ScoPo’s Powerplays: Market volatility creates both buying and selling opportunities in the Health sector
Health & Biotech
Health & Biotech
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Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
The Healthcare index (XHJ) is up 0.70% for the week at the time of writing, compared to the broader market which fell by 1.15%.
Investors’ anxiety over Fed tapering and the Evergrande debacle has led to a rollercoaster week, where the ASX 200 suffered its worst drop of the year on Monday (down 2.1%).
But the decision by the Fed to wind back its stimulus programs was offset by upbeat plans to open up international travel, as the world claws slowly back to normality.
This dynamic has led to market volatility and presented investors with both buying as well as selling opportunities in the health sector, Power told Stockhead.
“In this volatility, we can either buy into some good names or if a stock has rallied hard we’re always happy to take a bit off the table,” he said.
Medical Developments International (AASX:MVP) was one such stock that was impacted by volatility and rallied 15% for the week on no news.
The last time the company released a notable announcement was when it reported a $12.6m loss for the full year of FY21.
“I’m not sure what’s causing the movement on MVP but there must be something behind its rally in a volatile market,” said Power.
It’s interesting to note that company insiders have been buying the MVP stock over the past year.
In other stocks, Power noted the best health performer for the week was that of Rhythm Biosciences (ASX:RHY), which surged by 20% on news that it was commencing recruitment of patients for the clinical study of coloSTAT.
The coloSTAT is a low-cost, simple blood test that can early detect colorectal cancer, which is the third biggest cause of cancer-related deaths globally.
“The important thing for Rhythm is they’re on track for a European approval by the end of this calendar year, and the TGA approval next year,” said Power.
The biotech high flyer rose by another 11% this week, after receiving a patent grant in Japan for its HER-Vaxx immunotherapy, currently in development to treat HER2-positive gastric cancer.
The patent will protect the method of composition and use of Imugene’s HER-Vaxx immunotherapy up to the year 2036.
Approximately 75% of all gastric cancer diagnoses are in Asia.
Japan has the third highest incidence rate worldwide, of which approximately one in five cases are considered HER2 positive, making the country a very large market for gastric cancer medications.
The IMU stock price meanwhile, has surged by 870% over the past 12 months.
“It’s defying gravity, in my books,” Power said.
“Imugene has got a huge market cap and we’re happy to be reducing our position in this stock.”
The company has enrolled the first patient in the BARDA-funded burn patients study.
The Biomedical Advanced Research and Development Authority (or BARDA) is a US Department of Health office responsible for the development of medical countermeasures – principally against bioterrorism such as chemical and nuclear, as well as viral pandemics.
PNV’s study is being conducted in 20 US and five Canadian burn centres comprising up to 150 burn patients in a comparative study against the existing standard of care.
It’s estimated to take approximately three years, with BARDA chipping in US$15m to support it.
Telix says the US FDA has extended the review period for the New Drug Application (NDA) of its prostate cancer imaging investigational product, Illuccix, by three months.
The revised target date of 23 December will allow the FDA to review and consider further manufacturing-related information submitted by the company, and conclude its label review.
Power said what’s important is that the FDA has raised no manufacturing of clinical review issues (in line with June update) as part of the NDA, so on face value it appears to be a straightforward matter of requiring more time to review new information required.
“The other thing about Telix is that it has a very deep pipeline, so we’ll add any weakness in the stock price to possibly add to our positions,” Power said.
The Powerplay stock of the week is breast imaging company, Volpara Health (ASX:VHT).
VHT provided a solid 1Q FY22 cashflow report despite it being a seasonally weak quarter.
One of the key metrics in the result was that it recorded cash receipts of NZ$6.4m, a 30% increase on pcp.
And as global interest in personalised medicine grows, VHT is also sharpening its focus to risk and genetics.
Its recent CRA acquisition and the collaborations with Ambry Genetics and Invitae Corporation were key components of this strategy, Power said.
Volpara has also just confirmed the expansion of its US market footprint via a strategic partnership with lung AI company, Reveal-Dx.
“The important thing to know here is that the imaging technology used in breast cancer detection is the same as that used in lung cancer detection, so it’s not as if they have to reinvent the wheel,” Power explained.
“I feel Volpara will break out of its trading range and trade higher, as we come into stronger periods of sales,” he added.
Morgans has an Add recommendation on the VHT stock, with a 12-month price target of $1.87 vs the current price of $1.22.
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.
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