ScoPo’s Powerplays: Profit-taking on the cards for health stocks that have had good runs

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.

Theme of the week

The Healthcare index (XHJ) is down 1.28% for the week at the time of writing, compared to the broader market which fell by 1.78%.

Despite the lacklustre performance of the stock market this week, there was price momentum in some of the healthcare names.

Clinuvel Pharma (ASX:CUV) has been climbing by almost 50% since it reported record revenues and profit for the full year.

The genetics and metabolic disease-focused company delivered a record $48.5m for the full year, compared to $33.9m a year ago. Its net profit before tax has more than doubled to $25.7m.

Clinuvel has successfully commercialised its FDA-approved SCENESSE, a treatment for adult patients with a history of phototoxic reactions (damage to skin).

It’s also currently undergoing a Phase 2 clinical trial of CUV801, which will study the potential of afamelanotide in patients who are ineligible for standard stroke therapy.

“With big share price rises, at some point there will be a bit of profit taking coming in, so we’d be happy to trim our position in Clinuvel,” Power told Stockhead.

This profit taking was also seen in ProMedicus (ASX:PME), which had gone on a 60% price hike in the last six months before profit taking saw the stock retreat by 10% over the past weeks.

Other health stocks on a good run

Nanosonics (ASX:NAN) also had a massive run over the past month, rising by over 20%.

Nanosonics has recently detailed information on its next major product, which is a flexible endoscope.

The commercial launch is estimated to be in CY23, and management has indicated the revenue model will be similar to the Trophon2 device, with a capital and consumable component.

“There’s a bunch of companies that are benefiting from the US economy reopening, and Nanosonics is one of them. They’re getting greater access to the hospital network over there, and that looks more positive,” said Power.

Hearing tech Audeara (ASX:AUA) was up 10% this week, but on thin volume.

Audeara posted a full year EBITDA loss of $0.7m after excluding one-off IPO expenses of $0.4m, and has sunk to 11c after making its IPO debut at 20c in May.

But Power believes the company has a strong momentum into FY22 with growing repeat sales.

“Audeara appears to have advanced its US entry through the Westone agreement, giving it access to around 16,000 clinicians,” Power said.

In the immuno-oncology space, both Imugene (ASX:IMU) and Immutep (ASX:IMM) have also had good runs this year.

Imugene has risen by 40% in the past month, while Immutep is up 70% in the last six months.

“There’s a lot of global interest in these cancer programs.”

“Having said that, we’re always happy to take some profit with big share price appreciations,” Power reaffirmed.

On the capital raise front, Imricor Medical Systems (ASX:IMR) is currently raising $16.5m to ramp up its MRI and X-ray devices sales.

The company said that there is a growing addressable market in cardiac catheter ablation, which is worth around $6 billion globally.

ScoPo’s Powerplay

The Powerplay stock of the week is breast imaging company Volpara Health Tech (ASX:VHT).

VHT has just provided a solid 1Q FY22 cashflow report despite being a seasonally weak quarter, with record cash receipts.

As 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 are key components of this strategy, Power said.

Management has reconfirmed FY22 revenue guidance in the range of NZ$25m to NZ$26m, which combined with the stable cost base, sees the company moving closer to a cashflow positive business.

“I feel Volpara will break out of that trading range and break higher, as we come into stronger periods of sales,” says Power.

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.

Volpara share price today:

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