ScoPo’s Powerplays: ASX health stocks fall but Dimerix up 150% on drug licensing deal
Health & Biotech
Health & Biotech
Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplay.
Are you a tea drinker? A recent observational study conducted in China has shown individuals who consume tea regularly, especially dark tea, may experience improvements in their blood glucose levels and reduced insulin resistance, potentially lowering their risk of developing type 2 diabetes.
The research, conducted jointly by the University of Adelaide and SouthEast University in China, was presented at the Annual Meeting of The European Association for the Study of Diabetes (EASD) held in Hamburg this week.
In the study, 562 men and 1,361 women, aged 20-80, from eight Chinese provinces were examined. Among them, 436 had diabetes, 352 had prediabetes, and 1,135 had healthy blood glucose levels.
Out of these participants, 1,000 were habitual tea drinkers, consuming various types of tea, including green tea (300), black tea (125), dark tea (521), and other types (54), all without milk or sugar.
The study aimed to find links between tea consumption frequency and type with urinary glucose levels. Insulin resistance and glycaemic status were also measured.
The findings indicated that daily tea drinkers had increased urinary glucose excretion and reduced insulin resistance. They also exhibited a 15% lower prediabetes risk and a 28% lower risk of developing type 2 diabetes compared to those who did not consume tea.
Greater effects were observed in study participants who consumed dark tea, which undergoes a distinctive fermentation process involving microorganisms.
And the ASX healthcare sector looks like it could do with a cup of tea for good health this week. At market close on Thursday the S&P/ASX 200 Healthcare index (ASX:XHJ) was down 1.7% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 1.9% for the same period.
The health care index is now down more than 10% for the year, while the ASX 200 is also in negative territory and down 2.1%.
“Higher bond rates in the US seem to be what is driving the macro picture at the moment and that has created a period of uncertainty which we’re hoping will moderate into the end of the year,” Power says.
“Seasonally this is a stronger part of the year and what we’ve been through with weekly, monthly, quarterly and yearly all down for healthcare it’s had a torrid time.
“We’re looking for a stronger finish to the year and we’ve said that a fair bit over the last couple of months but in the next few weeks we will see if it comes to fruition.”
Dimerix (ASX:DXB) shares surged more than 150% on Thursday after announcing it will receive $230m in upfront and milestone payments following a licensing deal with ADVANZ PHARMA to commercialise DMX-200 for treatment of rare kidney disease focal segmental glomerulosclerosis (FSGS).
DXB is currently undertaking its Phase 3 trial, known as ACTION3, into its lead drug DMX-200, with the first analysis outcome forecast on or around March 15, 2024.
The exclusive licence agreement with multinational pharmaceutical company ADVANZ covers the European Economic Area, UK, Switzerland, Canada, Australia, and New Zealand for commercialisation of DMX-200 for the treatment of FSGS following regulatory approval.
DXB retains all rights to commercialise the drug outside of these territories.
“That was a very big licensing deal and good news for Dimerix which have worked long and hard,” Power says.
The US FDA has approved Cyclopharm’s (ASX:CYC) lung imaging technology Technegas, opening up a US$180 million market that has the potential to quadruple the size of the company’s existing pulmonary embolism (PE) market.
CYC expects to repeat its experience of entering the Canadian market, where Technegas is the dominant PE imaging technology. Being dominant in the US is expected to accelerate Cyclopharm’s longer term strategy to access the circa US$1 billion opportunity in other respiratory disease states like COPD, lung cancer and long Covid.
CYC will now complete final assembly of its first wave of 200 generators, with plans for the first air shipments to arrive in the US by early November.
Additionally, CYC will execute its marketing strategy, leveraging its extensive sales and operational experience across 64 countries where the product is already approved and established.
In the US sales approach, CYC will provide and install Technegas generators in nuclear medicine departments to boost the adoption and use of single-patient consumables, generating recurring revenue.
Agreements are already in place for third-party distribution, generator servicing, installation, and administrative support for Technegas in the US.
“It’s a major milestone for the company and something that has been delayed for a while,” Power says.
Wound care company Avita Medical (ASX:AVH) has fallen more than 20% this week after the FDA requested additional information regarding its marketing application for the Recell Go device.
The request has led to a delay of four to six months in processing its premarket approval (PMA) supplement application for Recell Go.
