ScoPo's Powerplays: ASX health stocks fall, Healius receives $1.52 billion takeover offer

ASX health stocks fall 0.9% in the past five days
Healius receives a $1.52 billion takeover offer from Australian Clinical Labs
Pharmaceutical wholesaler Sigma reports improved performance for the financial year

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 Powerplays.

What is your favourite type of cuisine? If its Mediterranean then that is good news for your health.

Scientists at Newcastle University found that individuals who ate a Mediterranean-like diet rich in foods such as seafood, fruit and nuts, had up to 23% lower risk for dementia than those who did not.

For this research, BMC Medicine analysed data of 60,298 individuals from the UK Biobank.

The large cohort of study participants included individuals who had completed a dietary assessment.

Scientists scored individuals based on how closely their diet matched a Mediterranean diet, with participants followed for almost a decade, during which time there were 882 cases of dementia.

Each participant’s genetic risk for dementia was also considered with scientists estimating their polygenic risk, a measure of all the different genes related to dementia risk.

The study found higher adherence to a Mediterranean diet was associated with lower dementia risk, independent of genetic risk, underlining the importance of diet in dementia prevention interventions.

To markets…

And ASX health stock investors could do with a little Mediteranean holiday with the sector continuing to feel macro-economic pressure as well as continued jitters about overseas bank collapses.

At 12:45pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was down 0.9% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) had fallen 0.4% for the same period.

“These last two weeks have been tough,” Power said.

“We’ve always been talking about interest rate rises but now we have this liquidity crisis for want of a better term and it’s unsettled a lot of investors.”

Healius receives takeover offer

Power said the big news of the week came on Monday with an all-share takeover offer of pathology and medical imaging company Healius (ASX:HLS) by smaller play Australian Clinical Labs (ASX:ACL).

One of the country’s largest pathology providers said it will offer 74 cents/share for every Healius share valuing the company at $1.52 billion.

The offer price represents a discount of about 4.2% to HLS’s last close.

In an announcement HLS confirmed it had received the offer and advised shareholders to take no action.

It said the board will evaluate ACL’s offer and bidders’ statement and provide a recommendation to shareholders in due course.

The HLS share price has risen ~10% in the past five days. Morgans has a Hold rating on the stock from a previous Add, maintaining a $3.02 12-month target price.

“It came from left field and we weren’t particularly focused in on it but if successful in theory it makes a strong business,” he said.

“But they do have pretty big hurdles to get over, most obvious with the ACCC as it’s becoming the largest pathology operator in Australia.”

Morgans said HLS has sold off much of its businesses to become much more streamlined.

“Over the last year it’s been a chronic underperformer in the healthcare space so in essence has been a target and a few years ago there was suggestions of corporate activity but they’ve underdelivered,” he said.

“The fact a smaller player can come in thinking they have a pretty efficient operation and can handle the bigger part of the business than they have is a big call to make.”

Morgans have a Hold on the stock from an Add, maintaining its $3.02 12-month target price.

Amcal owner Sigma focuses on simplifying business

Australia’s biggest pharmaceutical wholesaler Sigma (ASX:SIG) reported an improved performance for the financial year ended January 31, 2023.

Revenue was up 6.2% to $3.7 billion and SIG posted a small NPAT of $1.8m compared to a loss last year.

Power said key points from results is that the company-wide ERP system has been fully implemented after some disruption over the implementation period.

Banner groups have also been consolidated from five into two including Amcal and Discount Drug Store.

Guidance for FY24 is EBIT between $26 and $31 million.

“The overarching theme is they are trying to continue simplifying the business which always strikes a chord with me,” Power said.

“Sigma looks like it’s in much better shape.”

Pharmaxis shows promise for blood cancer treatment

Clinical stage drug developer Pharmaxis (ASX:PXS) this week announced scientific journal Nature Communications had featured peer-reviewed data from a preclinical collaboration with the University of Heidelberg of the company’s lead drug candidate, pan-lysyl oxidase inhibitor PXS-55051.

The study combined PXS-55051 with a standard-of-care chemotherapeutic agent (5-azacytidine; 5-AZA) in models using bone marrow cells from patients with myelodysplastic neoplasms, including myelodysplastic syndrome (MDS), group of blood cancers that occurs in older adults with an annual incidence of 75/100,000.

Patients with MDS are at risk of symptomatic anaemia, infection, bleeding, and transformation to acute myeloid leukemia (AML).

Authors conclude a significant increase in red blood cell production evidenced in the studies makes a strong case for trialling PXS-5505 combined with the current standard of care in MDS patients, especially those with anaemia.

The HLS, ACL, SIG & PMX share price today:

ScoPo’s Powerplay – Micro X (ASX:MX1)

Leader in cold cathode x-ray technology MX1 is Power’s stock of the week after announcing it had achieved technical milestones two and three under its technology licence agreement with Varex Imaging Corporation (NASDAQ:VREX).

The tech licence agreement is part of MX1’s long term collaboration with Varex. It consists of a non-refundable fee of US $5 million for Varex to use the MX1’s NEX technology in the field of multi beam x-ray tubes.

The licence agreement includes an agreed work program for MX1 to transfer the licensed technology to Varex, broken into five milestones, with the goal to enable Varex to design and manufacture multi-beam tubes using NEX emitter technology.

The second and third milestones under the agreement have now been achieved, triggering payments totalling US$2 million to MX1, bringing the total amount received under the licence to US$3 million.

The remaining two milestones in the program will result in an additional US$2 million in payments to Micro-X.

Away from the medical sphere, MX1’s bomb detection Argus x-ray camera commercial launch is due in the next couple of months, which Power said is set to be a key catalyst for the company.

“That’s the real driver of the business and has been delayed but the expectation is in the next couple of months it will be in the hands of the customer,” Power said.

“It will be appealing to defence forces and police around the world so they are looking pretty good.”

The MX1 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.