• ASX health stocks fall 0.44%% in the past five days but several stocks continue upwards trajectory
  • Aroa Biosurgery reports preliminary unaudited FY23 full year total revenue growth of 60% to ~NZ$63.4 million
  • BMT reports revenue growth of +51% on pcp in Q3 FY23 following contract wins in Australia and internationally

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. 

There’s a bit of a movement towards embracing natural grey hair as we age, especially among women.  Scroll through Instagram to see many high profile women showing their naturally greying locks.

But what if we you could maintain our younger hair colour beyond a visit to the hairdresser every couple of months as we age?

A variety of cells, including melanocyte stem cells that create melanin, the pigment responsible for hair colour, can be found in hair follicles.

A recent study in mice, led by New York University Grossman School of Medicine and published in  the journal Nature, revealed that during each hair growth and shedding cycle, these stem cells move between two sites in the hair follicle.

The cells produce melanin for hair colour in one location and generate stem cells in the other location. The research discovered that aging causes more of these stem cells to remain or get stuck in the site where they produce stem cells. This in turn reduces the number of stem cells that produce melanin resulting in grey hair.

Lead investigator Qi Sun, PhD, a postdoctoral fellow at NYU Langone Health said the study adds to basic understanding of how melanocyte stem cells work to colour hair.

“The newfound mechanisms raise the possibility that the same fixed positioning of melanocyte stem cells may exist in humans,” he said.

“If so, it presents a potential pathway for reversing or preventing the graying of human hair by helping jammed cells to move again between developing hair follicle compartments.”

 

To markets….

At  2.20pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was down 0.44% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) also fell 0.36% for the same period.

However, in a positive sign several healthcare stocks have bounced over the past week after reporting positive quarterly results.

“Last week we were getting the sense of more cautious positivity creeping into the sector and this continuing at least for now,” Wilkie said.

 

Aroa solid Q4 results in line with expectations

Soft tissue regeneration company Aroa Biosurgery (ASX:ARX) announced preliminary unaudited FY23 full year total revenue of ~NZ$63.4 million, compared to $39.7m in FY22, representing growth of 60% (42% on a constant currency basis).

Q4F FY23 results included net cash outflow from operations of NZ$1.9 million for the quarter, primarily reflecting the timing of cash receipts for product sales during the quarter.

Net cash outflow from investing activities was NZ$1.8 million for the quarter, reflecting further investment into additional manufacturing plant and  equipment capacity.

The company has a strong cash balance of NZ$44.7 million as at March 31, 2023, and the company remains debt free.

“That was a solid result in line with expectations,” Wilkie said.

“Unaudited results look set to fall within our full year assumptions so wasn’t anything new or special but the company is progressing nicely.

“There is a big opportunity in that space which Aroa seem to have a pretty good handle on so we’re happy with the result.”

 

Beamtree Holdings reports 51% revenue growth

While not a stock Morgans follows closely Wilkie said he thought Beamtree Holdings (ASX:BMT) announced a quite positive trading update for Q3 FY23 which saw its share price lift ~12% for the week.

BMT proprietary AI subscription based system called RippleDown offers decision support and data insights solutions to the healthcare industry and consists of two components including RippleDown Auditor and RippleDown Expert.

BMT reported continued revenue growth of +51% on pcp, strong organic revenue growth of 24%, and an operating profit improvement of 25% on pcp, which it put down to contract wins both in Australia and internationally.

BMT said the Abbott partnership continues to deliver to expectations with three new RippleDown licences in Q3 bringing the total to 11 new Tier 1 licences since the partnership renewal in December 2022, an increase of 40% in the current year. Total Tier 1 licences are 38, currently generating ~$1m per million in recurring revenue.

The company said larger Abbott co-sales (Tier 2) partnership pipeline continues to grow following the first co-sale licence completed with Western Diagnostics Pathology, a Healius (ASX:HLS).

Management expects a second co-sale licence to be signed in Q4 FY23 with further wins to follow into FY24 and importantly noted as the Tier 1 renewals occur, several are expected to convert to higher value Tier 2.

“This partnership with Abbott is starting to mature and feed through some solid contracts,” Wilkie said.

“The company said they expect FY23 to deliver organic revenue growth of around 25% and operating costs to run at about 10% growth so we’ll see some operating leverage roll through.

“Management recently made some long term outlook of delivering annual recurring revenue of $60 million by 2026 so there is a pretty strong growth roadmap there.”

 

Nanosonics rises 9% on no news

Wilkie said heavily shorted infection prevention company  Nanosonics (ASX:NAN) is worth noting having risen ~9% this week on no news.

