ScoPo’s Powerplays: ASX health stocks fall as investors fail to reward good news
Health & Biotech
Health & Biotech
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Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, is back after a holiday to explain what the movers and shakers have been doing in health and gives his ASX Powerplay.
Have you been eating your fruit and veggies, had any dark chocolate or a glass of red wine this week?
Plant-based foods containing flavonols may lower the risk of frailty, according to a recent study in the American Journal of Clinical Nutrition.
Researchers found that a higher intake of flavonols was linked to reduced odds of developing frailty. The study suggested that consuming an additional 10mg of flavonols per day lowered the risk of frailty by 20%.
Flavonols are naturally occurring compounds found in fruits, vegetables, berries, onions, peaches, tomatoes, kale, dark chocolate, tea, and red wine.
According to the research, certain foods like blackberries and apples, which contain a specific type of flavonoid called quercetin, may play a crucial role in preventing frailty.
Frailty is a condition commonly seen among older adults that can significantly increase the likelihood of hospitalisation, disability, falls, fractures, and even mortality. The prevalence of frailty tends to rise with age, affecting around 10% of individuals aged 65 and above.
And ASX health stocks are looking like they could do with some more fruit and veggies this week. At 12:30pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was down 0.30% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 1.20% for the same period.
Power said markets appear to be impacted by continued macro economics factors at the moment along with concerns about the US debt ceiling.
“The markets are quite directionless at the moment and a fair bit of nervousness around with interest rate hikes hitting the discretionary retail part of the market,” Power said.
“There’s quite a bit of downward pressure particularly on the small end of the market but staying bullish there are great opportunities arising.”
Power’s top pick for last week Volpara Health Technologies (ASX:VHT) has posted its FY23 result which was slightly above Morgan’s expectations.
VHT reported revenue of NZ$35 million, up 34% or 20% constant currency and above the top end of guidance range of NZ$33.5-34.5 million.
Normalised EBITDA was loss of NZ$6.1 million which Power said was better than Morgan’s expectations of NZ$8.1 million, while net loss for the year of NZ$9.8 millon was down 40%.
Other key points include:
“It is a very strong outlook for Volpara but having said that if you look at the share price it is down so not reflecting the value and true operational improvements which have happened over the last 18 months in this business,” Power said.
“It’s frustrating in the short term but I think we really need to stay focused on these good quality emerging healthcare names.”
Power said regenerative medicine and wound care company Avita Medical (ASX:AVH) is another example of a company which has not seen its share price rewarded despite recently reporting strong quarterly results and with key catalysts approaching.
“They had a good quarterly result and reaffirmed their guidance but over the week they’re down around 8% and before that were down 20%, so in the last couple of weeks there’s been a fair bit wiped off that share price despite a major catalyst coming.”
ImpediMed (ASX:IPD) has announced a $20 million placement to institutional investors as it moves to capitalise on changes to cancer care guidelines in the US.
IPD is offering shares at 13¢/share, a 16.1% discount to the last close and 25.7% lower than the 10-day volume weighted average price.
The company will also offer a non-underwritten share purchase plan to eligible shareholders in Australia and New Zealand to raise up to $5 million.
The raises comes after the US National Comprehensive Cancer Network Guidelines were updated to recommend bioimpedance spectroscopy (BIS) for all cancer patients at risk of limb lymphoedema.
IPD currently holds the only FDA-cleared BIS technology for the assessment of lymphoedema.
“There looking to get in front of as many of the private health insurers in the US and get medical policy to enable reimbursement of their device and the first has come through,” he said.
“It is an insurer called Priority Health and based in Michigan and they are the first to cover the technology of Impedimed.
“It’s great news for them but the share price is flat and that is the market we are in.”
Clinical stage drug developer Pharmaxis (ASX:PXS) has announced promising top line data from a Ph 1c double‐blind three‐month study of drug candidate PXS-6302 for the treatment of established scars in 42 adult patients.
PXS‐6302, formulated in a cream applied three times a week, is a first in class inhibitor of the lysyl oxidase enzymes (LOX) that are involved in formation and maintenance of scars or cross-links collagen fibres which are implicated in adverse scarring.
The treatment is a potential breakthrough treatment for patients with problematic scars. Lead study investigator, Professor Fiona Wood, said the exploratory clinical study has significantly enhanced our understanding of the role of LOX enzymes in scarring and the scar process itself.
The study met its primary endpoint of safety and tolerability, with no serious adverse events reported and only two patients withdrawing from the study after reporting redness/itching at the site of application, which resolved after treatment was stopped.
“That was a positive outcome so they will extend that trial to the next stage,” Power said.
“Again it was a milestone the company had highlighted and they hit it and the share price is still flat.”
Immutep (ASX:IMM) has announced that its drug eftilagimod alpha (efti) combined with the leading anti-PD-1 therapy, Keytruda, generates meaningful long-term survival in non-small cell lung cancer patients in Phase II TACTI-002 trial.
An initial median Overall Survival of 25 months was reported in non-small cell lung cancer patients with >1% PD-L1 expression, a key area of focus for future development of efti.
These results are above reported rates of anti-PD-1 monotherapy and various immune checkpoint inhibitor combinations with and without chemotherapy, which is why the market was so excited.
“It is a very tough market but I think now is the time to put money to work,” he said.
Wound care company Aroa Biosurgery (ASX:ARX) is Power’s top pick for this week. The company is due to report its full year results on May 31, which Power said is looking to be in line with guidance and with solid revenue growth in FY24 which the market should like.
ARX’s Q4 FY23 cashflow report was largely in line with expectations and guidance, with total unaudited product revenue for FY23 of NZ$60.5m and preliminary gross margins of 84% and positive normalised EBITDA.
During the quarter, ARX received FDA 510k approval for the pump and catheter components of the Enivo system, this will likely be followed by a DeNovo pathway for the entire system which will require additional clinical data.
“We maintain our positive view on ARX, with near term catalysts including launch of Myriad Morcells Fine and release of full year results with FY24 guidance,” Power said.
Morgan’s maintains an Add recommendation and $1.57 target price for ARX.
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