ScoPo’s Powerplays: ASX biotech IPOs show 'money is out there'; Virtus to benefit from rise in IVF

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

Healthcare finished the week up 0.68%, compared to the broader market which rose by 1%.

Earnings will still dictate price movements in the health sector over the coming week, according to Power.

Nanosonics (ASX:NAN) came back higher this week, rising by 5%, after a broker downgrade from Goldman Sachs that sent its price tumbling by 10% last week.

“We’re also watching Neuren Pharma (ASX:NEU) very closely as they’re expecting the recruitment for their Phase II trial to be finished very shortly,” Power told Stockhead.

“Thats going to be a key catalyst for a price move, along with their results in the fourth quarter.”

Neuren has recently received guidance from the FDA regarding the Phase II clinical trials of NNZ‐2591 to treat Phelan‐McDermid, Angelman, and Pitt Hopkins syndromes.

In the IPO space, there have been 80 IPOs on the ASX so far in 2021, which have returned an average of 11%.

Interestingly, there are two sectors which are performing better than average: health and life sciences, and resources.

In the health and life sciences space, there were nine ASX debutants this year, most of which have clocked healthy gains.

Chimeric Therapeutics (ASX:CHM) and mosquito disease focused company Island Pharmaceuticals (ASX:ILA) have been the best performers, sitting on gains of over 60% vs the IPO price.

“In 2021, there was $1.8 billion raised in IPOs within the healthcare sector with $224 million in the last quarter alone, so that’s a massive amount of money invested into the sector,” Power said.

“What this continues to tell us is, there is still money out there looking to back solid healthcare IPOs.”

Significant healthcare announcements this week

Drugs distributor Australian Pharma Industries (ASX:API) received an unsolicited takeover proposal from giant Wesfarmers (ASX:WES) to acquire 100% of API’s shares. The indicative price was $1.38, and the API price closed the week at $1.40, up 4%.

Orthocell (ASX:OCC) has appointed Samson Medical as its exclusive distributor in Australia for Orthocell’s Striate+ (CelGro Dental) product for bone and soft tissue repair.

Samson Medical has established relationships with leading dental surgeons, and an experienced sales team throughout Australia. The OCC share price is down 4.5% for the week.

Artifcial intelligence-based medtech company LBT Innovations (ASX:LBT) rose 11% this week after presenting data on the use of APAS Independence for early reading of culture plates, at the European Congress of Clinical Microbiology and Infectious Diseases (ECCMID).

The annual ECCMID conference is the world’s premier conference for clinical microbiology and infectious diseases.

Recce Pharma (ASX:RCE) announced that multiple patients have been dosed with RECCE 327 (R327) in Phase I/II clinical trial at the Fiona Stanley Hospital Burns Unit in Perth. The study aims to assess the clinical effectiveness and safety of R327 as a spray-on antibiotic in the treatment of infected burn wounds in adults.

ScoPo’s Powerplay

The Powerplay stock of the week is an IVF company called Virtus Health (ASX:VRT).

Morgans currently has an “Add” recommendation on the stock.

According to the Morgans’ research note, catalysts for the company’s growth includes the continued rise in the IVF cycle volumes.

Morgans’ forecast is for cycle volumes in Australia to increase by 15% (from 9%), and it has a 12-month target price on Virtus of $7.04 vs the current price of $6.60.

“A continuing strength in IVF cycle numbers has been with us all year, which has resulted in good profit performance,” said Power.

‘We expect that to continue with Virtus.”

Virtus share price today:

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.