• ASX health stocks up 1% in the past five days in line with broader markets
  • Volpara records third quarter of positive cashflow following successful growth strategy
  • Gut health a popular theme at 17th Bioshares Biotech Summit along with immuno-onocology

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.

Do you own a pet? Do they have fur, feathers, fins or perhaps even scales?  According to research from the University of South Australia (UniSA) owning and caring for pets can offer valuable support for communication and overall wellbeing, especially for individuals facing acquired language difficulties like aphasia.

In collaboration with Aphasia SA, the researchers discovered that pets play a unique role in enhancing communication among people with aphasia — a condition resulting from damage in the brain that impacts one’s capacity to communicate effectively, including speaking, listening, and connecting with others.

Presently, there are more than 140,000 Australians living with aphasia, which could be caused by a stroke, illness or accident.

The study demonstrated that pets can have a notable positive impact on emotional and social wellbeing. They can boost the confidence of individuals in social situations and provide much-needed companionship during low moments.

UniSA student researcher  Charlotte Mitchard says each person with aphasia experiences the condition differently. It often affects their ability to speak, read, write, and comprehend others.

Aphasia can have a big impact on a person’s life affecting how they connect and interact with others, as well as how they participate in the community,” Mitchard says.

“People with affected communication skills can feel quite isolated and alone.

She says pets are a non-judgemental communication partner, offering friendship without expectations.

“In fact, one of the most common phrases we heard was ‘my pet doesn’t care if I can’t talk properly, they love me anyway’.”

Senior researcher and speech pathologist Professor Maria Kambanaros says the study presents a leaping point for other pet and health research in speech pathology.

“The next phase of our study will examine how pet ownership can help people who are caring for those with aphasia,” Prof Kambanaros says.

“Beyond that, we’re also exploring the impact of pet ownership on the wellbeing of people with different acquired neurological disorders, such as Parkinson’s Disease.”

 

To markets…

And there’s a more comfort for ASX health investors this week. At 12pm (AEST) on Friday the S&P/ASX 200 Healthcare index (ASX:XHJ) was up 1% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) was up 0.9% for the same period.

Power has just returned from the 17th Bioshares Biotech Summit, which was this year held in Hobart. He says ~25 companies presented at the summit, predominantly ASX listed biotechs.

“The mood was very upbeat and there is an expectation that the window for capital raising, particularly secondary raising is opening and the share prices for quite a number of companies have been improving particularly if they’ve hit key milestones,” Power says.

“For those companies approaching profitability or key milestones, investors are starting to pay a lot more attention to them and that’s been reflected in higher share prices.”

 

Neuren a star of the show

Market darling of the ASX biotech sector for 2023 Neuren Pharmaceuticals (ASX:NEU) presented at the conference.

In March, NEU announced that its North American partner Acadia Pharma received a historic US FDA approval of trofinetide, marketed as DAYBUE, making the drug the first and only approved treatment for Rett syndrome in the world.

NEU earlier this month announced it had completed enrolments for its Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome has now been completed with topline results forecast for December.

“Neuren were the clear star of the show given their performance over the last 12 months but highlighted this was a success story 20 years in the making – with a lot of ups and downs including its first partnership arrangement with Acadia which disappointed the market at the time given the small upfront component. However, this is paying dividends now,” Power says.

“Management are very positive on NNZ-2591, which could be the jewel in the crown.

“The first readout from the trial results at the end of CY23 will be widely watched.”

Power says there was a lot of interest and discussion at the conference about companies “which have been around a while and after not much happening with their share price they’ve hit an inflexion point and their share price has rocketed”.

 

Gut health emerges

Power says gut health was a key theme at the conference, which is a relatively new area.

“That is an area of interest for big pharma,” Power says.

“It’s a new class of drugs coming through and there’s been two approvals  in the area of gut biome recently which have attracted attention.”

In the gut health space is Microba Life Sciences (ASX:MAP), which recently announced it had inked its first commercial agreement with diagnostic giant Sonic Healthcare (ASX:SHL).

The agreement involves MAP providing its advanced infectious disease test called MetaPanel to be distributed in Australia through SHL’s subsidiary, Douglass Hanly Moir Pathology.

The collaboration comes after SHL acquired nearly 20% of MAP for $17.8 million in late 2022.

Power says  at the conference there’s also still a lot of interest in immuno-oncology, which is your immune system being triggered to help fight cancer along with companies going higher on key catalysts.

 

Volpara reports third quarter of positive cashflow

Volpara Health Technologies (ASX:VHT) has delivered its Q1 FY24 cashflow report, with its third quarter in a row of positive cashflow and a full year ahead of schedule.

VHT, which specialised is the early detection of breast cancer, has provided guidance of FY24 revenue of NZ$40-42 million, up 15-20% on FY23, guiding to EBITDA breakeven of between NZ$500k and $2 million.

