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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, gives his take on the ASX health care sector for the week and his ‘Powerplay’ stock pick.
Power is confident momentum is returning to the ASX healthcare sector, which has risen in the past five days with the drought also lifting on IPOs.
At 12.40pm (AEDT) on Friday the S&P/ASX 200 Health Care index (ASX:XHJ) was up 4.3% for the past five days, surpassing the benchmark S&P/ASX 200 (ASX:XJO), which rose 1% for the same period.
On Tuesday, human and animal health cryogenic services company Vitrafy (ASX:VFY) and nerve-repair biotech Renerve (ASX:RNV) hit the ASX board with the first IPOs in the sector since Blinklab (ASX:BB1) in April.
Blinklab, which has developed a smartphone-based diagnostic platform for autism, ADHD and other neurodevelopmental conditions, is the only other IPO for the ASX healthcare sector so far in 2024.
Both companies have FDA-approved products, with Morgans co-lead manager for the Vitrafy IPO.
Vitrafy traded as high as $2 a share, ~8.7% premium to the $1.84 listing price on its day of listing.
Meanwhile, Renerve listed at 20 cents/share but saw its price drop back 10% to 18 cents.
“We’re starting to see some momentum come back into the healthcare sector,” Power said.
“We’ve had a couple of IPOs this week, there are more capital raisings coming through and money out there looking for a home in stocks outside the large caps.
“It definitely feels like we’re in for a good December and January.”
Imricor Medical Systems (ASX:IMR) is Power’s pick for the week, having risen ~30% in the past five days after making two positive announcements.
The company has conducted its first case for atrial flutter ablation in the interventional cardiac magnetic resonance (iCMR) lab at the Lausanne University Hospital (CHUV) in Switzerland.
The CHUV site is IMR’s first customer site in Switzerland and adds a third site to the company’s VISABL-AFL clinical trial, supporting US FDA approval of Imricor’s products.
Imricor is the only company in the world that provides MRI-compatible consumable devices, such as single-use ablation catheters, required to perform cardiac ablations in an iCMR lab.
The company has also inked a license agreement with ADIS, a Swiss-based software company, to integrate AI modules into Imricor’s NorthStar 3D mapping system.
NorthStar 3D Mapping System is the only MRI compatible 3D mapping system of the heart globally and an important part of its portfolio with collaborations underway with Siemens, Philipps and GE Healthcare to integrate with their respective MRI platforms.
“The mapping system is very important to guide the cardiologist to the right spot to do the ablation,” Power said.
The agreement sets up terms for upfront license payments and ongoing fees. While the company is still working through regulatory processes, Imricor plans to commercially roll out the NorthStar system and its AI modules across Europe, the USA, and the Middle East in 2025.
“Their entire system is very much now complete, and we’re looking forward to more commercial sales in Europe and getting approval in the US by the middle of next year,” Power said.
“News still to come is the start of the VT (ventricular tachycardia) trial in Europe.”
Imricor has a speculative buy rating on Morgans. Its share price has run through Morgans price 12-month price target of $1.08.
Australia’s largest private hospital operator Ramsay Health Care provided an update on current trading conditions at its AGM.
Ramsay expects further growth in activity in all regions throughout FY25, albeit the rate of growth will be lower than FY24 at ~3.4%.
“Ramsay has struggled to contain its cost base but appears to be rightsizing itself,” Power said.
“They haven’t provided any FY25 guidance and there’s been a change of management at the top.”
December 2 has been flagged as when current CEO Craig McNally will officially hand over the reins to Natalie Davis, whose appointment was announced in July and has been CEO-elect since Oct 1.
McNally will remain with the company until the end of Jun-25 to support a smooth transfer of executive responsibilities.
Management said its immediate focus continues to be on improving margins, unlocking value in its portfolio and ultimately improving returns for shareholders.
As such, certain services and facilities have been closed or restructured over the last twelve months and this process is ongoing.
Power said wound care company PolyNovo (ASX:PNV) presented a good buying opportunity with its share price falling ~24% since September 30. Consensus has revenue growth of 29% in FY25 to $135.1m, with Morgans at the lower end of $125.2m, up ~18%.
“We think they’ll probably have a softer first half with growth skewed to the second half but remain confident on PolyNovo.”
Growth of 20%+ is expected to continue in FY26/27 driven by regional expansion as well as additional indications.
Further Power said an increase of ~5% in manufacturing capacity was on target to be operational by the end of CY25.
The current share price weakness is an opportunity to add to positions. We maintain an Add recommendation.
“PolyNovo’s NovoSorb technology has gained rapid market traction, initially in burns and extending into trauma,” Power said.
“We continue to get positive feedback from surgeons speak to the effectiveness of the product.”
Morgans has an add rating and 12-month price target of $2.85 on PolyNovo.
Power said results of another H1 FY25 results of New Zealand-headquartered wound-care company Aroa Biosurgery (ASX:ARX) were in line with expectations.
The highlights included 45% sales growth for Aroa’s Myriad family of products – which can be used in a wide range of surgical procedures where tissue needs to be rebuilt.
Sales of breast reconstruction products OviTex and OviTex PRS by Aroa’s US partner TELA Bio rose 23%.
Power said importantly, FY25 guidance was reconfirmed with revenue growth of 25% at the midpoint, 86% gross margin and positive EBITDA of ~NZ$4m.
He said a lot of clinical data was also coming out which should help with adoption of Aroa products.
Morgans has an add rating on Aroa and has maintained its 12-month target price of $1.05.
“Aroa is looking pretty interesting for us given the share price has been weak for a couple of years now but it is starting to come up,” he said.
“If we continue to see momentum in the next six to nine months we will hit our price target.”
A University of Queensland-led study has found 70% of Australians diagnosed with major depressive disorder are not receiving even the minimal treatment necessary.
The researchers analysed data for 204 countries and territories, to assess global access to adequate mental health care.
Dr Damian Santomauro from UQ’s School of Public Health and the Queensland Centre for Mental Health Research said the aim was to understand how many people with depressive disorders worldwide were receiving adequate care.
Minimally adequate treatment is defined as at least one month of medication alongside four doctor visits or eight sessions with a professional.
Globally, only 9% of people with major depressive disorders received sufficient care.
“There was a small gender discrepancy with females (10.2 per cent) having higher rates than males (7.2 percent),” Santomauro said.
The study involved researchers from the University of Washington, the World Health Organization (WHO) and Harvard University.
Santomauro said the findings – published in the The Lancet Psychiatry – supported WHO’s Comprehensive Mental Health Action Plan 2013-2030, which aims to increase mental health service coverage by at least 50% by 2030.
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Health & Biotech
Health & Biotech
Health & Biotech
