- ASX health stock rise in line with broader markets in big quarterly reporting season week
- Imricor sales momentum improve as focus on imminent start of pivotal US trial VISABL-AFL into Atrial Flutter
- Micro X well funded with necessary working capital to build pool of its bomb-detection Argus units for customer trials
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.
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A team of scientists from across the US with the Molecular Transducers of Physical Activity Consortium (MoTrPAC) used an array of techniques in the lab to analyse molecular changes in rats as they were put through weeks of intense exercise.
The study revealed exercise induces numerous cellular and molecular alterations across all 19 organs examined in rats. The team discovered that exercise assisted in immune system regulation, stress response, and control of pathways linked to inflammatory liver disease, heart disease, and tissue injury.
The findings offer insights into numerous human health conditions. For instance, the researchers identified a potential mechanism behind the reduction of liver fat during exercise, offering prospects for novel treatments for non-alcoholic fatty liver disease.
The team hopes their findings could be used for personalised exercise regimens based on individual health status or to develop treatments mimicking exercise effects for those unable to engage in physical activity. The scientist have initiated studies in humans to monitor exercise’s molecular impacts.
To markets…
And ASX health stocks are looking in better shape this week. At 12.30pm (AEDT) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 1.4% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) rose 0.75% for the same period after a strong rebound on Friday.
“The market is still pretty tough on the small end,” Power says.
“But if I am right that just gives us some good buying opportunities, particularly for companies with meaty catalysts coming.”
Power says Imricor Medical Systems (ASX:IMR), PolyNovo (ASX:PNV), Avita Medical (ASX:AVH) and Neuren Pharmaceuticals (ASX:NEU) all have upcoming catalysts.
“If the news is positive from those four companies I mentioned the share price should react positively,” he says.
It has been a big week of quarterly reporting from ASX health stocks. Power says there were several companies worth noting.
Imricor sales momentum improves
Focused on improving safety and first time success rates in cardiac catheter ablation, IMR reported its Q1 CY24 cashflow report, which Power says was in line with expectations.
Importantly he says sales momentum is improving with April consumable sales ahead of Q1 sales. Customer receipts for the quarter were US$100k and net cash outflow was US$4.7m.
IMR had cash reserves of US$1.2m, however subsequent to period end completed the balance of a rights issue raising US$6.5m.
Power says additional funding options are in place and with short-term funding issues resolved, IMR is in a strong position to execute on important milestones.
He says Morgans short-term focus is on the imminent start of IMR’s pivotal US trial Vision-MR Ablation of Atrial Flutter, or VISABL-AFL for short, and its pivotal European ventricular tachycardia (VT) trial VISABL-VT.
IMR says the VISABL-VT trial will have global implications for the company, even before completion of the trial. The company says the medical community says that MRI guidance would add maximum value to complex ablation procedures, like VT, which require the doctor to access the left side of the heart via puncturing through the septum.
IMR says successfully treating the first few patients over the coming months will be the culmination of 18 years of work and more than US$100m of investment in the technology.
Power says on the competitive landscape there continues to be investment into the US$7bn electrophysiology (EP) ablation market, which this is expected to increase to US$13bn (up ~11% CAGR) by 2027, according to a recent Johnson &Johnson investor update.
“The large medical device companies are positioning themselves for this growth and as an example Medtronic acquired Affera Inc in August 2022 for US$925m.
“This gave Medtronic access to Affera’s Prism-1 cardiac mapping and navigation platform.”
Power says IMR’s Northstar 3D mapping system will be an important part of its portfolio with collaborations underway with Siemens, Philipps and GE Healthcare to integration with their respective MRI platforms. We will continue to monitor the landscape closely.
“We think these guys have some really leadin-edge technology in the space, which I think in the not-to-distant future a few more people will start cottoning onto.”
Morgans has a speculative buy and 12 month price target of 96 cents on IMR.
Aroa Q4 results in line with expectations
Soft tissue repair company Aroa Biosurgery (ASX:ARX) has seen it’s share price fall in the past five days despite reporting its Q4 FY24 cashflow report, which Power says was broadly in line with expectations.
Importantly, he says it appears that the re-alignment of product shipments to ARX’s US distribution partner TELA Bio as it right sizes its inventory holding is now complete.
He says this should see ARX sales to TELA Bio re-align to its sales trajectory. Cash receipts from TELA Bio were up 20% in H2 compared to H1. TELA Bio has provided CY24 revenue guidance of US$74-76m (growth of 27-30% on pcp), of which product shipments from ARX should align.
During the last quarter, TELA Bio also launched the new format for ARX’s OviTex IHR designed specifically for laparoscopic and robotic assisted hernia repair. Power says this should result in incremental sales.
