Scott Power: ASX health stocks lift in good news week across sector

• ASX health sector moved up 1.30% for the week, while broader market inched up 0.12%
• This week: PainChek’s groundbreaking digital app scored coveted FDA De Novo clearance;
• The FDA lifted a clinical hold on Neurizon’s lead drug candidate for treatment of ALS;
• Micro-X locked in a big contract for its mobile X-ray units; and Dimerix’s kidney drug trial was bolstered by PARASOL findings

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.

After lagging the broader market for much of the year, the ASX healthcare sector is showing renewed momentum in October.  The S&P/ASX Health Care Index (XHJ) was up 1.30% for the week, ahead of the broader S&P/ASX 200 (XJO), which was closing out the week fairly flat at the time of writing.

Morgans senior healthcare analyst Scott Power said the sector’s bounce reflects growing investor confidence amid plenty of positive newsflow.

“Healthcare has been the under performer for so long that it is nice to see some momentum coming back into the sector,” Power said.

PainChek’s big FDA win is a ‘major step forward’

PainChek (ASX:PCK) turned investors’ heads early in the week, securing the hotly anticipated FDA De Novo clearance for its groundbreaking digital app, making it the first and only regulated medical device for pain assessment in the US.

The FDA created a new product code “SGB” to classify the technology, opening a US$100 million per year initial market across 3 million long-term care beds. With partnerships already in place with PointClickCare and Eldermark, covering about 60% of the US and Canadian aged care market, PainChek is now positioned to launch commercial sales in the near term.

The announcement pointed to an excellent US regulatory and reimbursement landscape for pain management, expanding PainChek’s total addressable market to as much as US$582 million when hospitals and home care are included.

And the clearance also provides a streamlined path for expansion into hospitals and home care, and sets the stage for faster approvals in markets such as Japan and Europe.

For further nuance, read Tim Boreham’s excellent recent coverage here … and here.

US FDA lifts clinical hold on Neurizon’s ALS drug candidate

The wait is finally over as the US Food and Drug Administration (FDA) lifted the clinical hold on Neurizon Therapeutics’ (ASX:NUZ) lead drug candidate NUZ-001 (monepantel) for treatment of amyotrophic lateral sclerosis (ALS) – the most common form of motor neurone disease (MND).

The FDA’s decision to lift the IND clinical hold on Neurizon’s repurposed animal drug NUZ-001 represents a major regulatory milestone, which Morgans’ healthcare analyst Iain Wilkie described as  a “major regulatory overhang” that has been on Neurizon since the hold was first placed in January.

The FDA decision means NUZ-001 can progress to a phase II/III trial stage, which will be undertaken through the Healey ALS Platform. The significant ongoing program in the US aims to accelerate ALS treatment development and test several potential drug candidates at the one time.

“This lift marks a major inflection point for the company, clearing the way for NUZ-001 to enter the Healey ALS Platform Trial at Mass General Hospital (MGH),” Wilkie wrote in a note to clients.

READ On track: Analysts hail FDA lift as turning point for Neurizon’s ALS therapy ambitions

Micro-X ‘deserves greater investor attention’

Leader in cold cathode X-ray technology for health and security markets  Micro-X (ASX:MX1) has locked in its largest contract for its Rover Plus Mobile X-ray units  worth $3.3 million.

The purchase order with the Malaysian Ministry of Health comes through its newly appointed Malaysian distributor Integrated Medical System.

The contract is further good news for the Adelaide-headquartered company, which recently announced its first Head CT imaging test system for the Australian Stroke Alliance (ASA) to install in a hospital and start phase I imaging trials.

It has also secured a $4.4m grant to trial the Head CT scanner in standard ambulances for stroke diagnosis and a contract extension of up $2.5m with the US Department of Homeland Security (DHS)  to advance Passenger Self-Screening Checkpoint detection algorithms.

Power said  Micro-X continued to make solid progress across all its verticals.

“Micro-X have had some good announcements recently and are starting to pick up a bit of pace,” Power said.

“The cadence of news flow increases our confidence that MX1 has reached an important inflection point and deserves greater investor attention.”

Morgans has a speculative buy on Micro X and a 12-month target price of  17 cents.

Dimerix phase III kidney trial bolstered by PARASOL findings

In a boost to Dimerix (ASX:DXB) this week final data analysis from its collaboration with PARASOL reinforces the company’s proteinuria-based endpoints in its phase III ACTION3 trial of lead drug DMX-200 in rare kidney disease Focal Segmental Glomerulosclerosis (FSGS).

