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

Power says the broader market is still looking positive going into year-end, albeit with some concerns around rising yields.

Economies are opening up at a rapid pace around the world, bringing into the fore some previously neglected health stocks.

Nanosonics (ASX:NAN) is one that plays well to the re-opening theme, as most of its clients are hospitals that have had to adjust or close down their operations due to the pandemic.

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

The company has successfully developed and commercialised a unique automated disinfection technology, which was the first major innovation in disinfection for ultrasound probes in more than 20 years.

Morgans has now upgraded its recommendation on NAN from Hold to Add, with a 12-month target price of $6.97 vs the current price of $5.92.

The top news during the week however belonged to ImpediMed (ASX:IPD), which finally released its PREVENT study data.

The PREVENT trial was a randomised controlled trial involving 1,200 patients who were at risk of lymphoedema.

The landmark trial was conducted over six years, and patients were followed up to three years with the primary aim to determine if subclinical detection of extracellular fluid accumulation reduces the risk of lymphoedema progression, compared to when using tape measurements.

“The bottom line for ImpediMed is, their technology is far superior to the tape measure,” Power told Stockhead.

IPD’s share price has surged by 45% over the last month in anticipation of this data release.

Power said that Morgans still has a Speculative Buy recommendation on ImpediMed, with a 12-month price target of 21c vs the current price of 16c.

Power’s take on other ASX health stocks this week

Ramsay Health Care (ASX:RHC) announced this week that the lifting of restrictions on non-urgent elective surgery in NSW will positively impact its earnings for FY22.

The NSW Ministry of Health is lifting restrictions on non-urgent elective surgery at all private and public facilities within Greater Sydney, effective 25 October.

Overnight elective surgery however, will be capped at 75 per cent for both public and private facilities.

Power has a Hold recommendation on RHC, arguing that while the lifting of restrictions on surgery will be supportive, Australia’s COVID response will still dictate the near-term earnings trajectory.

Medlab Clinical (ASX:MDC) announced this week that it has sold the Australian part of its nutraceutical business, AUS Nutraceuticals, to PharmaCare, a well-established Australian health and wellness company.

Medlab will receive cash of $1.6m from PharmaCare, and will now focus completely on its core products, NanaBis and NanoCelle.

It will also look to take advantage of emerging commercial partnering opportunities after having successfully gained patents in 48 worldwide markets.

“While a difficult 12 months on the regulatory and accessibility front, stymied clinical progression and sales growth, we continue to view MDC’s pharmaceutical assets as attractive partnering opportunities,” Power said.

The company, he says, is currently in a holding pattern while a number of questions around clinical timeframes, funding arrangements, and licensing arrangements are being sorted out.

Morgans has a Speculative Buy rating on MDC, with a 12-month target price of 29c vs current price of 16c.

ScoPo’s Powerplay

Power’s stocks of the week are Atomo Diagnostic (ASX:AT1) and Genetic Signatures (ASX:GSS).

Both companies are in the rapid testing market, and will be beneficiaries going forward as rapid testing will continue to play a role for many years to come.

Atomo shares are up 50% in six months, since its COVID-19 rapid antibody and antigen tests were added by the TGA to the ARTG (Australian Register of Therapeutic Goods).

Genetic Signatures meanwhile, reported a 151% increase in revenue and a swing to net profitability of $1.75m for the full year of FY21.

GSS designs and manufactures a suite of real-time Polymerase Chain Reaction (PCR) products for the routine detection of infectious diseases under the EasyScreen brand.

“They will both be reporting their quarterly reports next week, and we’re expecting a strong earnings for the quarter,” Power said.


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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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