhere Group PLC (ASX:DOC) is one of the UK’s biggest telehealth providers and is riding the remote medicine boom.

The company today reported a June (first) half profit of £500,000 compared with a £2.7 million previously, on revenue of £19.2 million (up 1.6%).

Doctor Care cites expansion into mental health and physiotherapy sectors. The company has also upgraded its booking systems, “significantly reducing the time taken to book appointments.”

Doctors Care is listed here because it was acquired by GP2U Telehealth in pandemic-ridden 2021.

The company raised a chunky $100 million in the process.

Chemist-versus-supermarkets war goes up a notch

One concern leading into Sigma Healthcare’s (ASX:SIG) full-year result yesterday was the potential impact of supermarket Coles Group’s (ASX:COL) intent to focus more sharply on the health and beauty sector.

The grocer has been worried that parties such as Chemist Warehouse (CW) – now owned by Sigma – has hugely expanded its range in areas such as skin creams and fragrances.

Naturally, Coles wants a cut of the action.

As it happened, Sigma reported robust sales for the second half – the period in which the Sigma-CW union took effect.

Coles’ result didn’t mention health and beauty – the disclosures aren’t that granular – but its overall sales also did well.

“There was some fear in the market that Coles was being more competitive in the health and beauty category, but there’s no obvious impact [on CW],” says Investors Mutual portfolio manager Daniel Moore.

He notes the health and beauty category is booming,  the result of product innovation and healthier lifestyles.

These goods are among the most nicked, by the way, which shows that shoplifters are becoming more health conscious.

Unlike the supermarkets, pharmacies have the advantage of prescription drugs which are dispensed at the back of the store.

This is no coincidence: while svelte patients wait for their GLP-1 scrip to be filled, they wander the aisles and no doubt find something else to buy … or nick.

Meanwhile, Wesfarmers (ASX:WES) this morning reported a 5.5% revenue increment for its health division, to $5.9 billion.

This arm includes the Priceline chain, acquired from Australian Pharmaceutical Industries in 2022.

The conglomerate’s $45 billion of revenue is dominated by Hammerbarn – er, Bunnings – but the health contribution is nothing to sneeze at.