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 AGM season has been flushing out a few negative surprises, resulting in significant drops in a handful of health names.

However Power believes this gives investors like Morgans the perfect opportunity to pick up some bargains and add to exisiting positions.

Immutep (ASX:IMM) for example, is down almost 18% for the week at the time of writing, despite the company reporting some positive news.

Immutep announced this week that its Phase IIb AIPAC Study on metastatic breast cancer showed increased overall survival rates for some patient groups.

The median survival benefit of using ‘efti plus chemotherapy’, compared to ‘chemotherapy plus placebo’ is +2.9 months, the company reported.

“The market just read the headline and saw those results as being insignificant,” Power told Stockhead.

“But we’re very positive on Immutep and will add to our position on this price weakness, as they have a deep pipeline with a lot of news flow to come.”

In terms of global headlines in healthcare, Power pointed to GE’s decision this week to split itself into three separate companies.

GE was founded in 1892 by Thomas Edison, and the decision to spin off into aviation, healthcare and energy businesses will create three global publicly listed companies.

“GE will now become a much more focused player in healthcare,” Power said.

“But the split will not happen for another 18 months, so we’re really looking at FY23 before anything happens.”

“There are several ASX companies that operate with GE, including Micro-X and Volpara, and Sonic Healthcare,” he added.

Power’s take on other ASX health stocks this week

Ansell (ASX:ANN) was another stock that was down after its AGM, losing 5% this week.

The personal protective equipment (PPE) manufacturer had a good FY21, with strong growth in key segments.

“We believe that while the unprecedented demand for PPE will eventually slow, it is unlikely to fall off a cliff,” Power said.

“The demand for Ansell’s products will just shift from COVID-driven products to more differentiated ones, on the back of vaccine rollouts and improving economic outlook.”

Power said that Morgans has 12-month target price of $43.64 on Ansell vs the current price of $31.33.

PolyNovo (ASX:PNV) is another stock that has presented a buying opportunity for investors, Power said.

PNV shares lost 20% this week following the resignation of its CEO, Paul Brennan.

Max Johnston will take over the CEO role. He was a director at Polynovo between 2014 and 2020, and was also the CEO of Johnson & Johnson Pacific for 11 years.

Clinuvel Pharma (ASX:CUV) was down 18% over the past week.

The company announced that it was expanding its pharmaceutical development portfolio with a new product called NEURACTHEL, a novel formulation of the melanocortin adrenocorticotropic hormone (ACTH).

Various formulations of ACTH are already approved globally for patient use, with sales of the drug estimated to grow to around US$1.9 billion by 2031.

“The market didn’t like the news because it appears that they are deviating from their core business,” Power said.

ScoPo’s Powerplay

Power’s stocks of the week are Virtus Health (ASX:VRT) and Nanosonics (ASX:NAN).

Nanosonics has successfully developed and commercialised a unique automated disinfection technology, which was the first major innovation in disinfection for ultrasound probes in more than 20 years.

“There’s a bunch of companies that are benefiting from the US economy reopening, and Nanosonics is one of them,” said Power.

NAN is currently trading at $5.78, and although Morgans has recently downgraded NAN’s 12-month target share price from $7.26 to $6.97, the recommendation was upgraded to Add (previously Hold).

For Virtus, Power reckons it will benefit from Australia’s changing society towards having more babies through IVF cycles.

Morgans has an Add recommendation on VRT, with a 12-month target price of $7.13 vs the current market price of $5.52.


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