ScoPo’s Powerplays: Neuren breakthrough, M&A deals, and why EBOS ticks ESG boxes
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 25 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
It’s been a better week on the ASX overall, after choppy trading last week caused by Omicron concerns.
Those fears have dissipated and risk assets have bounced back, as reports confirmed the variant isn’t as deadly as first thought.
Power notes there has been a flurry of acquisitions in the ASX healthcare sector this week, with EBOS Group’s (ASX:EBO) takeover of LifeHealthcare being the most eyecatching.
Pharmaceutical distributor EBOS wants to buy LifeHealthcare, one of the largest independent distributors of third party medical devices and manufactured allograft material in Australia, New Zealand and South East Asia, for approximately $1.167 billion.
“That looks to be a very good acquisition for EBOS, and will take their revenues in the hospitals segment from 26% to 38% of their overall business,” Power told Stockhead.
“EBOS has previously flagged to the market they wanted to expand their exposure to medical devices, so this is right up in their wheelhouse.”
Trajan Group (ASX:TRJ) was another company that announced an acquisition deal this week, a US$7.7 million takeover of North Carolina based LEAP PAL.
LEAP operates in the specialised parts of medical instruments business, which supports customers that operate automated laboratory workflows.
“Alcidion (ASX:ALC) is also raising $55m to acquire Silverlink, so there is plenty of M&A activity in the space at the moment,” said Power.
Neuren Pharma (ASX:NEU) spiked 90% on Tuesday after revealing it was close to launching the first ever drug for Rett syndrome to the market.
The company announced that its North American partner, Acadia Pharma (Nasdaq: ACAD), reported positive top-line results from the Phase 3 Lavender study of trofinetide, Neuren’s lead asset.
This was the first treatment ever approved for Rett, a groundbreaking achievement that will net Neuren $111m in revenues in 2022 and 2023, plus double digit royalties going forward.
Patients enrolled in the Phase 3 trial reported improvements in core symptoms, like being able to respond to a choice when asked by their parents.
The study also observed that the girls were experiencing less repetitive hand movements, one of the known symptoms of Rett.
“Neuren now has the opportunity to license out this new drug to the rest of the world, which puts them in a very strong position,” Power said.
Power picks EBOS as his ESG stock of the week.
EBOS has launched its ESG program and recently published its inaugural sustainability report.
The company’s management is one the most diversified teams on the ASX, with 43% female representation, including the chair.
Across the wider organisation, 59% of its workforce is female.
“Health lends itself to ESG, and then within that you’ve got gender diversity. EBOS is on top of the whole ESG component,” Power said.
“EBOS’ governance has always been very strong, and employee satisfaction rates have always been very high for them.”
Power’s stock of the week is Impedimed (ASX:IPD).
Morgans has increased its 12-month price target on ImpediMed from 20.7c to 24.7c. The IPD share price is currently at 17c.
A big part of Morgans’ decision to upgrade is IPD’s looming publication of the PREVENT data, which is expected shortly.
The PREVENT was a randomised controlled trial involving 1,200 patients who are at risk of lymphoedema.
“Apart from that, we believe the recent $40m capital raising sets up the company to achieve a break-even position over the next two years,” says Power.
“We maintain our Speculative Buy rating on IPD. We think there are numerous catalysts that will see investor interest increase in the stock.”
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