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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.
The human body doesn’t age at a constant rate throughout adulthood but instead accelerates around ages 44 and 60, according to a new study.
Published in Nature Aging the study reveals that major molecular and microbial shifts happen around ages 44 and 60, potentially impacting overall health.
As we age, our bodies undergo significant changes with visible signs like greying hair and wrinkles well known. However, many changes also occur internally within organs, tissues, and cells.
The researchers studied data from 108 people in California aged 25 to 75, tracking them for an average of 1.7 years and maximum of 6.8 years.
The participants provided blood and biological samples regularly, allowing scientists to monitor age-related changes in more than 135,000 molecules and microbes across nearly 250 million data points.
Researchers observed that around 81% of the molecules and microbes they studied undergo more significant changes at specific ages. The most pronounced changes occurred at ~44 and 60, which are linked to potential health concerns.
For people in their 40s, notable changes were seen in molecules related to alcohol and caffeine metabolism, lipid levels, cardiovascular health, and skin and muscle function.
At age 60, key changes were connected to cardiovascular disease, immune function, kidney health, and carbohydrate metabolism.
“Overall, this research demonstrates that functions and risks of aging-related diseases change nonlinearly across the human lifespan and provides insights into the molecular and biological pathways involved in these changes,” the researchers concluded.
And ASX healthcare stocks are still giving investors a few grey hairs this week. At the close of markets on Thursday (AEST) the S&P/ASX 200 Healthcare index (ASX:XHJ) was up about 1.27% for the past four days, while the benchmark S&P/ASX 200 (ASX:XJO) was up about 1.69%.
“The reporting season is mixed for our healthcare names and the lifescience space is lacking any momentum,” Power says.
“The macro picture is still towards the positive side but consumer demand has been dented and then you have the overlay of geopolitical uncertainty weighing on the market.
“At this point our sector has just lost some of its momentum with some disappointing catalysts and mixed share price reactions to broadly in line financial results.”
Pharmaceutical distributor EBOS Group (ASX:EBO) has posted its FY24 result which was in line with consensus forecasts.
Importantly, Power says the FY25 guidance range sits comfortably within both Morgans forecasts and consensus.
EBO has provided FY25 guidance of underlying EBITDA between $575-$600m.
The company reported underlying EPS of 157.9 cents, up 6.8% in FY24. EBO is forecasting a dip in earnings in FY25 through the loss of the Chemist Warehouse contract to Sigma from July 1, 2024.
Power says underlying EBITDA ~8% in FY24 and FY25 guidance implies underlying EBITDA
growth ex-Chemist Warehouse of 5% to 10%.
EBITDA margins were down by 3 bps to 4.73% in FY24, while operating cash flow was down 9.3% to $367m.
Net debt increased to $1bn from $767m. A final dividend of NZ$0.615 was declared.
In its announcement CEO John Cullity says sales revenue exceeded $13 billion for the first time reflecting particularly strong growth within its community pharmacy and institutional healthcare divisions.
“Our confidence in our future growth strategies saw us make significant investments during the year in our operations and continue our expansion via acquisitions in both our healthcare and animal care segments,” he says.
Morgans has an Add recommendation on EBO but has reduced its 12-month target price to $39.04 from $39.40.
“We thought it was a good quality result and they have outlined a clear growth strategy to continue growth remembering the Chemist Warehouse contract came to an end in FY25,” Power says.
“There is a hole in earnings but if you look at the history of this company over the last 10 years they have had compound EPS growth of greater than 10%.
“FY25 will be a down year with the Chemist Warehouse contract no longer in their books but then FY26 will resume that upward growth so we think EBOS is good buying at the current price.”
Labelled by Power in the past as an “underperformer” Healius (ASX:HLS) this week released its FY24 results, reporting a business-as-usual (BAU) revenue of $1.74bn, up 6.1% from FY23.
Underlying EBITDA of $346.6m, and underlying EBIT of $65.4m was at the top end of the guidance range.
HLS says covid-19 revenues reduced in FY24 by $61m, equating to an EBIT reduction of $30.4m compared to FY23.
In a note to clients Morgans healthcare analyst Derek Jellinek says pathology was the main drag, negatively impacted by cycling out of covid-19 testing, combined with ongoing cost inflation.
HLS’s soon to be sold Lumus Imaging showed above market growth in hospital/community, while Agilex demonstrated strong growth and significant margin expansion on new contract wins.
HLS entered into a deal to acquire Agilex, which is Australia’s largest bioanalytical and toxicology laboratory, in December 2021.
