ScoPo’s Powerplays: Solid earnings for health stocks all round, but price action stays with larger caps

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

Healthcare finished the week down 1 per cent, compared to the broader market which ended flat.

It has been a hectic week in earnings for the ASX, with many companies reporting their financials and quarterly activities.

Stocks on Morgans’ coverage list have mostly done well, but their share prices are disappointingly not responding to the results.

“This tells us there is not a huge amount of interest at the smaller end of the market right now, and investors are still focused on the larger capped stocks,” Power told Stockhead.

Highlights for the week included ImpediMed (ASX:IPD), the medical device company that uses bioimpedance spectroscopy (BIS) to measure and monitor fluid status and tissue composition.

Impedimed reported record results for Q4 and had a $10m+ revenue run rate, yet its share price tumbled 8% during the week.

“The key thing with ImpediMed is, we’re expecting data to be published shortly in one of the major journals, which they said would be published within 90 days during their previous quarter reporting. This could be a major catalyst for them, but that report is now overdue,” Power said.

Another company that reported strong quarterly earnings was hearing tech Audeara (ASX:AUA), which announced a 56% year-on-year revenue growth in the June quarter.

Audeara’s share price rose by 9% during the week.

“Volpara’s (ASX:VHT) numbers were also good, and traditionally this would be soft quarter for them but they’ve come in with record receipts of $6 million for the quarter.”

Control Bionics (ASX:CBL) was another company that had a solid quarter, with Q4 cash receipts up 36% on the previous quarter to $1.05m.

“Despite all this good news, in most cases the share prices haven’t really responded and have stayed at the same levels,” Power said.

Continuing M&A activity

Aged-care company Japara Healthcare (ASX:JHC) jumped by 18% last Tuesday after its board unanimously recommended the 100% takeover of the company by Little Company of Mary Health Care for $1.40 per share, valuing Japara at $380 million.

The proposal will be voted at a shareholders’ meeting, with the JHC stock price closing the week at $1.38.

Other takeover plays to watch out for include that of Regis Healthcare (ASX:REG).

An offer to buy Regis was withdrawn by Washington H. Soul Pattinson (ASX:SOL) in January, after the Regis board rejected the two offers by SOL – first at $1.65, and a subsequently improved one at $1.85.

Meanwhile, drugs distributor Australian Pharma Industries (ASX:API) has this week rejected a 100% takeover proposal from giant Wesfarmers (ASX:WES) at $1.38.

The API board called the proposal “opportunistic”, given the impact COVID and the related lockdown restrictions have had on API’s financial performance over the last 18 months.

“Usually the first offer wouldn’t be the highest, so we’ll see how this will play out over the next months,” said Power.

Big capital raising

There’s a number of fairly big capital raisings coming through.

Imugene (ASX:IMU) has just completed a $90m placement to institutional and sophisticated investors at 30c, as well as a $5m Share Purchase Plan (SPP) to existing shareholders at the same price. IMU’s share price closed the week at 30c.

Aroa Biosurgery (ASX:ARX) is also raising big capital of $52m, comprised of $47m in placement and $5m in SPP.

Rhythm Bioscience (ASX:RHY) has secured a rights issue to raise $4.3m, while BARD1 Life Sciences (ASX:BD1) is raising $15m to accelerate its cancer diagnostic program.

Other health stocks announcements you might have missed

US FDA has approved Acrux (ASX:ACR)’s generic version of its EMLA Cream.

Chimeric Therapeutics (ASX:CHM) has obtainined the exclusive licence to a novel CAR-T for solid tumours from the University of Pennsylvania, which will bring its novel CDH17 CAR-T cell therapy to more patients.

Meanwhile in its quarterly update, 4D Medical (ASX:4DX), said it has ramped up commercialisation activities following the rapidly growing vaccination uptake in the US.

Stock of the week

Power’s stock of the week is Antisense Therapeutics (ASX:ANP).

The company has received positive feedback from the Type-C meeting with the US FDA (trial design, dosage, endpoints were all acceptable) on its Phase-2 ATL1102 trial, with the decision on fast designation request expected in August.

ATL1102 is an antisense inhibitor to treat Duchenne Muscular Dystrophy (DMD), a fatal genetic muscle inflammation disorder that affects every 3,500 to 5,000 males worldwide.

“The other area of interest with Antisense is that its long-serving chairman Bob Moses is stepping down to make way for Dr Charmaine Gittleson, a very highly credentialed executive from CSL,” Power said.

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.