ScoPo’s Powerplays: Who fancies 22 minutes of exercise? And ASX health stocks are up (finally)
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 26 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplay.
Do you have a job where you are sitting for long periods? A new study has found that even just 22 minutes of daily moderate to vigorous physical activity (MVPA) can significantly decrease the risk of premature death caused by a sedentary lifestyle.
The research, published in the British Journal of Sports Medicine, involved monitoring 11,989 individuals who participated in fitness-tracker-based studies such as the Norwegian Tromso Study, the Swedish Healthy Aging Initiative, the Norwegian National Physical Activity Survey, and the US National Health and Nutrition Examination Survey.
All participants were aged 50 or older and provided information on various factors, including weight, height, gender, education level, alcohol consumption, smoking habits, and any history of cancer, cardiovascular disease, or diabetes.
Among the participants, 5,943 individuals sat for less than 10.5 hours daily, while 6,042 individuals sat for 10.5 hours or more each day.
The study aimed to evaluate the impact of sedentary time and physical activity on the risk of mortality, as recorded in death registries.
For people exercising less than 22 minutes a day, sitting for more than 12 hours was associated with a 38% increased risk of earlier death compared to sitting for eight hours.
“Efforts to promote physical activity may have substantial health benefits for individuals, and small amounts of MVPA may be an effective strategy to ameliorate mortality risk associated with high sedentary time,” the study authors concluded.
And ASX health stocks have been moving in the right direction this week. At 11am (AEDT) on Friday the S&P/ASX 200 Healthcare index (ASX:XHJ) was up 3.4% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) was up 2.8% for the same period. The XHJ is down 12.3% YTD, while the XJO is down 1% for the same period.
Power says after a weak October it was good to see November get off to a more positive start.
“Interest rates were kept on pause in the US and that saw the bond market come back,” he says.
“The increasing bond market has been troubling everyone for most of the year really and the fact there was a pause has given the market some reason to be more positive.”
“Australia has its interest rate decision next Tuesday on Melbourne Cup day so we will see whether they keep interest rates where they are or move them up and there’s still a fair bit of uncertainty.”
Power says more health care stocks appear to be rattling the tin with capital raises heading into the year with tighter markets seemingly taking a toll on cash flow.
“Big discounts are taking place at the moment as companies try to preserve their cash positions,” Power says.
“Some of these smaller companies will not survive and their business plan is not robust enough to justify continuing but some will limp along and others will regain momentum when the market turns back in favour.”
Health imaging company Mach7 Technologies (ASX:M7T) achieved record quarterly sales orders of $33.5 million in Q1 FY24 with contracted annual recurring revenue of $25.5 million at September 30 2023, up 24% on the previous quarter end.
M7T expects to return to positive operating cashlflow in FY24. Guidance for sales growth of greater than 20% on pcp, with revenue growth of 15-25%, was reaffirmed.
The company has landed some large contracts this year, including participation in the Veterans Health Administration’s National Teleradiology Program (NTP) in the US in a deal which could be worth up to $60 million in July.
“That was a good quarter for them and they started the year well,” Power says.
“We have a lot of confidence operationally they are going to have a strong year.”
Morgans has maintained an Add rating and 12-month target price of $1.54 for M7T.
Soft tissue repair company Aroa Biosurgery (ASX:ARX) reported cash receipts from customers for Q2 FY23 of NZ$14.8 million, while net cash outflows from operations reduced by NZ$1.6 million from the previous quarter to NZ$3.2 million.
ARX reaffirmed its guidance for FY24 revenue growth of 25-30% (NZ$72-75m product revenue) and normalised EBITDA of NZ$1-2m. Management flagged that net cash outflows will move towards cashflow breakeven for the remainder of the year.
ARX’s continue to focus on growth in its US operations, which helped drive the strong quarterly result. The US field sales team achieved higher average run rates, with 10 representatives reaching at least $750,000 annually, up from eight and five in the previous two quarters.
