ScoPo’s Powerplays: Volpara leads a minor ASX small cap health sector renaissance

ASX health stocks rise 0.8% this week as smaller names in sector show signs of being back in favour
Volpara signs five 5-year contracts worth more than US$7.8 million in Total Contract Value
Mach 7 continues its 2023 recovery after announcing landing its largest ever customer contract

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.

Good news for reducing cognitive decline associated with ageing this week with a new study finding short bursts of physical activity could improve the lifespan of a healthy brain and delay the onset of Alzheimers.

Scientists from University of Otago in New Zealand, recruited 12 people as part of their study to find to find the best way to boost production brain-derived neurotrophic factor (BDNF).

The protein is essential for brain formation, learning and memory along with the ability to form new connections and pathways.

Pharmaceutical interventions haven’t been able to increase the amount of BDNF produced by the human body.

Study participant were analysed as they undertook four different ways to boost BDNF including:

Fasting for 20 hours
90 minutes of low-intensity cycling
A six-minute bout of vigorous exercise consisting of 40 seconds of cycling and 20 seconds of rest
Combined fasting and exercise.

Results, published in The Journal of Physiology, revealed brief but vigorous exercise was the most efficient way to increase BDNF, as it increased as much as five-fold compared to those who fasted or did light exercise.

Researchers suggest this could be because intense exercise increases the number of platelets, which store large amounts of the protein, being released by the body.

To markets….

And ASX health stocks are showing some more momentum for their second week of trade for 2023. At 12.50pm (AEDT) the S&P/ASX 200 healthcare index (ASX:XHJ) is up 0.8% in trade for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) is up 3.9% for the same period.

“A lot of the smaller names are running this week with the exception of Telix (ASX:TLX) which was quite surprising actually,” Power said.

“They posted their fourth quarter revenue numbers for their product and on the surface it looked pretty good and they are continuing to grow on quarter on quarter but the market has marked them down so we are not really sure why that has happened.”

On January 9 TLX released an unaudited revenue update for Q4 2022, reporting revenue of $76.8 million, generated from sales of its Illuccix kit for prostate cancer imaging in the US.

This is an increase of 39% on Q3 2022, and a total of $149.7 million revenue since Illuccix launched in April 2022.

The TLX share price has fallen more than 15% in the past five days.

Volpara climbs on multi-million dollar contracts

ASX Health imaging company Volpara (ASX:VHT) saw its share price climbed ~10% this week after announcing it had signed five 5-year contracts worth more than US$7.8 million in Total Contract Value (TCV).

The new contracts include leading US healthcare providers Bon Secours Mercy Health, Northside Hospital, Adventist Health, Duly Health and Care, and Onsite Women’s Health.

VHT, which specialises in the early detection of breast cancer, also announced that Centura Health, a 19-hospital health system serving patients across Colorado and western Kansas, has renewed for an additional five-years. The contract adds a further US$887K in TCV for VHT.

The company has working on securing agreements with larger providers and said the deals validate its focus on “elephant-sized” industry leaders for recurring revenue growth.

“That has really set them up nicely to achieve the guidance they’ve got in place plus the key thing they’ve been telling the market which is they expect to hit cash flow breakeven by quarter four in FY24 and use their existing cash reserves to get there,” she said.

“That means in the next few quarters we are going to see a big improvement in their cash flow position.”

VHT is due to report its Q3 results on January 18 and Power said he is expecting a solid result.

“It’s a seasonally stronger quarter for them and given they’ve been able to sign these contracts it is setting them up really nicely,” Power said.

Polynovo rises 18% on no news

Wound care company Polynovo (ASX:PNV) is up ~18% this week on news.

PNV completion a $30m institutional placement. in December and said the funds will be used to expand the business in the US, Canada, India, and Hong Kong.

PNV in November said its NovoSorb BTM registration had been approved in the EU and Australian markets which includes treatments for full thickness burns. The company launched the Canadian Burn Conference in October last year.

“There share price has been moving up on some pretty good volume and there was no news during the week but will be reporting quarterly numbers before the end of January,” Power said.

“There previous update suggests that the sales momentum was very positive so not sure what is driving up the share price specifically but think its just this move back into smaller names which have been out of favour for quite a while.”

Proteomics rises as looks to secure Sonic deal

Powers stock choice for last week Proteomics International Laboratories (ASX:PIQ) is also up ~5% in the past five days.

PIQ gained US approval for its PromarkerD test for diabetic kidney disease. The CPT PLA (Proprietary Laboratory Analyses) code has been issued by the American Medical Association, and was a key approval in getting reimbursement coverage of the PromarkerD test by both Medicare and private health insurers in America.

The approval is significant in the commercialisation of the test in the US market. PIQ has also signed a letter of intent with Sonic Healthcare (ASX:SHL) to use the test in their US labs, which has been exted until the end of January.

“We think that’s going to be a very good milestone for Proteomics and the market looks like it wants to reward this company and continues to push that price up,” he said.

The TLX, VHT, PNV & PIQ share price today:

ScoPo’s Powerplay

Medical imaging specialist Mach7 Technologies (ASX:M7T) is Powers Stock of the week after ~22% last week and more than 15% this week after announcing landing its largest ever customer contract.

M7T signed up Nasdaq-listed Akumin Inc, an outpatient radiology service provider in the US, as a new customer to deploy its entire cloud-based enterprise imaging platform.

The total contract value is ~$16.7 million, which will be staged annually across the life of the contract with $7.5m of that expected to be recognised in FY23. Annual support fees will be weighted to the second half of the contract term.

M7T’s entire Enterprise Imaging Platform including its Vendor Neutral Archive (VNA), and eUnity Diagnostic Viewer and Workflow Applications and support Akumin’s decision to consolidate multiple systems into one common enterprise solution.

“It was one of the first major annoucements for this year and their share price has moved up really nicely and we think like Volpara the recovery in this share price is only just getting started,” Power said.

“They are due to report their second results at the end of January.”

The M7T share price today:

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