Power said the improved financial performance has been driven by the change in strategy through the leadership of CEO Teri Thomas, who took up the role in April 2022, to focus on the most profitable products and regions, as well as targeting larger value customer contracts.

“They posted a small cash flow result which was terrific given they had guided the market to a cash outflow of the quarter,” Power says.

“It’s now their third quarter of positive cashflow so they’ve well and truly turned the corner and their expectation is the business will be positive.”

Power says VHT was one of the companies presenting at the conference and outlined their larger client opportunities, which they’ve termed “elephant” opportunities particularly in the US.

ARPA was up by 30% in FY23, which Power says shows the increase in value of deals.

“Teri Thomas presents well, and we think she has been instrumental in re-focussing the company, with the cost base largely stable. We think there will be significant operating leverage in the business as the top line revenue grows at ~20% per annum,” Power says.

“There was plenty of inbound interest following her presentation.”

Morgans has an Add rating on VHT and a 12-month target price of $1.20, down 1 cent from $1.21.

 

Micro X gets key US contract extension

Micro-X (ASX:MX1) this week announced it has been awarded a 40 month extension valued at $21 million on its existing development contract with the US Department of Homeland Security (DHS) to build and test fully integrated self-screening checkpoint modules in an operating airport with travelling passengers.

The leader in cold cathode X-ray technology for the health and security sectors has been working to replacing the current conveyor belt design for the screening of passengers’ carry-on luggage with a bank of multiple self-service security stations capable of scanning passengers and their carry-on luggage together.

MX1 says the concept, enabled by MX1’s miniaturised CT technology,  is based on the idea of self-service checkout at supermarkets, moving from a staffed conveyor system to a smaller and automated self-service system to increase throughput, improve staff efficiency, and improve passenger experience.

“This a positive announcement which we had not included in our forecasts – this shows that the DHS is pleased with the progress being made over the last 18 months,” Power says.

“Other catalysts include launch of its Argus bomb detection unit, and an update on the Australian Stroke CT program.”

Furthermore, MX1 released its quarterly results. During the quarter MX1 reported undertaking a series of cost reductions to reduce its overheads and better align the business with a closer focus on managing cash outflows and driving returns on all investments.

MX1 had $5.2 million of cash on hand at June 30, following overall cash outflows for the quarter of $3.3 million.

The company says it has taken steps to decrease cash costs in coming quarters, which will be assisted by the expected cash inflows, which are before proceeds from new product sales.

The share price has dropped a bit on the quarterly report but was popped on the DHS announcement to end the week up ~9%.

“It’s had a nice little run up and a bit of profit taking coming but they’re looking pretty good now,” Power says.

“With the transition to the new CEO there is a commercial focus making sure everything they do has a near-term commercial outcome.”

MX1 founder and MD Peter Rowland has retired with Kingsley Hall appointed CEO in April after being its CFO and company secretary since February 2020.

“Even though the cash balance is looking pretty tight there’s clearly a focus to maximise the commercial outcomes in the near term,” Power says.

 

The NEU, MAP, VHT & MX1 share price today:

 

ScoPo’s Powerplay – Signs positive for Aroa quarterly result

Aroa Biosurgery (ASX:ARX) is Power’s pick of the week with the soft tissue regeneration company due to report its June quarter results on Monday.

ARX develops, manufactures, and distributes medical devices for wound and tissue repair, using extracellular matrix (ECM) technology.

Operating in the US and internationally, ARX’s product line includes Endoform, Myriad, and Symphony, with a direct sales team. Additionally, the company partners with Tela Bio (TELA-US) for distributing its hernia repair and breast reconstruction products (OviTex).

ARX’s Enivo product, designed for dead space management, recently received FDA 510k approval for two of its three components.

“They’ve continued to grow and are providing guidance of 25% to 30% revenue growth for the period and a positive EBITDA,” Power says.

“They expect to continue to grow their revenue by at least 25% per annum for the next three or four years so they’re in good shape.

Powers says the share price hasn’t really moved compared to its peers like Avita Medical (ASX:AVH) and PolyNovo (ASX:PNV).

“We think that will change fairly shortly so are happy to get on the front foot,” he says.

Power says from their presentation at the conference ARX sees Enivo as a significant driver for future growth,  which will provide long-term competitive advantage, estimating a TAM of US$1bn.

“During the presentation, it was highlighted that 70% of R&D spend was on developing the Enivo system and without this spend the company would already be highly profitable,” he says.

Power says Myriad had a difficult start when launched during Covid-19 with a joint venture partnership, which has since been dissolved and its own direct sales force established. Myriad sales in FY23 grew by 300% to $8.5m in sales.

“They were able to build a highly experienced sales force through redundancy at a competitor and hired ~20 sales reps,” Power says.

Morgans has an Add rating on ARX and a 12-month target price of $1.50.

 

The ARX 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.

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