ScoPo’s Powerplays: Recent price swings uncovered hidden gems and buying opportunities in healthcare

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 health and gives his ASX powerplays.

Theme of the week

The Healthcare index (XHJ) is down 0.72% for the week at the time of writing, compared to the broader market which fell by 0.34%.

Power says recent price swings in the healthcare sector has presented investors with gems and buying opportunities on some really good names.

Following Monash IVF Group’s (ASX:MVF) strong FY21 results where it posted a 61.5% increase in full year NPAT to $23.3m, Morgans has upgraded its target price for the stock.

Morgans’ 12-month target price for MVF is now $1.09, from a previous target $1.06 but with the Add recommendation intact.

Power says that growth in IVF cycles in Australia has continued to grow beyond that of pent-up demand alone, after the suspension of elective surgeries last year.

“We view this as an industry-wide acceleration and push shifting focus to families as a beneficiary of COVID,” Power told Stockhead.

“There’s also very good science now done around genetic testing, which has given confidence around history of disease and producing healthy babies.”

“The IVF industry is also being supported by single women as well as gay couples wanting to have babies.”

Power also sees a good buying opportunity in imaging company, Pro Medicus (ASX:PME), which has fallen from its 52-week high of $70 over the past few weeks to $60.

He said that PME is a high quality growth name with long contracted baseline revenues, serving some of the world’s largest and most prestigious hospital systems.

“Our entry point on PME is $54.49,” Power said, versus the current share price of $61.14.

Another buying opportunity that Power is closely watching is ultrasound device company, Nanosonics (ASX:NAN).

The NAN stock price has come back to earth, falling by 5% this week to $6.65, and Power has a 12-month target price on NAN at $7.26.

Nanosonics has recently detailed information on its next major product, which is a flexible endoscope.

The commercial launch is estimated to be in CY23, and management has indicated the revenue model will be similar to the Trophon2 device, with a capital and consumable component.

Other notable health stock announcements

Neuren Pharma (ASX:NEU)

The company has just announced that its US partner Acadia Pharmaceuticals (Nasdaq: ACAD), will be conducting Daffodil, a clinical study of trofinetide in approximately 10 girls aged 2-5 years with diagnosed Rett syndrome.

The trial will be a 12-week, multicentre, open-label safety, tolerability and pharmacokinetics study in this younger age group, followed by a possible open-label extension for up to an additional 21 months.

Rett syndrome is a debilitating neurodevelopmental disorder estimated to affect between 1 in 10,000 and 1 in 15,000 females worldwide.

Immutep (ASX:IMM)

The company’s share price jumped 5.66% on Wednesday after it announced the last patient has been enrolled and safely dosed in its Stage 2 of Phase IIb TACTI-002 study into patients with non-small cell lung cancer (NSCLC).

A total of 154 patients out of 183 are now participating in TACTI- 002 at 19 clinical sites across Australia, Europe, the UK and US.

The company expects to report further data from TACTI-002 at a scientific conference in calendar year 2021, or early calendar year 2022.

Japara Healthcare (ASX:JHC) and Regis Healthcare (ASX:REG)

In July, Japara’s board unanimously recommended the 100% takeover of the company by Little Company of Mary Health Care for $1.40 per share, valuing Japara at $380 million.

The proposal will be voted at a shareholders’ meeting in October.

“The other aged care play that we’re looking at is Regis, which had quite a reasonable result during the very challenging conditions that they were operating in,” Power said.

“We also expect further consolidation in the aged care sector. And in that scenario, Regis could be a predator or prey. They could be taken over, but by the same token they’re also looking to grow their business,” he added.

Morgans has 12-month price target of $2.33 on Regis, with an Add recommendation. The REG share price is currently trading at $2.19.

Ebos Group (ASX:EBO)

After posting a solid full year earnings result last week (revenue to $9.2bn and NPAT of $188.2m), the pharmaceutical distribution company’s share price kept rising.

The EBO share price has now risen by 22% this year to $34.20.

Morgans reckons that EBO continues to impress in terms of its return on capital employed, recording its highest ever of 18%, up on 17.1% the pcp.

“We rate the Ebos management team and consistent financial performance highly,” says Power.

ScoPo’s Powerplay

The Powerplay stock of the week is hearing tech company Audeara (ASX:AUA).

AUA posted an underlying EBITDA loss of A$0.7m after excluding one-off IPO expenses of $0.4m, which was broadly in line with Morgans’ expectations.

The company has sunk to 11c after making its IPO debut at 20c in May.

Share price aside, Power says the business continues to progress well with a record quarter in 4Q of FY21, providing strong momentum into FY22 with growing repeat sales.

“Audeara also appears to have advanced its US entry through the Westone agreement, giving it access to around 16,000 clinicians,” Power said.

He expects the first international revenues for Audeara to be delivered in 1H of FY22, a full 9-12 months ahead of forecasts.

Morgans has a speculative buy recommendation on Audeara, with a 12-month price target of 33c.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.