In its FY24 results announcement HLS says pathology also needs more financial support from the Federal Government to remain viable
“Patient rebate for pathology tests has not increased since 1999, requiring Healius and other pathology providers to continue to fill the funding gap between the diminishing value of the rebate (in real terms) and the increasing cost of providing pathology services,” HLS says.
“Healius repeatedly called on the Federal Government to urgently address this funding gap in the 2024-25 federal budget, but the government responded by indexing just one-third of pathology items, and only from July 2025. “
Morgans maintains a hold rating on HLS and has increased its target price from $1.28 to $1.48.
“While underlying growth is improving, broad-based structural change continues, making translation into sustainable earnings growth challenging and difficult to predict,” Jellinek says.
Ansell (ASX:ANN) released its FY24 results this week and importantly forecast that revenue growth should return to normal in FY25 after several years of soft sales where hospitals and distributors overstocked on Covid-19 protective gear.
In a note to clients Jellinek says the provider of personal protective equipment (PPE) for the healthcare and industrial sectors reported mixed FY24, with better-than-expected adjusted EPS US$1.055, within guidance of US$0.94-1.10, but ahead of expectations.
“While industrial demand is broadly stable, healthcare destocking is ending and H2 momentum is a clear positive, we remain cautious, given uncertainties around ongoing cost-outs, integration of Kimberly-Clark’s personal protective equipment business and potential earnings headwinds from higher input and freight costs, all reflected in a very wide FY25 guidance range ofUS$1.07-1.27; +1.4-20%,” he says.
Morgans maintains a hold on ANN and has increased its 12-month price target to $27.10 from $25.61.
Monash IVF Group (ASX:MVF) reported group revenue of $255m, up 19.7% in FY24 driven acquisitions and added fertility specialists plus volume and price increases.
Underlying EBITDA was $62.8m, while EBITDA margin was 25%, largely in line with pcp 25%, and Morgans forecast of 25%.
MVF reported a net loss of $5.9m, including from a class action settlement, while underlying NPAT was $29.9m up 17.4% on the pcp, which was in line with guidance of $29-30m.
Pre-Tax EBITDA conversion was strong at 104%, slightly up from 100% pcp 100% with capex $21.7m for FY24.
The company’s net debt as at June 30, 2024 was $48.7m and Power says its net debt ratio remains below 1x.
Power says the balance sheet remains strong to support organic and non-organic growth.
MVF declared a final 2.5 cents/share dividend bringing the total to 5 cents/share and in line with Morgans’ expectations.
MVF Australia stimulated cycles were up by 10.4% to 11,401 cycles compared to industry growth of 2.4%, and frozen cycles were up 18.2% to 8,752 cycles.
Industry volumes remain elevated from pre-covid levels. Overall, in the Australia market, MVF’s market share was 21.7%, up 150 bps from 20.2% in the pcp.
MVF says market share gains are expected to continue in FY25 with the new fertility specialists joining the group and contribution from the Fertility North acquisition.
“Monash has just settled their class action so that is now behind them and their results were in line with guidance,” Power says.
“Importantly, the growth trajectory for FY25 looks very strong so that is one I think is very interesting.”
Pathology and radiology provider Sonic Healthcare (ASX:SHL) reported its FY24 results with Power saying underlying profit tracking to recently updated guidance.
SHL reported net profit for FY24 of $511m, ahead of consensus, on revenues of ~$9bn.
In an ASX announcement CEO Dr Colin Goldschmidt says FY24 was a “transition period” as the company “moved away from the impacts of the pandemic towards business as usual”.
“An 87% reduction in Covid-related revenue has meant that our headline numbers for the year show significantly lower earnings versus FY23,” he says.
The company says inflationary pressures also had an impact on its bottom line in FY24. SHL paid a final dividend of 63 cents/share ahead of expectations.
SHL is targeting EBITDA of$1,700-1,750m in FY25 with consensus $1,718m and Morgans forecast $1,768m.
“The result was in line with guidance that they provide and next year’s guidance that previously provided they have reconfirmed,” Power says.
“Our view is they are through the worst and there’s pretty good growth trajectory going into FY25 and FY26.”
Health-imaging company Mach7 Technologies (ASX:M7T) reports its FY24 results next week.
M7T recently reported its Q4 FY24 results announcing it had achieved guidance to be cashflow positive for the financial year.
The company met and exceeded FY24 guidance of sales orders hitting $61.3m ($60m guidance).
“What we will be looking at will be their outlook commentary and what we expect is it will show positive growth in their order book continuing their move towards profitability and transition to subscription based business gaining momentum,” Power says.
Morgans has an add rating on M7T with a 12-month target price of $1.56.
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
Disclosure: The journalist held shares in Sonic Healthcare and Mach 7 at the time of writing this article.
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