ScoPo’s Powerplays: ASX health stocks lift, as Paragon Care up 16pc on EBOS takeover speculation
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.
What type of personality do you have? A meta study (study of other studies) from the University of California, Davis, and Northwestern University suggests that individuals displaying traits like conscientiousness, extraversion, and positive affect have a lower risk of dementia compared to those with neuroticism and negative affect.
According to the study, published in Alzheimer’s & Dementia: The Journal of the Alzheimer’s Association, variance isn’t associated with physical brain damage typical in dementia patients but possibly connected to how certain personality traits assist in managing dementia-related challenges.
The study scrutinised data from eight published research works, encompassing more than 44,000 participants, including 1,703 of whom developed dementia. It examined Psychology’s Big Five personality traits – conscientiousness, extraversion, openness to experience, neuroticism, and agreeableness – along with subjective well-being being factors (positive and negative affect, and life satisfaction).
The study then compared against clinical indicators of dementia, such as performance on cognitive tests and pathology following autopsies.
Surprisingly to the authors no link was found between these personality traits and actual neuropathology in the brains of people after death.
The study suggests that individuals with elevated levels of certain personality traits may instinctively develop strategies to navigate and mitigate impairments, possibly without conscious awareness.
Additional work by the team suggests that some individuals, despite having substantial pathology, display minimal impairment on cognitive tests.
Researchers looked at other factors that could moderate the relationship between personality and dementia risk and neuropathology, including age, gender and educational attainment with almost no evidence for effects, except that the protective effect of conscientiousness increased with age.
Researchers will continue their work including looking at people who show little impairment in the face of a lot of pathology.
And ASX health stocks are showing positive traits this week. At midday (AEDT) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 1.55% for the past five days, while benchmark S&P/ASX 200 (ASX:XJO) had risen 1.06% for the same period.
“The market feels good and if you look at the macro indicators interest rate rises seem to be coming to an end around the world,” Power says.
“We might get another one in Australia but the end of hikes seem to be in sight and if there are cuts to interest rates in 2024 that will bring money back into the equity markets.
“We think the small cap end of the market has been impacted significantly over the last couple of years and will flow into some of these names which is why we’re keen to promote some of our key picks.”
Pharmaceutical distributor EBOS Group (ASX:EBO) appears to be continuing its search for an acquisition to fill the loss of a lucrative Chemist Warehouse contract, worth about $1.1 billion in revenue.
EBO announced earlier this year the loss of the Chemist Warehouse contract, saying it won’t be renewed beyond the expiry date of June 30, 2024.
There was media speculation that EBO were in discussion to acquire Greencross Vets. However, the company in late November announced discussions about a potential strategic transaction related to its animal care segment had concluded, with a decision not to proceed with any deal.
PGC operates in the areas of specialty diagnostics, specialty devices, capital and consumables, service and technology. Its brands include Designs for Vision, Electro Medical Group, Specialist Medical Supplies and Immulab.
EBO’s loss was to the gain of pharmaceutical distributor rival Sigma Healthcare (ASX:SIG) which announced it would supply Chemist Warehouse both Pharmaceutical Benefits Scheme (PBS) medicines and Fast-Moving-Consumer-Goods (FMCG) products.
SIG went into a trading halt on Wednesday as the story takes another turn with speculation it is going to announce a reverse takeover with the pharmacy giant which will see it listed on the ASX.
On Friday SIG announced it will be suspended from quotation immediately “pending the release of an announcement regarding a material transaction”.
Power says the healthcare team at Morgans has caught up with soft tissue repair company Avita Medical (ASX:AVH) CEO Jim Corbett on his visit to Australia following release of strong Q3 FY23 results this week.
“He was giving an update to the market but what he’s highlighted is when they report their full year results in February, they’ll provide full year guidance for next year, provide a regulatory update on RECELL Go and a sales update so it will be pretty interesting,” he says.
“By the way he was presenting the information he looks pretty confident and the share price is up over 15% for the week.”
AVH in November announced a “slower-than-anticipated progression through the customer’s Value Analysis Committee (VAC) processes,” driven by the expanded label applications of its newest indication, full-thickness skin defects.
Consequently, AVH downgrading its full year 2023 commercial revenue guidance from the previously disclosed range of US$51 million to US$53 million to a new range of ~US$49.5 million to US$50.5 million.
However, Power says that Corbett has been reassuring during his visit. Morgans has an 12-month target price of $5.90 and add rating for AVH.
Another soft tissue repair company Aroa Biosurgery (ASX:ARX) reported its H1 FY24 result which Power says was in line with expectations and importantly reconfirmed FY24 guidance, albeit with the help of a lower exchange rate.
He says Myriad family of products continue to be the major growth driver up 80% and accounting for 33% of product sales, which Morgans forecast this will increase to 35% of sales for FY24.
Power says ARX is looking to a strong second half with guidance for FY24 revenue growth of 25-30% (NZ$72-75 million product revenue and NZ$73-76 million total revenue).
“The split will be 40% first half and 60% second half and that is what the guidance is suggesting and recent commentary from the company would indicate they’re confident of achieving that,” Power says.
“They have a March year end so we are well and truly into that second half.”
Furthermore in August ARX submitted a US FDA 510(k) application for Myriad Flow, a new Myriad product that could be commercialised in combination with the previously US FDA-cleared components of its Enivo system.
Morgans maintains a 12-month target price of $1.50 and add recommendation for ARX.
Market darling Neuren Pharmaceuticals (ASX:NEU) is again Power’s stock of the week with results from its Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome (PMS) results scheduled for release this month.
“The market is really focused on Neuren’s upcoming results given the size of the company and their importance,” Power says.
Earlier this week NEU announced that enrolment of subjects into its Phase 2 clinical trial of NNZ-2591 in Pitt Hopkins syndrome has been completed, with initial results forecast by Q2 2024.
Pitt Hopkins syndrome arises from alterations in the TCF4 gene and affects around 1 in 34,000 to 1 in 41,000 individuals, occasionally leading to an autism diagnosis.
NEU is simultaneously conducting Phase 2 trials of NNZ-2591 for Angelman syndrome, and Prader-Willi syndrome. Each of these programs has received Orphan Drug designation from the US FDA and operates under Investigational New Drug (IND) applications.
In March the USA FDA approved its compound trofinetide (now called DAYBUE) for Rett’s syndrome, the first drug for the treatment of the rare neurological disorder which emerges in infancy.
Power says all of the syndromes present significant neurological challenges in early childhood, currently with few or no approved treatment options.
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