Scott Power: ASX health stocks remain under pressure but Telix charts FDA path forward

• ASX heath sector fell 0.37% over past five days, while broader markets down 0.5%
• Telix finds way forward with the FDA on brain cancer imaging agent Pixclara
• Big Pharma to showcase Clever Culture Systems tech at major global conferences

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 a challenging few weeks, the ASX healthcare sector remains under pressure. The ASX Health Care Index (XHJ) has slipped 0.37% over the past five days, only slightly better than the broader S&P/ASX 200 (XJO), which fell 0.5% over the same period.

Morgans’ senior healthcare analyst Scott Power said the sector was still recovering following a tough reporting season, with many companies now focused on presenting their investment case to institutional investors.

“There’s a lot of meetings taking place at the moment,” Power said.

At the end of October it will be quarterly reporting time again for smaller companies and also AGM season next month and in November,  when companies typically provide a forward-looking update or reconfirm guidance for half year or full year.

“We are a bit of an information vacuum at the moment with all the information out there from the last reporting season and we are sitting here digesting it all,” he said.

Power said seasonally, September is a weaker month for markets so the healthcare sector was more likely to trend down than trend up.

“Then we start to move into the seasonally stronger period of the year of October, November, December and into January.”

Telix finds way forward with FDA for brain cancer imaging agent

Some good news for radiopharmaceuticals company Telix Pharmaceuticals (ASX:TLX) this week after reaching an agreement with the  US Food and Drug Administration (FDA) on the pathway to resubmitting its marketing application for Pixclara, its imaging agent for rare and aggressive brain cancer glioma.

The FDA previously issued a complete response letter (CRL) in April, requesting “additional confirmatory clinical evidence” but raising no safety concerns.

Under the agreement, Telix will perform a confirmatory efficacy analysis of existing data, without the need for a new clinical trial, and plans to resubmit the application in the December quarter.

If approved, Pixclara would become Telix’s third approved radiopharmaceutical imaging agent, following Illuccix and Gozellix for prostate cancer.

“They’ve been able to sit down with the FDA and work out what is required to find out what is required for a resubmission of their NDA and they’ve told the market that will happen in the fourth quarter so between now and Christmas,” Power said.

Separately, in late August, Telix also received a CRL for its kidney cancer imaging agent Zircaix, with the FDA seeking assurance that manufacturing at scale meets quality standards.

Telix described these issues as “readily addressable” and has begun remediation.

Big Pharma to showcase Clever Culture tech

Clever Culture Systems (ASX:CC5)  also announced some good news this week with big pharmaceutical companies set to showcase its Automated Plate Assessment System (APAS Independence) at major industry conferences worldwide over the coming months.

AstraZeneca, Bristol Myers Squibb and Pfizer will present new evaluation performance data for APAS Independence, which uses artificial intelligence (AI) and machine learning software to automate the imaging, analysis and interpretation of microbiology culture plates.

The system is the only FDA-cleared AI technology for automated culture plate reading and is being sold to microbiology laboratories in the pharmaceutical manufacturing sector for the reading of environmental monitoring culture plates.

Clever Culture said the Big Pharma presentations would include results for both the APAS settle plates (90mm) and the newly launched contact plates (55mm), as well as strategies for global validation and rollout.

CEO and managing director Brent Barnes will present at HealthInvest 2025 in Sydney on September 24, which is being hosted by Stockhead in partnership with Morgans and investor relations firm IR Department.

“CC5 is up around 13% on the back of announcing data releases by their major customers AstraZeneca, Bristol Myers Squibb and Pfizer at major industry conferences,” Power said.

“That’s a positive for CC5 and should increase adoption of their APAS system.”

Morgans moderates price target for Nanosonics

Morgans has updated its forecasts for infection control company Nanosonics (ASX:NAN) following a deeper review of guidance provided in its FY25 results and management commentary, particularly around tariff impacts and timing of commercialisation of its Coris product following FDA de novo clearance.

Coris is the world’s first automated system specifically designed to clean the internal channels of flexible endoscopes.

Morgans has revised Nanosonics FY26 revenue slightly higher to $218.5 million, sitting around the midpoint of guidance, but expects EBITDA and EBIT to only moderately grow before a broader launch of Coris  in FY27.

“While near-term earnings are trimmed, these changes are immaterial to the long-term investment thesis, which remains anchored by recurring revenue growth, installed base expansion, and Coris’ medium-term potential,” Morgans’ analyst Iain Wilkie wrote in a note to clients.

Nanosonics’ flagship Trophon system – an automated ultrasound probe cleaner that uses sonically-activated hydrogen peroxide mist – is expected to continue to drive sales.

“Our buy thesis remains unchanged, and despite a few minor tweaks and market uncertainty around FDA approval processes and commercialisation timing, we view the Trophon business as a decade-plus cash cow and Coris as a significant contributor to topline growth, margin and profit in coming years,” Wilkie wrote.

“Happy to stay on the front foot and view the weakness post strong FY25 result as viable entry point for investors.”

Morgans maintains a buy rating on Nanosonics but has downgraded its 12-month price target from $5.50 to $5.

Power’s Powerplay: Weaker EBR share price presents buying opportunity

Developer of the WiSE CRT System – the world’s only leadless solution for pacing the left side of the heart, EBR Systems (ASX:EBR) is Power’s stock of the week on the back of a lower share price.

“That share price has fallen around 9% for the week, which we think has created a great buying opportunity,” Power said.

President and CEO John McCutcheon of the Silicon Valley-based medical device company will be in Australia in a couple of weeks to also present HealthInvest.

“This will be an opportunity for John to update the market,” Power said.

WiSE was approved by the FDA in April and eliminates the need for cardiac pacing leads, historically a major source of complications, offering a potentially safer and more physiologically effective solution for patients requiring Cardiac Resynchronisation Therapy (CRT).

“We spoke to the electrophysiologist that did the first implant in one of the hospitals in Texas and he was very excited so on the back of that we expect more implants are taking place,” Power said.

The US Centers for Medicare & Medicaid Services (CMS) has granted new technology add-on payment (NTAP) approval for WiSE, which comes into effect in October.

“That is for the in-patient, in-hospital setting so that provides a lift to commercialisation process for EBR,” Power said.

“It’s a little confusing as to why the share price has drifted back but as far as we’re concerned the fundamentals remain firmly in place.

“The company is well funded for the next 18 to 24 months and we’re likely to hear a series of positive announcements around implant rates and  reimbursement, which should drive the share price higher.”

Morgans has a buy rating on EBR and 12-month target price of $2.86.

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.

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