Scott Power: ASX health stocks ‘catch a bid’, up 5.4pc over past five days

• ASX health stocks rally 5.4% over five days as Morgans’ Scott Power says optimism is returning to the sector
• The sector’s largest stock CSL is up 10% over past two weeks with other key plays also showing momentum 
• With new CEO Terri Thomas at the helm, health imaging stock Mach7 will posts its FY25 results next Tuesday

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his ‘Powerplay’ stock pick.

Could there be a rotation back to the long-suffering ASX healthcare sector? That is the optimistic hope of Morgans’ senior healthcare analyst Scott Power.

With FY25 wrapped up, the Australian healthcare sector has once again lagged behind, down 4%, while the broader share market rose 10%.

However, looking ahead in FY26, there are encouraging signs that conditions are starting to improve.  After rising 5% last week, the S&P/ASX 200 Health Care index (ASX:XHJ) was up 5.4% this week, while the benchmark S&P/ASX 200 (ASX:XJO) rose 0.5%.

“It feels like there is a rotation back into healthcare even as we speak,” Power said.

He said that in just the past two weeks, share prices across the ASX healthcare sector had begun to reflect renewed investor interest. Blood products giant and the sector’s largest stock CSL (ASX:CSL) gained 10% over the period.

Hearing implant leader Cochlear (ASX:COH) rose 3.8%, sleep disorder device maker ResMed (ASX:RMD) was up 6%, and wound care specialist PolyNovo (ASX:PNV) jumped 12%.

Radiopharmaceutical developer Clarity Pharmaceuticals (ASX:CU6) has surged ~62% in the past two weeks, while EBR Systems (ASX:EBR) – maker of the world’s first wireless system for left-heart pacing – gained 18%.

“It certainly seems to be an improving market sentiment and we’ve past the end of June so tax-loss selling is out of the way and markets generally are hitting all-time highs,” Power said.

“There’s a bit of rotation out of financials and some of the tech names into sectors like healthcare, which really seems to be catching a bid at the moment.”

Power said many healthcare businesses have also taken steps to reduce costs and improve efficiency, while at the same time, demand for healthcare products and services continues to rise.

Importantly, share prices across the sector are still trading at multi-year lows, which may offer good value for long-term investors.

“There are still challenges to watch and in particular, changes in the US government policy may create short-term uncertainty around drug pricing and regulation timelines,” he said.

“But it’s worth looking beyond the headlines with the long-term drivers of healthcare remain very strong including an ageing population, medical innovation and high levels of government funding.

Telix faces unwanted US regulatory scrutiny

Telix Pharmaceuticals (ASX:TLX) shares slumped ~16% on Wednesday on news that the radiopharmacy play had attracted unwanted attention from the Securities and Exchange Commission (SEC).

“They had their quarterly results which by and large looked good but the downside came with the US subpoena,” Power said.

In an ASX announcement Telix reported Q2 2025 unaudited group revenue of ~$204 million, up 63% YoY and reaffirmed full year revenue guidance of $770m to $800m.

However, the company noted it had received a subpoena from the SEC seeking various documents and information primarily relating to the company’s disclosures regarding the development of its “prostate cancer therapeutic candidates”.

“The company said it was fully cooperating with the SEC and is in the process of responding to the information request,” Telix said.

“At this stage, this matter is a fact-finding request”.

Telix adds the SEC’s entreaty does not mean that Telix has violated US security laws “or that the SEC has a negative opinion of any person, entity or security”.

“Whether it is something they can deal with quickly I’m not sure what will be involved,” Power said.

Strong Q4 for Microba provides springboard into FY26

Microbiome diagnostics and therapeutics company Microba Life Sciences (ASX:MAP) has reported its Q4 FY25 result, closing the year in-line with guidance and marginally ahead of Morgans forecasts following sustained momentum in Australia and positive early traction in the UK for its MetaXplore tests.

Microba achieved record quarterly sales for MetaXplore with Q4 sales of 3,451, up 88% on previous corresponding period (pcp) with growth underpinned by a continued increase in the number of ordering clinicians.

Revenue for the quarter was $4.2m, up 22% QoQ but down 13.5% YoY, reflecting the discontinuation of legacy products. Core personal testing and supplements revenue grew to $4.1m, up 25.3% QoQ and 3.8% YoY.

MetaPanel adoption continues to build steadily in Australia, with 266 tests sold in Q4, up 85% YoY and 32% QoQ. Microba’s UK business is also showing signs of continued (early) traction, with MetaXplore test sales up 74% QoQ to 429, now representing 66% of GI tests sold.

Full market access in the UK was achieved in May, with June delivering strong growth. Ordering clinicians rose to 162, up 184% QoQ. Supplement sales declined, reflecting the planned transition to higher margin Invivo-branded products.

The company has reaffirmed FY25 revenue guidance of $15.67m, up 30% on pcp.

“Key outlook commentary continues to be very positive, and FY26 guidance sets the scene for a strong sales period while aiming for breakeven on a regional basis,” Morgans’ analyst Iain Wilkie wrote in a note to clients.

Morgans has reduced its 12-month target price from 32 cents to 31 cents but retains its speculative buy recommendation.

Power’s Powerplay – Mach7 due to report

With new CEO Terri Thomas taking over the reins on July 1, health imaging stock Mach7 Technologies (ASX:M7T)  will post their full year results next Tuesday.

Often referred to as the mini version of ProMedicus (ASX:PME), Mach7 recently posted a trading update including revenue expected to be $33-$34m, sitting at the bottom end of prior guidance range of 15-25% growth ($33-$36m), while Morgans estimate for FY25 was $34.7m.

Management expects recurring revenue – subscription revenue and maintenance and support revenue – to be 20% higher.

Contracted Annual Recurring Revenue (CARR) is expected to be ~$30m-$31m, slightly below the FY25 guidance of 15-25% growth ($32m-$35m).

Operating expenditure growth will be less than revenue growth, consistent with FY25 guidance.

Mach7 expects to have closed FY25 with $21m-23m with no debt.

Thomas officially started on July 1. She headed former ASX-listed breast imaging company Volpara Technologies, before it was taken over by South Korean provider of AI-powered solutions for cancer diagnostics and therapeutics last year.

“Like a number of the emerging healthcare names Mach 7 feels like it has momentum on its side,” Power said.

“New CEO Teri Thomas has an excellent track record in focussing a business on profitable sales growth.”

Morgans has an add rating and 12-month target price of $1.37 on Mach 7.

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Disclosure: The author held shares in CSL and Mach7 at the time of writing.