“We like this one but can’t point to any reason in particular or news for the run up,” Wilkie said.

NAN has successfully developed and commercialised its trademarked trophon EPR device, a unique automated disinfection technology, which was the first major innovation in disinfection for ultrasound probes in more than 20 years.

Wilkie said the company’s trademarked CORIS device is attempting to solve a complex disinfection problem in removing the biofilm from the flexible endoscope.

The CORIS launch remains on track for limited commercial launch by late CY23 in Australia and/or Europe subject to regulatory approval.

He said NAN has also successfully transitioned out of the GE distributor arrangement to a direct sales model in North America.

“The transition is now complete and seems to have run a lot smoother than investors originally feared and we should see some more operating leverage rolling through here now too,” he said.

Wilkie said CORIS is due to launch at the end of this calendar year so maybe there are some investors getting ahead of that catalyst but this week’s run could also have to do with short positions.

“Also worth mentioning it was a highly shorted stock, up around 12% mid last year and now sitting around 3.5% mark,” he said.

“The run could have potentially been some shorts closing positions – we’ll see in the next few days.”

 

The ARX, BMT, NAN, Share price today:

 

Other positive healthcare news

Last week’s stock of the week Telix Pharmaceuticals (ASX:TLX) has continued a solid run this week after reporting revenue for the March quarter of $100.1 million, driven by global sales of its prostate cancer imaging agent Illuccix.

Demand for Illuccix in the US continues to increase on the back of strong clinical results with sales of $97.5 million, up from $76.8 million in the prior quarter.

“That’s had another nice run up about 3% for the week,” he said.

Impedimed (ASX:IPD) is also up again this week, rising 25%, after recent good news. IPD Q3 FY23 results were in line with expectations, while the big catalyst for the company  was the US National Comprehensive Cancer Network (NCCN) including bioimpedance spectroscopy (BIS) as part of its new version of guidelines.

The inclusion of BIS in the NCCN guidelines will help establish BIS as standard of care, and will accelerate adoption by US private payors and providers.

IPD is the only FDA approved provider of BIS which meets the guidelines.

“I think last week’s news from the quarterly around payor response has begun to sink in a little, and spurred on by some small but handy director buying,” Wilkie said.

CEO and MD Richard Valencia ponied up for ~$52k of IPD stock on market on April 20, while non-executive chairman Donald Williams purchased ~$17,500 worth of stock on April 27.

Furthermore, Wilkie said it seems the market are showing they are willing to back health stocks over a sustained period more than just on release of positive news.

In March Neuren Pharmaceuticals (ASX:NEU) was granted US Food and Drug Administration (FDA) approval for its compound trofinetide for Rett’s syndrome, the first drug for the treatment of the rare neurological disorder which emerges in infancy with its share price continuing to rise.

“Over the past two years with volatility we’ve seen investors using positive catalysts to take profits or use higher volumes as an easier exit mechanism but we haven’t seen that with Neuren,” he said.

“What we have seen more recently is sustained upward traction post positive results and investors willing to back a stock for longer now, and on the same token some are running ahead of the news, particularly with these clear cut catalysts.”

He thinks there is still more growth for the likes of IPD and NEU.

 

The TLX, IPD and NEU share price today:

 

Wilkie’s Powerplay – EBR Systems

Medical device company EBR Systems (ASX:EBR), which is developing the world’s first and only inside-the-heart system for heart failure,  is Wilkie’s pick having risen ~15% in the past week.

EBR’s pivotal SOLVE-CRT (SOLVE) trial abstract  has been accepted at Heart Rhythm 2023,  which will be held in New Orleans, in the US in May.

Heart Rhythm 2023 is the Heart Rhythm Society’s (HRS) annual meeting and the premier global electrophysiology conference, attracting the largest gathering of heart rhythm professionals globally.

The abstract presentation, titled Safety and Efficacy of a Leadless Ultrasound-Based Cardiac Resynchronization Pacing System in Heart Failure – Results from the SOLVE-CRT Study, will be presented in the Late Breaking Clinical Trials session on on May 21, (May 22 AEST) by  co-principal investigator Dr Jagmeet P. Singh.

The abstract was submitted without any outcomes as the data is still being analysed.  Acceptance of the abstract requires an embargo on all SOLVE clinical data until 6am EDT the day of the abstract presentation. As such, EBR expects to make an announcement on the data and hold a webinar to discuss the data and results, on Monday, 22 May 2023 (AEST).

“That will be a very big catalyst for EBR,” Wilkie said.

 

The EBR share price today:

 

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.

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