ScoPo's (actually Iain's) Powerplays: ASX health stocks fall as CSL faces FX headwinds

Blood products giant CSL falls 9% in past five days after announcing it faces currency headwinds
Control Bionics announces a record month of sales in May 2023 after building pipeline over last quarter
Health imaging company ProMedicus rises 6% in past five days, closer to its February high of $68

Morgans healthcare and life sciences expert Scott Power is away this week so his colleague Iain Wilkie is stepping in to explain what the movers and shakers have been doing in health and gives his ASX Powerplays.

Wearable activity trackers, such as Fitbits, Garmins, or Apple Watches, could play a significant role in expediting patient recovery and alleviating the strain on Australia’s overloaded hospital system.

Researchers from the University of South Australia conducted a systematic review and meta-analysis of 15 studies involving a total of 1,911 patients undergoing various forms of rehabilitation and medical care.

The findings of the comprehensive analysis, recently published in the JAMA Network Open, indicate that patients who used activity trackers during their hospital stay exhibited higher levels of physical activity, reduced sedentary behaviour, and improved physical function compared to those receiving standard care without such trackers.

Specifically, patients wearing activity trackers recorded an impressive increase of 826 daily steps, engaged in an additional 10 minutes of active time per day, and reduced sedentary behaviour by 36 minutes daily when compared to their counterparts.

Accredited exercise physiologist and PhD candidate at UniSA Kimberley Szeto believes wearable activity trackers have the potential to accelerate patient recovery within a hospital setting by promoting increased physical activity and minimising sedentary behaviour.

“Hospital stays are often marked by extreme patient inactivity, which paradoxically, can exacerbate other health issues, and lead to longer hospital stays” Szeto said.

“Wearable activity trackers such as Fitbits are a great intervention for improving physical activity and sedentary behaviour during a hospital stay.

“This can also lead to improvements in clinical outcomes for patients, like physical function, which refers to the patient’s ability to perform daily activities, like balancing and walking to where they need to go.”

To markets….

And ASX health stocks could do with taking a few more steps in the right direction this week. At 12pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was down 6% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) was up 1.5% for the same period.

Wilkie said the fall in health stocks which was largely a function of Australia’s biggest healthcare company CSL (ASX:CSL) which has fallen ~9% in the past five days after issuing a market update.

“CSL said that due to foreign exchange rates it expects net profit after tax and amortisation to be down $US250 million,” Wilkie said.

CSL now expects a negative foreign currency impact of around US$230 million to $250 million, up from US$175 million anticipated at the time of the half year result.

Constant currency profit guidance for FY23 remains unchanged, albeit now skewed to the top end of the range.

Following finalisation of next year’s budget, CSL said that NPATA is expected to grow between 13–18% to US$2.9-$3 billion at constant currency.

Wilkie said that he is encouraged that management is targeting the top end of reaffirmed FY23 guidance and pleased to hear the company “remains in great shape”, with “strong” product demand, a “robust” underlying business and an R&D pipeline that has “never been better”.

However, Morgans has reduced its 12-month target price to $323 from $337.90 but maintains an Add rating.

Microba to receive $526k cash boost

Gut health company Microba Life Sciences (ASX:MAP) is up 9% for the past five days. MAP this week announced it had received approval from AusIndustry for two separate applications it has made for Advanced Overseas Findings for overseas research and development expenditure associated with its Inflammatory Bowel Disease (IBD) and Immuno-oncology programs.

MAP said the two Advanced Overseas Findings cover total overseas expenditure of an estimated $1,210,000 and may result in additional R&D tax incentive cash rebates of $526,000.

The two new Advanced Overseas Findings are in addition to the two that were announced in July 2022 for eligible overseas expenditure up to $13.4 million.

The findings cover financial years 2023, 2024 and 2025 and mean that these eligible overseas research and development expenditures related to MAP’s IBD and immuno-oncology programs, in addition to eligible Australian expenditure, will receive a 43.5% cash rebate under the Australian Federal Government’s R&D Tax Incentive Program.

MAP focuses on gut health with a revenue-generating business in microbiome testing. The company sells these testing products to healthcare practitioners and gets paid on a fee-for-service basis.

Sonic Health Care (ASX:SHL) has invested $17.8 million to acquire a 19.99% shareholding in MAP. The company is seeking to acquire options for an additional 5% equity position, subject to shareholder approval.

Control Bionics records record May sales

Control Bionics (ASX:CBL) is up ~7% for the past five days after announcing a record month of sales in May 2023, invoicing a total of $692k of sales for the month (unaudited). May was also the highest month of invoices for FY23.

CBL said the record result in May 2023 provides confirmation that revenue for FY23 (ending June 30, 2023) is expected to be ~$5.3 million, a more than 20% increase in the revenue of $4.4 million for FY22.

CEO Jeremy Steele said the record results in May were reflective of the consistent build in the company’s pipeline over the last quarter.

He said both Australia and the US performed well and importantly continue to have strong pipelines for the next three months.

With the strong performance in May and outlook for the balance of June, CBL reaffirm its revenue guidance for FY23 to be in excess of $5 million for the group.

CBL uses technology (including AI) to develop the world’s first autonomous wheelchair system called Drove, which negates the need for a joystick, mouse or keyboard.

EBR Systems down on softer trading volumes

Wilkie said medical device company EBR Systems (ASX:EBR) is down ~13% for the past five days on softer volumes traded.

EBR recently announced positive results of its pivotal SOLVE-CRT (SOLVE) trial at Heart Rhythm 2023.

The study met both its efficacy and safety endpoints with statistical significance, allowing the study to conclude, and importantly, providing clinical validation of EBR’s leadless pacing with the Wireless Stimulation Endocardially (WiSE) WiSE CRT system.

WiSE is the only left ventricle in-the-heart leadless system for Cardiac Resynchronisation Therapy (CRT).

“EBR is down ~13.6% on softer volumes traded and it seems like the hype of top line results is softening,” Wilkie said.

“The next big catalyst to look out for will be the US FDA approval which is still some time off.”

EBR earlier this month announced that Runway Growth Capital has confirmed access to the second tranche of its growth capital facility.

EBR first executed an agreement for a five-year US$50m growth capital facility with the venture debt provider on July 1, 2022.

The facility is structured over three separate tranches, with the first US$20m tranche being granted upon execution of the agreement.

EBR has now confirmed that the second tranche of up to US$20m has been unlocked given the positive SOLVE-CRT trial data announced in May.

The company said the second tranche provides further non-dilutive funding flexibility and will support growth activities as it finalises its pre-market approval submission to the US FDA in Q1 2024 and begins to execute on its commercialisation strategy, targeting key high-volume CRT procedure sites in the US.

The CSL, MAP, SHL,CBL & EBR share price today:

Wilkie’s powerplay – ProMedicus touching on record highs

Health imaging company ProMedicus (ASX:PME) is Wilkie’s stock of the week after rising 6% in the past week to $67, closer to its 2023 high of $68.93 in February but still $3 below its record high of $70 in 2021.

“It’s been one of our favourite health-tech names for a long time,” Wilkie said.

“It’s hard to find many negatives outside of the valuation which we view as full based on our current forecasts.

“However, names like these are a very easy place to hide in the current environment particularly with high inflation and recession risk given the highly non-discretionary nature of healthcare and long-term locked in contracts giving higher degree of baseline earnings certainty.”

Despite it being Wilkie’s stock of the week, Morgans have a $61.35 target price on this one and a Hold recommendation.

“We’re hoping for a better entry price,” he said.

The PME share price today:

Disclosure: The author held shares in CSL at the time of writing this article

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.