PARASOL is a global initiative that analyses kidney registry data to validate proteinuria and eGFR as surrogate endpoints for FSGS trials, aiming to accelerate regulatory approval of new therapies.

The outcomes were consistent with earlier findings and support FDA guidance for 104-week endpoints and highlights a potential link between 12-month proteinuria reduction and long-term kidney outcomes, which could enable an accelerated approval pathway for DMX-200.

Dimerix, alongside its US partner the Nasdaq-listed Amicus Therapeutics, intends to seek feedback from the FDA in coming months to align on endpoints and explore expedited approval options.

The company will also continue to work with its commercial partners across key territories to determine the potential for alternative approval pathways outside of the US.

“The PARASOL findings provide strong external validation for the proteinuria endpoints that will feature prominently in DXB’s Ph3 Part 2 interim analysis which is expected shortly,”  Wilkie wrote in a note to clients.

“If the blinded sample-size re-estimation confirms statistical powering for eGFR-based endpoints, DXB could leverage both traditional and accelerated approval pathways.

“This alignment with FDA expectations reduces regulatory risk and adds strategic weight to the upcoming readout, which will be a key catalyst for DXB.”

There’s a consensus target price of $1.11 for Dimerix.

Pro Medicus inks $10m German deal

Medical imaging software and services provider Pro Medicus (ASX:PME)  is Germany bound, announcing  its wholly-owned European subsidiary Visage Imaging has signed a five-year, $10m enterprise Picture Archiving and Communication System (PACS) deal.

The agreement is with University Hospital Heidelberg (UKHD), German Cancer Research Institute (DKFZ), and associated hospitals, Thoraxklink Heidelberg and KKH Bergstrasse.

The contract will see Pro Medicus replace and consolidate three legacy PACS with its Visage medical imaging software, which enables seamless access to massive imaging datasets across institutions, specialties, and research domains.

“The bulk of their business is in the US, so it is a little different for them and good news,” Power said.

World leader in G-quadruplex drugs joins Race Oncology

Power’s top pick from last week, Race Oncology (ASX:RAC), continues to power ahead, up more than 5% this week on news world leader in G-quadruplex (G4) drug development Professor Laurence Hurley will join its scientific advisory board.

Race surged more the than 45% last Thursday after scientists identified for the first time the primary mechanism of action (MOA) of the active pharmaceutical (E,E)-bisantrene (RCDS1) in its lead drug candidate RC220 involving G4s, which are special structures in DNA and RNA that control important cancer genes like MYC.

With research achievements spanning more than 50 years, including world-leading discoveries in G4 targeting drugs, Race said Hurley was  “eminently positioned” to advise on the development of RCDS1 and RC220.

“Race continues to march higher and since the beginning of September is up more than 230%, which is quite extraordinary,” Power said.

“Now they have a very high-profile professor joining their scientific advisory board and these people don’t tend to join these companies unless they have belief in what they are doing.”

Power’s Powerplay: New leader in November for Sonic Healthcare

Sonic Healthcare (ASX:SHL) is Power’s pick of the week with the pathology and radiology giant recently announcing that longstanding managing director and CEO Dr Colin Goldschmidt will retire at the company’s AGM on November 20.

Goldschmidt spent 32 years at the helm of Sonic and will pass the baton to Dr Jim Newcombe, who is a pathologist specialised in clinical microbiology, an infectious diseases physician.

He joined Sonic Healthcare eight years ago and is currently CEO of Douglass Hanly Moir Pathology in Sydney, Sonic’s founding practice and one of its largest laboratories globally.

Sonic reported its FY25 underlying profit – softer than expected. Covering the stock, Morgans’ Derek Jellinek wrote in a note to clients that organic revenue growth slowed across most regions, but appears to be due to country-specific issues rather than structural problems.

SHL has provided FY26 guidance for constant currency EBITDA growth of $1.87–$1.95 billion (+8% to 13%).  Jellinek believes confirmation that this guidance remains on track will be a key factor in turning around the share price for Sonic, which is at a multi-year low.

“Investors can look for early indications at the AGM in November, with the H1 FY26 results expected in February,” he wrote.

“The company’s structural fundamentals remain intact, supported by the continuing importance of pathology as a diagnostic tool, an aging population, and medical innovation driving advanced personalised testing.”

Jellinek believes Sonic could return to an EV/EBITDA multiple of 5.3x in FY27, supporting Morgans’ buy rating and 12-month target price of $29.33.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

At Stockhead, we tell it like it is. While Micro-X,  Dimerix,  Race Oncology and PainChek are Stockhead advertisers, the companies did not sponsor this article.

Disclosure: The author held shares in Sonic Healthcare at the time of writing.