The updated timeline suggests that the potential launch of Recell Go could occur between May 1 and July 1, 2024 with the extended timeline due to the PMA needing to undergo another 180-day review period after the data submission.
Recell Go is AVH’s introduction of an automated workflow to the company’s previously manually operated Recell autologous cell harvesting device, which is already approved in the US for the treatment of thermal burn wounds and skin defects.
“It was disappointing and the share price has marked it down so we think it is very much back in good buying territory given they’ve had a very good run in growing sales with their core product,” Power says.
“We expect them to hit third quarter guidance in November and also have provided full year guidance which we think they’ll be very close to hitting.”
Pharmaxis (ASX:PXS), soon to be rebranded as Syntara, is up around 6% this week after unveiling a substantial corporate restructure with a renewed emphasis on development of treatments for blood-related cancers.
The overhaul entails the establishment of a clinical-stage drug development firm Syntara, as well as the sale of its Mannitol respiratory business to pharmaceutical manufacturing specialist Arna Pharma. Additionally, there will be changes to the company’s board of directors.
This strategic shift, prioritising clinical development, is expected to lead to a significant reduction in annual expenditures with core expenses anticipated to decrease by over 60%, resulting in annual savings exceeding $14 million for the company.
PXS says it has five planned clinical studies to deliver results in high unmet need diseases by mid-2025 with its lead drug candidate PXS-5505 to start a FDA agreed Phase 2 trial in myelofibrosis in the current quarter.
“Pharmaxis is simplifying the business by selling Mannitol which reduces their cost base and enabling them to focus on key clinical trials which will read out over the next couple of years,” Power says.
Brisbane-based medical software technology company ImpediMed (ASX:IPD) has seen shareholders vote in a new board following a board spill.
At the first meeting of the new board, former CFO of Nanosonics (ASX:NAN) McGregor Grant was appointed chairman. He will be joined by incoming non-executive directors Christine Emmanuel-Donnelly, Andrew Grant and Janelle Delaney together with managing director and CEO Rick Valencia and non-executive director Dr Michael Seiden.
The spill follows a notice from shareholders holding at least 5% of the votes in August that directors hold a general meeting of the company to remove four of the existing directors and replace them.
The discontent followed a capital raising and perceived risks to shareholder wealth leading to the spill.
“Five directors have now resigned and been replaced by four new directors,” Power says.
“The new chairman is McGregor Grant who was the former CFO of Nanosonics and we think he is very good and will be good for the business.
Power says IPD is now focused on getting insured population in the US access to reimbursement coverage for its bioimpedance spectroscopy (BIS) SOZO testing for lymphoedema.
The US National Comprehensive Cancer Network (NCCN) included BIS as part of its new guidelines announced in March this year.
“It’s really focused on getting the private payors on board, so it’s onwards and upwards for Impedimed,” Power says.
Power says the upcoming AGM season and quarterlies reports should see positive trading updates. He says companies to watch include Volpara Health Technologies (ASX:VHT) specialising in the early detection of breast cancer, which is is likely to report positive cashflow for the fourth consecutive quarter.
“We’re confident this next quarter will also be cash flow positive which is good news for them and not reflected in the share price at the moment,” Power says.
He says the AGM on October 13 of medical devices company PolyNovo (ASX:PNV) should also provide a positive trading update. PNV specialises in development and commercialisation of dermal regenerative solutions.
“Polynovo said about a month ago its sales momentum was good and we expect that to continue,” Power says.
Imaging company Mach7 Technologies (ASX:M7T) is Power’s stock of the week, with the company to hold an investor day on Monday, which will include a product demonstration.
“It will be a live demonstration which we think will be quite interesting and they are also presenting at a couple more upcoming conferences together with reporting what we believe will be a good first quarter set of numbers, so it should attract more investor interest,” Power says.
M7T recently reported a record sales order book of $40.3 million, up 21% and exceeding the $36 million target for FY23.
M7T says sales orders continue to be the best measure of the company’s financial progress from year to year, as the timing of cash receipts and revenue can vary.
The company also hit record revenue of $30.1 million, up 11% on FY22 with the recurring component up 22% on FY22 and provide FY24 guidance of 20% sales order growth, 15-25% revenue growth, lower operating expenses than revenue growth and cashflow positive with the pipeline remaining strong.
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