Management has flagged that net cash outflows will move towards cashflow breakeven for the remainder of the year.
Power says ARX’s latest quarterly results were in line with expectations. The company will report its 1H24 result on November 28.
“Aroa had flagged a softer first half and pointed to a much stronger second half, which we are now in because they have a March year end,” Power says.
“That is all looking very attractive.”
Morgans has maintained an Add rating and 12-month target price of $1.50 for ARX.
Brisbane-based medical software technology company ImpediMed (ASX:IPD) had a mixed week of news and was up ~9% on Friday after announcing the largest private payor in the US, UnitedHealthcare, had updated its commercial and individual exchange medical policy omnibus codes policy to state Bioimpedance Spectroscopy (BIS) for Lymphedema Assessment no longer requires clinical review.
IPD focuses on non-invasively measuring, monitoring, and managing fluid status and tissue composition using bioimpedance spectroscopy (BIS) medical technology.
IPD in March achieved a key milestone with the US National Comprehensive Cancer Network (NCCN) including BIS as part of its new guidelines announced. The NCCN guidelines specifically named BIS as an objective measurement tool to identify early signs of lymphoedema.
Power says a key part of IPD’s strategy is to get private payor reimbursement in the US for its BIS SOZO testing.
“The change in the medical policy for health insurers is an important step forward for ImpediMed,” he says.
“That’s really important for increasing the rate of adoption for their device.”
In the not so good news, on Tuesday IPD posted its Q1 FY24 cashflow report with revenues down 12% YoY to $2.5 million, comprising of $2m in core SaaS revenue and $500k in contract, legacy and clinical revenue.
During the quarter 19 BIS SOZO testing units were sold in the US, below the strong Q4 FY23 of 34 units sold but higher than long-term quarter averages.
IPD revised its expectations on private payors updating their medical policies, now expecting 30% coverage by end of CY23, down from 50% and ~85% by end of FY24, lower than the more than 95% previously forecast.
IPD says this is due largely to a change in the way Blue Cross Blue Shield (BSBC) assess changes in their policies.
Morgans has maintained a speculative Buy rating on IPD but reduced its 12-month target price from 24 cents to 22 cents.
Market darling of the biotech sector for 2023 Neuren Pharmaceuticals (ASX:NEU) saw its large pharma partner Acadia (NASDAQ:ACAD) announce strong sales of trofinetide (DAYBUE) for the treatment of Rett syndrome, in Q3 FY23.
Arcadia reported Q3 FY23 net sales of DAYBUE in the US of US$66.9 million and provided guidance for net sales in Q4 FY23 of between US$80 million and US$87.5 million.
NEU says anticipated royalties to the company (assuming Acadia guidance for Q4 is met and exchange rate of 64 cents) are $10.4 million for Q3 2023, $12.5 to 13.7 million for Q4 2023, $26 to 28 million for the full year 2023.
“That’s very positive and they’ve provided upgraded guidance for the next quarter,” Power says.
“The key catalyst coming through for NEU will be the clinical results for Prader-Willi Syndrome (PWS), which is due out in December.”
Regenerative medicine and wound care and company Avita Medical (ASX:AVH) is Power’s pick of the week. AVH is due to release its Q3 FY23 results on November 10.
AVH earlier announced it had hit its Q3 FY23 revenue guidance of US$13.5 million and confirmed full year guidance of US$51-$53 million.
Additionally debt funding of US$90 million has been secured with OrbiMed to execute strategic growth initiatives.
Power says achievement of revenue guidance is a positive and shows sales momentum is continuing.
“More detail will be provided at the Q3 results briefing,” he says.
The debt funding to execute of strategic objectives is believe to include regional expansion, launch of automated device RECELL- GO and launch into expanded soft tissue markets.
“The market should also view the aim of achieving profitability in CY25 as a positive,” Power says.
Morgans has an Add rating and 12-month target price of $6.74 for AVH.
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