• ASX health stocks rise in the past five days outperforming broader markets
  • Avita Medical product sales up 40% on pcp to US$10.5 million in Q1 FY23
  • Proteomics International Laboratories inks a deal with Sonic Healthcare USA

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.

How is your sense of smell?

Researchers from NYU Grossman School of Medicine and the University of Szeged have conducted a study in mice and rats, which found that restoring certain signals in a brain region responsible for processing smells could counter depression.

The study was published in the journal Neuron and reported on in Science Daily this week. Past studies have determined effective communication between brain regions requires groups of neurons to synchronize their activity patterns in repetitive periods (oscillations) of joint silence followed by joint activity.

One such rhythm called gamma repeats 30 times or more in a second and is an important timing pattern for the encoding of complex information, potentially including emotions.

Past studies have shown depression is reflected in gamma oscillation changes, as an electrophysiological marker of the disease in brain regions that manage the sense of smell, which have also been tied to emotions.

These regions include the olfactory bulb next to the nasal cavity, which is theorised to be a source and conductor of brain-wide gamma oscillations.

To test the theory, researchers of the latest study shut down function of the olfactory bulb using genetic and cell signalling techniques. They then observed a related increase of depression-like behaviours in study rodents.

The researchers then reversed the behaviours using a device that boosted gamma signals of the brain at their natural pace.

The study found a link between deficient gamma activity and behavioural decline in mice and rat models of depression, with the signal changes in the olfactory and connected limbic systems similar to those seen in depressed patients.

The research shows gamma-enhancement as a potential approach for countering depression and anxiety in cases where current available medications are ineffective.


To markets….

And ASX health stocks are a little more upbeat this week.  At 12.30pm (AEST) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 1.3% for the past five days, double that of the benchmark S&P/ASX 200 (ASX:XJO), which rose 0.6% for the same period.

“The broader market is still very much macro driven but certainly been stabilising,” Power said.

“You’ve probably heard the old adage ‘sell in May and go away’… the market just doesn’t really know where to go at the moment.”

However, Power said if investors can identify catalysts for future growth they can be rewarded.

“What we’ve been talking about for the past couple of months is companies with material catalysts which are  starting to bring investor attention back into the sector,” he said.

“So far so good, we’ve had a pretty good run this year.”

Among catalysts so far in 2023 is Neuren Pharmaceuticals (ASX:NEU) achieving US FDA approval for a drug to treat Rett Syndrome, which has now started rolling out in the US.

Another catalyst was for ImpediMed (ASX:IPD) after the US National Comprehensive Cancer Network (NCCN) released a new set of guidelines, which included the use of bioimpedance spectroscopy (BIS) as an objective measurement tool to identify early signs of lymphoedema for the first time.

IPD currently holds the only FDA-cleared BIS technology for the assessment of lymphoedema.

EBR to present at Heart Rhythm 2023

Another company with a key catalyst on the horizon is medical device company EBR Systems (ASX:EBR). which is due to release results of its pivotal SOLVE-CRT (SOLVE) trial at Heart Rhythm 2023.

EBR, is developing the world’s first and only inside-the-heart system for heart failure. It is due to release results of its pivotal SOLVE-CRT (SOLVE) trial at the event in New Orleans on Monday, 22 May 2023 (AEST).

“We are quietly positive but until the results are released and published we don’t know the answer,” Power said.

“The focus at the moment is just identifying these catalyst-driven stocks.”


Budget $4.2 billion surplus shows strong underlying economy

Power  said in a positive for Aussie markets the Federal Government’s delivered a $4.2 billion surplus, the first time in 15 years that a budget has been delivered in the black.

“A lot of people were surprised there was a surplus but a lot of it was driven by a strong commodities market and royalties received by the government,” he said.

“But it shows we have a very strong economy sitting underneath the bonnet so the budget hasn’t really affected the market with most people thinking it was reasonably well-balanced and steady.”


Avita Medical releases strong quarterly results

Regenerative medicine and wound care company Avita Medical (ASX:AVH) has released its Q1 FY23 results which included product sales of US$10.5m, up 40% on pcp.

Gross margins were 84%, up from pcp 76%, while operating expenses of US$19.4 million were up from US$16 million.

Key components of operating expenses included:

  • Sales and marketing of US$6.5 million with additional 39 field staff (now 69) employed
  • R&D $4.6 million relates to clinical trials

EBITDA loss was US$6.4 million the same as pcp, while the net loss was US$9.2 milllion, down slightly from  US$9.5. AVH holds cash reserves of US$77.6 million.

AVH’s RECELL System has received US FDA approval for the treatment of acute thermal burns in both adults and children. The acute burns market in the US is estimated at US$600 million.

Power said key short-term catalysts for AVH are additional FDA approvals for the RECELL System for soft tissue repair and vitiligo indications which are expected in June 2023.

AVH has said approval potentially expands the target market to US$1 billion and US$5.2 billion respectively.

“AVH posted a solid 1Q23 result which was in line with guidance,” Power said.

“We are focussed on the near term catalysts on an FDA approval for expanded indications of soft tissue repair and vitiligo which are due in June.

“The share price will be materially higher if approval is achieved.”

Morgans has an Add rating and 12-month target price of $4.45 on AVH.


The NEU, IPD, EBR & AVH share price today:


ScoPo’s powerplay – Proteomics International

Back to catalysts, where Power’s top pick for this week Proteomics International Laboratories (ASX:PIQ)  is up ~8% in the past five days after achieving a significant catalyst.

The predictive diagnostics and bio-analytical services company announced it had inked an exclusive licence agreement with Sonic Healthcare USA, a division of Sonic Healthcare (ASX:SHL).

The agreement is for the use and commercialisation of PIQ’s PromarkerD predictive test for diabetic kidney disease in the US.

An estimated 32 million adults or 11% of the American population live with diabetes. PIQ said testing these patients with PromarkerD could help identify their risk of developing diabetic kidney disease.

“The deal marks the single most significant commercial catalyst in the company’s history and will enable commercial launch across the world’s largest diagnostic testing market,” Power said.

“They’ve also got some very interesting results with endometriosis along with a couple of other cancers where they can predict conditions very early on so there is potentially more licencing opportunities down the track.”

Morgans has an Add rating and 12-month target price of $1.77 for PIQ.

The PIQ share price today:



WORTH READING:  Q+A: Proteomics MD Richard Lipscombe on its potential US breakthrough with Sonic Healthcare

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.