ScoPo’s Powerplays: Who remembers that time they died? Oh, and Ramsay Healthcare cops credit downgrade

ASX health sector falls in line with broader markets as macroeconomic factors continue to create uncertainty
Fitch Ratings Agency downgraded the credit rating of Ramsay Health Care (ASX:RHC) to BBB- from BBB
Botanix Pharmaceuticals expects US FDA approval for its excessive sweating product by the end of September

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.

What happens to you when you die? It’s the ultimate question, and science has never stopped searching for answers.

A study led by NYU Grossman School of Medicine has found shortly after their hearts stopped, some CPR-revived patients experienced clear memories of death and exhibited brain activity linked to thought and memory while unconscious.

The AWAreness during REsuscitation (AWARE)-II study followed 567 men and women who experienced cardiac arrest during hospital stays between May 2017 and March 2020 in the US and UK.

Although less than 10% of the 567 CPR-receiving patients in the hospital recovered enough to be discharged, 4 in 10 survivors reported some level of consciousness during CPR not typically detected.

Published online in the journal Resuscitation, the study also revealed that nearly 40% of these patients displayed brain activity returning to normal, or close to normal, even an hour into CPR.

Electroencephalogram (EEG) recordings showed spikes in gamma, delta, theta, alpha, and beta waves associated with higher mental function.

Survivors often describe heightened awareness and vivid experiences during near-death episodes, include feeling detached from the body, observing events without pain or fear, and reflecting on their actions and relationships.

The study found the death experiences to different from hallucinations, delusions, illusions, dreams, or consciousness induced by CPR.

The researchers determined that the memories of near-death experiences warrant additional scientific examination. They intend to carry out studies to better identify clinical consciousness markers and to observe the lasting psychological impacts of cardiac arrest resuscitation.

To markets…

And the ASX healthcare sector looks like it could do with a lifeline this week. At 10.30am (AEST) on Friday the S&P/ASX 200 Healthcare index (ASX:XHJ) was down 4.4% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 3% for the same period.

Big names on the index fell including CSL (ASX:CSL) down 5.4%, Sonic Healthcare (ASX:SHL) dropping 2.9% and Cochlear (ASX:COH) losing 3.3% in the past five days.

Neuren Pharmaceuticals (ASX:NEU), which is forecast to release topline results of its Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome (PMS) in December, has fallen 7.7% this week.

READ: 2023 ASX biotech darling Neuren among sector stocks with upcoming catalysts

“We’re still in this period of September being a seasonally weak month and on the back of that we have concerns about China growth and when higher interest rates will cease,” Power says.

“In the next couple of months we should see markets improve given we are coming to the top of the higher interest rate cycle and share prices have just been under so much pressure.

“The value within these businesses now is looking very attractive.”

Ramsay Healthcare cops a credit downgrade

Power says as widely anticipated, Fitch Ratings Agency downgraded the credit rating of Ramsay Health Care (ASX:RHC) to BBB- from BBB, but bumped up the outlook to stable from negative.

Fitch noted high labour costs, inflationary pressures and capex plans are likely to keep leverage elevated until FY26, delaying the realisation of RHC’s cost-out initiatives.

Power says the improved outlook reflects expectations that the proposed sale of the Ramsay Sime Darby (RSD) joint venture is successful, helping to reduce leverage.

At EOFY23, the group’s leverage ratio stood at 3.2x, below convenant (4x), with interest cover of 7.4x, more than convenant (>3x).

While the financial impact of this change on the company’s $1.5bn loan equates to a 10bp interest rate increase, management has reconfirmed its FY24 net interest expense guidance between $570 to $600m.

Importantly, the rating change isn’t expected to impact RHC’s future funding or liquidity.

Management also provided an update on the RSD sale, stating it is in receipt of several non-binding indicative offers.

Select parties are now in a phase 2 due diligence process, which is expected to conclude by the end of October. As previously flagged, funds from this sale will be used to pay down debt, with management targeting a leverage ratio below 2.5x at EOFY24.

The RHC share price has come under enormous pressure this year and is down ~20% YTD but Power says procedure volumes are increasing, the inflation effect on their cost base is under control, so moving forward, profit growth should start to return.

“While the operating environment remains unpredictable and dynamic, with ongoing inflationary pressures and workforce issues, we look to growing volumes and improving productivity (albeit slowly) as suggestive of growing earnings momentum that underpins our add rating and $66.40 12-month price target,” Power says.

Proteomics awaits US reimbursement rate

The predictive diagnostics and bio-analytical services company Proteomics International Laboratories (ASX:PIQ) remains in a trading halt for an update on the Australian regulatory pathway and reimbursement payment rate in the US for its Promarker D predictive test for diabetic kidney disease.

The payment rate is set by the American Medical Association (AMA) pricing review and is what labs can charge patients.

“This is very big news and will tell us what the pricing is and we’ve modelled US$150 per test so if it’s that it will be terrific and give us our $1.66 price target,” he says.

“If it’s higher than that, that is an upside to our valuation – and conversely if it’s lower – but we believe we were very conservative when setting our price target assumptions so we are confident it will be $150 or more.”

Micro X sells Rover to Aussie Government

Adelaide-based cold cathode X-ray machine manufacturer Micro-X (ASX:MX1) has announced it has received a purchase order from the Australian Government for $1.5 million worth of its lightweight portable X-ray Rover systems.

MX1 says the Rover units are currently in inventory and will undergo final modifications in Adelaide before they are due to be delivered in early October.

The Rover unit is designed for high throughput hospitals and radiology clinics. The lightweight design ensures the X-ray machine is highly manoeuvrable, easy to use and position around the patient but provides high-quality images.

The purchase brings MX1’s total sales and orders for this quarter to $2.8 million.

Morgans has a speculative buy on MX1 with a 12-month target price of 27 cents.

The CSL, SHL, COH, RHC, PIQ, MX1 Share price today:

ScoPo’s Powerplay – Botanix awaits FDA approval

Dermatology-focused biotech Botanix Pharmaceuticals (ASX:BOT) is Power’s stock of the week and is expecting US Food and Drug Administration (FDA) approval for its lead product Sofpironium Bromide to treat excessive sweating by the end of September.

“If the approval is received this will represent a significant milestone for the company, and pave the way for a commercial launch of the product,” he says.

“The product will be targeted at dermatologists where the company estimates that 3.7 million patients are already seeking a solution to this condition.”

BOT recently appointed Dr Howie McKibbon as CEO, who was previously chief operating officer. He has more than 25 years experience in the pharmaceutical industry and has led the successful launch of more than 15 products.

The BOT share price today:

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
Disclosure: The author held shares in CSL and Sonic Healthcare at the time of writing this article.