Health Check: Polynovo shares go crackers after positive US reimbursement changes

• Perversely, Polynovo stands to benefit from a US reimbursement cut for outpatients
• ASX biotechs had a poor August, but they will Spring into action
• Race Oncology opens Hong Kong site in “cautious” trial rollout

PolyNovo (ASX:PNV) shares have sprung to a perky Spring start, soaring up to 25% on news of a favourable US reimbursement change for outpatient wound care procedures.

Glad to hear that someone’s happy with the RFK Junior regime!

As Polynovo explains it, doctors are paid a percentage of the price for each skin substitute used in outpatient wound care.

“This has disincentivised the selection of lower priced product, as it reduces the physician/surgeon payment with a decrease in product cost,” the company says.

“As a result, the market has favoured expensive products – driving significant Medicare outlays and making it harder for cost-effective options to compete.”

The Centers for Medicare & Medicaid Services (CMS) now proposes a flat reimbursement for outpatient skin substitutes, of US$806 per square inch.

Current payments are up to US$2000 per square inch.

“This fundamental change is designed to remove the economic incentive for surgeons to use higher-cost products and to create a more level, value-oriented market.”

Of course, Polynovo still needs to win its fair share of the affordable end of the market.

Acting CEO Dr Robyn Elliott says most of Polynovo’s sales to date have been for inpatients.

“Outpatient product application … is a significant potential growth area for Polynovo’s products,” she says.

“We are currently assessing the optimal commercial model for accessing this market opportunity.”

The crux is that Polynovo’s core Novosorb products are profitable under the proposed flat rate.

ASX shares box on after August of discontent

August was not the kindest month for the biotech sector, with a number of big-name stocks suffering setbacks.

According to Biotech Daily’s tally, the top 40 stocks lost 10% of their value, for a collective worth of $18.9 billion (its lowest level since May 2024).

Not included in the Top 40, the large caps fell 13% for a collective worth of $215.5 billion.

The Big Daddy caps are CSL (ASX:CSL), ResMed (ASX:RMD), ProMedicus (ASX:PME) and Cochlear (ASX:COH).

CSL did most of the damage, with the plasma giant’s stock down around 20%. Investors last Tuesday blew a raspberry at the company’s omnibus announcement of full-year results, a cost-cutting purge and a demerger.

Telix shares have lost 30%, the main culprit being a second ‘complete response letter’ from the FDA. This related to the company’s marketing approval application for its kidney cancer diagnostic, Zircaix.

Mesoblast (ASX:MSB) shares meanwhile are down 14%.

The company posted sales result for its recently-approved maiden product, Ryoncil, that didn’t quite meet expectations.

Put in context, the ASX200 improved 2.6%,while the Nasdaq climbed 4.9%.

“There’s no gilding the sow’s ear. August was a bad month for Australian biotechnology,” Biotech Daily opines.

“That said, it will make the Spring bounce-back look terrific or we really are in trouble.”

Other losers included Syntara (ASX:SNT) (down 55%), Universal Biosensors (ASX:UBI) (down 43% and in voluntary administration), Amplia (ASX:ATX) (32%), MedAdvisor (ASX:MDR) (30%), Clarity Pharmaceuticals (ASX:CU6) (27%), Avita Medical (ASX:AVH) (19%), Genetic Signatures (ASX:GSS) (19%), Alcidion (ASX:ALC) (17%) and ImpediMed (ASX:IPD) (17%).

The best performer was 4D Medical (ASX:4DX), up 136% (and a further 36% yesterday on the back of FDA approval of its lung imaging tool).

The other key gainers were CurveBeam AI (ASX:CVB) (52%), Cynata Therapeutics (ASX:CYP) (43%), Actinogen Medical (ASX:ACW) (34%), Starpharma (ASX:SPL) (24%), EMvision Medical Devices (ASX:EMV) (15%), Prescient Therapeutics (ASX:PTX) (13%), Neuren Pharmaceuticals (ASX:NEU) (13%) and Nanosonics (ASX:NAN) (11%).

Sizing up the healthcare titans

Is CSL a bargain?

Far be it for us to say. But on a price-earnings (PE) measurement, the stock is cheaper than it has been for at least the past decade.

Morgan Stanley appraises CSL’s current PE multiple at 19 times, based on current year earnings expectations. The ten-year average stands at 31 times, thus implying an 38% ‘discount’.

Of course, the stock could well have been overvalued in the first place.

Resmed trades at an 8% discount to the ten-year norm, as does Ramsay Health Care (ASX:RHC).

Ansell (ASX:ANN) is 6% below par and Cochlear is about on trend.

Interestingly, the NZ -based Resmed rival Fisher & Paykel Healthcare (ASX:FPH) trades at a 16% premium.

Of course, this may prove nothing other than Kiwis like to be different.

Tali Digital boxes on, too

The developer of tools to enhance kids’ cognitive function, TALi Digital (ASX:TD1) has raised $446,000 in a placement of shares not taken up during its earlier rights offer.

In June the company raised $800,000 in a placement, but the follow-on entitlement offer raised only $140,000 of the targeted $700,000.

The company did the deal at one tenth of a cent.

As of the end of June, Tali had cash of $1.3 million.

Tali’s play-based tools are for attention deficit hyperactivity disorder and autism spectrum disorder.

Tali’s armoury includes the screening tool Detect and the training modules Train and Ready Attention GO!

“These programs are designed to be play-based interactions and can be complementary to existing therapy,” Tali says.

This puts Tali “at the forefront of improving early intervention for childhood attention and concentration performance.”

In June this year Tali paid $1.14 million of cash upfront for You Can Do It! Education (YCDI!), a “social-emotional” learning program that reaches one million students.

Sadly, Tali’s partner Genius Learning entered voluntary administration in March.

Tali depended heavily on Genius for product development, sales and marketing.

Tali is “engaging with the administrator to secure access and rights to its products and has contingency plans in place to mitigate disruption”.

Trial recruitment is not a race, says… Race

Race Oncology (ASX:RAC) has activated another key site for a 33-patient phase I trial to treat advanced solid tumours, at Hong Kong’s Queen Mary Hospital.

The study road tests Race’s RC-220, which repurposes an old cancer drug called bisantrene.

This is in combo with the cancer standard of care, doxorubicin. The company hopes that as well as attacking the tumors, RC-220 will protect the heart against the dangerous effects of chemotherapy.

Meanwhile, Race reports trial progress in Australia is on track, with two patients treated with RC-220 at Sydney’s Southside Cancer Care Centre.

“So far, 12 patients have been evaluated for inclusion by trial investigators and the Race clinical team,” the company says.

“Due to the additional risks from doxorubicin in patients with advanced  disease, recruitment is proceeding cautiously.”

However, the company expects recruitment to accelerate as it opens additional sites in Hong Kong and South Korea.