Health Check: Control Bionics eyes 20pc revenue growth and ‘near term' profitability

Control Bionics says it has overcome the “challenges” of the 2023-24 year
Ord Minnett identifies the health sector stunners
Noxopharm finds a drug manufacturer to kick-start its lupus trial

Health Check is renowned biotech journo Tim Boreham’s daily wrap covering morning movers and shakers of note in the ASX Healthcare sector, Monday through Thursday.

Assistive communication group Control Bionics (ASX:CBL) has flagged at least 20% revenue growth in the current year, on the back of a record sales backlog that is now being processed more expeditiously.

The company also says it is close to cash-flow even (excluding corporate costs) and expects to be “near term” ebitda positive “in all key geographic markets” for its core assisted communication arm.

At this morning’s AGM, the company said it had overcome “challenges” of the 2023-24 year, including a $1 million backlog of payments from the National Disability Insurance Scheme.

Control Bionics is about enabling disabled people to communicate more effectively by tapping the neural (or visual) signals sent from the brain to the muscles.

The company’s core tech Neuronode uses algorithms to convert these signals into code, which controls the devices. Other rival assistive technology devices require a keyboard, mouse, joystick, touch screen or eye-tracking to function.

The muscles don’t have to be functioning; as long as the electrical signals are extant. Users include those with motor neuron disease, spinal cord injuries, cerebral palsy and multiple sclerosis.

Control Bionics has also developed the world’s first autonomous wheelchair, Drone, which enables users to navigate around their house independently, without the need for a joystick, mouse or keyboard.

The company generated $5.3 million of revenue in the 2023-24 year, down 5% and a $5.9 million loss compared with a $5.56 million deficit previously.

US sales accounted for 80% of revenue. With the company resolving third-party billing issues, June quarter US sales hit record levels.

Meanwhile, the company is angling for US marketing assent for Drove, which is approved here.

Control Bionic shares edged up 1.3% to 7.6 cents.

The importance of picking winners (but not how to, sadly)

A new monthly summary of healthcare sector performance from Ord Minnett highlights the importance of picking winners rather than buying the index – although that is more easily said than done.

Cheekily dubbed Ord Health Check, the data shows the ASX200 healthcare index declined 2.1% in September, compared with the broader market’s 2.7% increase.

Over the year, the index and the broader market (as measured by the all ordinaries index) were on par with a 22% increase.

But Ords’ suite of 11 stocks (not necessarily in the top 200) gained an average 19.4% for the month and 54% for the year (79% on a weighted average basis).

Sigma Healthcare (ASX:SIG), Chemist Warehouse’s merger candidate, led the way with a 186% rise over the year, while Paragon Healthcare Paragon Care (ASX:PGC) (166%) and Regis Healthcare (ASX:REG) (141%) also recorded triple-digit gains.

There’s a brat in every pack, and in this case it was device maker ImpediMed (ASX:IPD), which lost 64% over the year but has recovered 27% over the last month.

With the exception of house of fertility Monash IVF Group (ASX:MVF), which it rates as a ‘hold’, Ords has a buy or similar calls on these stocks

For a more global perspective on the pulse of the sector, Janus Henderson Investors US portfolio manager Andy Acker says a falling rates cycle is likely to spur biotech stocks from their three-year bear market.

“Indeed, biotech has typically outperformed during periods of declining rates since low interest rates increase the net present value of future earnings, which in biotech can take years to be realised,” he says.

“As such, the industry has historically delivered gains seven out of eight times in the six months after the Federal Reserve’s first rate drop and outperformed the S&P 500 by an average of 16% over the following 12 months.”

He says while many small and mid-cap biotech stocks have depressed valuations, biotechs last year submitted a record number of US Food and Drug Administration (FDA) drug approvals in 2023.

“The pace of innovation continues, with companies reporting clinical progress for the next wave of medical advances in cancer, neuromuscular disease, and autoimmune conditions.”

Noxopharm gets its gear

A drug trial won’t get very far without securing a reliable supply, so it’s pleasing that Noxopharm (ASX:NOX) has overcome this by signing up a specialist contract manufacturer to produce the novel molecule for its upcoming autoimmune diseases trial.

The first-in-human trial, dubbed Heracles, tackles cutaneous lupus erythematosus, a form of lupus that affects just the skin.

SOF-SKN contains proprietary ultra-short oligonucleotides – DNA or RNA molecules – that are thought to reduce inflammation at its source.

The company is preparing for a phase I trial, but cautious the drug preparation will take several months.

“Manufacturing such ultra-short oligonucleotides requires considerable expertise [but] we are confident that our partner will deliver on time and to the high quality standards needed to support a trial in Australia,” says Noxopharm CEO Dr Gisela Mautner.

Noxopharm shares were steady at 12 cents.

At Stockhead, we tell it like it is. While Control Bionics is a Stockhead advertiser, the company did not sponsor this article.