“Aroa is talking about 20% revenue growth for the next three years so that’s pretty attractive and moving into profitability so the company is ticking all right boxes,” Power says.
“The market is just wanting a bit more proof on what is essentially a longer term growth story.
“Another quarter or so and we should be off and running.”
Morgans maintains its Add rating and 12-month target price of $1.20 for ARX.
Micro-X well funded to move ahead with Argus program
Power says it was a similar story of not being rewarded by a jittery market for Adelaide-based cold cathode X-ray machine manufacturer for health and security markets globally Micro-X (ASX:MX1) which has fallen ~3% this week after releasing its what Morgans termed as a “reasonable” Q3 FY24 result.
MX1 reported cash receipts of $4.1m, including $800k product receipts and $3.3m of project work and net operating cash outflow of $2.8m for the quarter.
MX1 has completed has completed a $4m placement at 9.5 cents/share and is currently conducting a SPP closing on May 23, which is expected to raise another $1m.
Power says the funds will provide MX1 with the necessary working capital to build a pool of its bomb-detection Argus units for customer trials which Morgans believe will ultimately become sales orders.
He says existing cash of $2.2m, the $5m capital raising, R&D funding of $4m and contracted projects of $14.2m to June 30, 2025 provide a reasonable base upon which to build the sales momentum for the Argus and further advance strategic partnerships for ARX’s Checkpoint (airport self-check-in) and brain CT stroke imaging projects.
“All the ingredients are in place and it’s just the same sort of thing where the market just wants a bit more proof that the sales are going to come for this key product,” Power says.
ResMed Q3 FY24 results above expectations
Power says leader in obstructive sleep apnoea (OSA) and other sleep-related respiratory disorders ResMed (ASX:RMD)
Q3 FY24 results were above expectations, with double-digit bottom line gains on improving gross profit margin, operating leverage, and strong cash flow.
RMD says its results followed strong patient and customer demand for its products and software solutions, resulting in double-digit revenue growth for masks and accessories.
The company says growth is complemented by ongoing operational enhancements aimed at improving margins and boosting profitability, leading to double-digit growth in both operating profit and earnings per share (EPS).
“That was a very strong result for ResMed and they produced a good quarterly result,” he says.
Furthermore, RMD’s major competitor NYSE-listed Royal Philips releasing its Q1 FY24 results and announced a US$1.1bn settlement to resolve personal injury litigation and medical monitoring class action.
The announcement sent the stock soaring 27%, as it ends the uncertainty associated with US litigation related to its Jun-21 device recall of certain sleep therapy and ventilators due to potential health risks related to the use of polyester-based polyurethane (PE-PUR) sound abatement foam.
Following this settlement, along with the recent US consent decree, management highlighted a “clear path forward”…but did not detail how and when it would “gradually restore (its) position”.
“Philips have had this consent decree which they’ve still got to do a lot of work to do and we think its still at least two years before it comes back onto the market so RMD won’t have that competitive pressure for at least two years,” Power says.
Morgan has an add rating on RMD and has increased its 12-month target price from $32.82 to $34.11.
Clarity prostate cancer treatment achieves ‘complete response’
Clarity Pharmaceuticals (ASX:CU6) jumped 32% this week after announcing that the first patient to be dosed with two cycles of 67Cu-SAR-bisPSMA at 8GBq achieved a complete response to treatment based on RECIST criteria.
The patient received the first cycle of 67Cu-SAR-bisPSMA as part of Cohort 2 of CU6’s theranostic SECuRE trial, which is evaluating the drug in patients with mCRPC (metastatic castration-resistant prostate cancer).
CU6 says before receiving the drug, the patient had failed multiple lines of treatment, including hormone therapy, an investigational agent and chemotherapy.
“Even though it was only one patient they had a complete response so that share price has moved ahead,” he says.
The IMR, ARX, MX1, RMD & CU6 share price today:
ScoPo’s Powerplay – PolyNovo to give sales update
Wound care company PolyNovo (ASX:PNV) is Power’s pick of the week, which Power says is due update the market on their sales and will also present next week at the 2024 Macquarie Australia Conference next week.
“We wouldn’t be surprised to see a positive sales update come out of PolyNovo,” Power says.
“Everyone is looking at all the companies to see who is going to say what and PolyNovo is one we’ve picked out in the healthcare space as being a potential to come out with some good news.”
In March PNV came out with strong H1 FY24 results, which were above market expectations. The company reported strong sales acceleration across all regions.
Morgans has an Add rating on PNV and upgraded the company’s 12-month target price from $1.95 to $2.22 following the H1 FY24 result.
The PNV share price today:
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.
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