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Health & Biotech
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 go for walks and follow a Mediterranean diet? Researchers are exploring whether individuals who adopt the “MedWalk intervention” can lower their chances of experiencing cognitive decline and various forms of dementia, such as Alzheimer’s disease.
The research from Australia, New Zealand, and the UK, remains ongoing, with interruptions caused by the COVID-19 pandemic with authors have shared their data on their methodologies and ongoing analysis in the Journal of Alzheimer’s Disease.
The primary focus of the study’s authors centres around assessing the 12-month changes in visual memory and learning among the participants.
Previous research has connected both the Mediterranean diet and walking with brain health. The new study aims to confirm the benefits of the combined MedWalk intervention.
The researchers also have a keen interest in examining the effects of the intervention on various aspects, including mood, quality of life, health expenses, cardiovascular health, and arterial flexibility.
Study participants comprise people aged 60 to 90 living in South Australia and Victoria. Significant attention is dedicated to monitoring biomarkers associated with cognitive decline, encompassing parameters like glucose regulation, inflammation, nutrients, and oxidative stress.
Participants were sorted into either the MedWalk intervention group or the control group, maintaining their regular diet and activity levels.
The intervention combines dietary adjustments with a supervised walking program and incorporates psychosocial behavioural change techniques. Intensive support is provided for the first six months, with ongoing assistance for the subsequent six months to keep participants on track.
And the ASX healthcare sector looks like it could do with a “MedWalk intervention” to improve its wellbeing this week. At 12.30pm (AEDT) on Friday the S&P/ASX 200 Healthcare index (ASX:XHJ) was down 1.64% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 2.11% for the same period. The XHJ is now down ~15% YTD.
“It’s the same things we’ve been talking about with higher interest rates, question marks over the China recovery, war in Ukraine and now the Middle East conflict has thrown a spanner into the works,” Power says.
“Putting all that together it’s a bit hard to see the market moving higher anytime soon which flies in the face of what we’ve been hoping for which is a strong end to the year.
“We have to soften our stance a little bit I think but having said that there’s some key events for healthcare companies coming. Just how the market responds we will see.”
Leader in obstructive sleep apnoea and other sleep-related respiratory disorders ResMed (ASX:RMD) has today reported a strong start to FY24 with revenue up 16% to US$1.1 billion for Q1, which Power says came in above consensus but in line with Morgans’ forecast.
The dual ASX and NYSE listed RMD reported adjusted NPAT for Q1 FY24 up 9% to US$241 million, above consensus of $239 million but slightly below Morgans’ 9% US$243 million.
RMD says sleep and respiratory sales in Americas were up 10% to US$638 million, with a small 2% increase in device sales and 23% jump in mask sales.
SaaS revenue grew 32% to US$139 million, primarily due to RMD’s recent acquisition of Medifox Dan and continued growth in the home medical equipment vertical.
RMD says its ability to meet global demand with technologies, including its best-in-class AirSense 11 platform, has positioned the company well to continue growing across global markets, with particularly strong growth this quarter in Europe, Asia, and beyond.
The company has begun rolling out AI-driven software products into its digital health ecosystem, which it says will create a new class of offerings that will drive long-term, profitable growth.
Health imaging stock Volpara Health Technologies (ASX:VHT) is down in the past five days despite announcing its fourth consecutive solid quarter of operating cashflow.
Specialising in the early detection of breast cancer, VHT reported cash receipts of NZ$11.6 million up 32% on pcp and represents the first quarter over NZ$11 million. Cash receipts YTD were NZ$22.6 million.
Net operating cash inflow was NZ$1.2 million, which Power says was largely driven by strong quarterly cash receipts.
He says VHT’s fourth consecutive positive cashflow quarter is a full year and a half ahead of guidance, meaning it is no longer required to provide Appendix 4C quarterly reporting updates but can do half-yearly results.
Annual recurring revenue (ARR), which now represents annualised recurring revenue on a 12-month trailing basis, was US$22.5 million (NZ$36.6 million) up from US$21.5m in Q1 FY24.
Average revenue per account (ARPA) for the quarter was US$40.4k and has been growing at a compounding rate of more than 20% since 2022.
“Volpara is going from strength to strength and continuing to move into profitability which will attract a broader range of investors,” Power says.
Australia’s biggest healthcare name CSL (ASX:CSL) is down this week despite management expressing confidence in the company’s resilience to hype around GLP-1 class of drugs, such as Ozempic, which are continuing to gain attention as weight loss drugs with potential to reduce obesity-related conditions such as chronic kidney disease (CKD) and sleep apnoea.
Morgans healthcare analyst Dr Derek Jellinek wrote in a note to clients that CSL’s recent inaugural capital markets day offered investors the opportunity to better understand the strategic direction across core franchises including Behring, Seqirus, Vifor, vet its growing R&D portfolio and glimpse at information and digital initiatives.
He says management expressed confidence in CSL’s resilience with no material impact from GLP-1s and competitive advantages in scaled operations, reiterating FY24 guidance and annual double-digit earnings growth over the medium term.
Morgans maintains an Add rating for CSL with a 12-month target price of $328.22.
Botanix Pharmaceuticals (ASX:BOT) is down this week despite inking an exclusive deal with UpScriptHealth to provide the digital platform and telehealth services for the commercial launch of its trademarked Sofdra to treat excessive sweating.
BOT says the deal with UpScriptHealth is an important step towards building the commercial infrastructure for the successful launch of Sofdra following US FDA approval, which is now expected mid CY24. The FDA has conditionally approved Sofdra as the company’s proposed trade name.
“The approval will be a very important milestone for the company,” Power says.
Health imaging company ProMedicus (ASX:PME) continues to win deals, securing a $16 million, eight-year contract with South Shore Health, the largest independent health system in Southeastern Massachusetts.
South Shore Health includes the 393-bed South Shore Hospital with more than 5,600 employees, and has renowned clinical affiliations at academic and cancer centres across Massachusetts that also use PME’s cloud-engineered Visage 7 Enterprise Imaging Platform.
Wound care company Avita Medical (ASX:AVH) has hit its Q3 FY23 revenue guidance of US$13.5 million and confirmed full year guidance of US$51 to $53 million.
Additionally debt funding of US$90 million has been secured with OrbiMed, with the first US$40 million able to be accessed immediately. There’s an additional US$50 million in two tranches available based on certain revenue goals.
Power says the funds will be used to execute strategic growth initiatives with more detail expected to be provided at its Q3 briefing in early November.
“It takes the funding question right off the table for them,” he says.
He says achievement of revenue guidance is a good and shows sales momentum is continuing. He says the market should view AVH’s aim of achieving profitability in CY25 as a positive.
Another wound care company, Aroa Biosurgery (ASX:ARX), is Power’s pick of the week, with the company due to report its Q2 FY24 results on October 31.
Power says he expects to hear a cashflow improvement from Q1 FY24 for New Zealand headquartered ARX, with the quarter expected to be strong.
“I think they will say that the sales momentum is picking up and their key product Myriad is doing well together with positive commentary that their distribution partner in the US TelaBio is on track to hit guidance,” he says.
“I think they will also suggest that they will have a stronger second half, bearing in mind they have a March year-end so we are already into their second half of the financial year.”
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Disclosure: The author held shares in CSL and Resmed at the time of writing this article.
Health & Biotech
Health & Biotech
Health & Biotech
