Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 24 years, explains what the movers and shakers have been doing in health and gives his ASX powerplays.
Themes of the week
With stock markets around the world touching record highs, Scott Power is warning there might be a bit of pullback soon.
“We’re coming into a what is seasonally a weaker part of the year, May and June,” Power says.
There’s an old adage, “sell in May, go away”, he adds.
“At the end of June, with the tax year ending, there’s usually a bit of reshuffling portfolios and tax selling and all that sort of stuff.
“If there is a bit of pullback, it gives us a chance to reload into some of our favourite stocks, which in some instances are pushing all-time highs – like a Pro Medicus (ASX:PME), companies like that.”
Power adds that he’s still maintaining his bullish stance, just recognising that we’re approaching a period of seasonal weakness.
This week the healthcare sector outperformed the broader market, gaining 1.9 per cent while the All Ordinaries was up 1.0 per cent.
Capital raisings/IPOs continue
This week Island Pharmaceuticals (ASX:ILA) made its debut on the ASX after an IPO that raised $7.5 million at 25 cents per share. ILA shares opened Tuesday at 50c and finished the week at 44c after trading as high as 67c.
“It was a terrific start for them,” Power said.
The company is working on repurposing a Johnson & Johnson cancer drug to use against dengue fever.
“I think there’s continued interest in the space, we’re got a couple of IPOs coming through we’re looking forward to bringing to the boards.”
Microsoft buys AI speech firm for $US19.7 billion
In international news this week, Microsoft (NASDAQ:MSFT) announced it would buy Nuance Communications (NASDAQ:NUAN) in an all-cash transaction for $US19.7 billion ($25 billion).
The price makes it Microsoft’s second-biggest deal ever, behind its $US26 billion acquisition of Linkedin.
MSFT is paying $US56 a share, a 23 per cent premium, for the maker of the Dragon suite of speech recognition software products.
“It’s being used in medical, radiology, in particular,” Power said. “It just shows the importance of some of these really smart technology companies, they’re being snapped up.
“All sort of broadly in that space where they’re got very interested technology that’s gaining market share, and potentially targets for some of these bigger players.”
Elsewhere, Power noted a spate of recent distribution agreements this month from Universal Biosensors (ASX:UBI), a company that makes handheld sensors for both the healthcare and the wine industry.
“Really quite an interesting diversification for them,” Power said. They’ve been quite active in the marketplace in terms of their distribution agreements.”
UBI shares closed at 80c, up 21.2 per cent this week and from around 40c in February.
Telix Pharmaceuticals (ASX:TLX) meanwhile is down 6.6 per cent this week, to $3.97, despite submitting its prostate cancer imaging product to Australia’s Theraputic Goods Administraiton for approval.
“There’s been a lot of announcements made to the market, and they’re building what appears to be a very interesting business,” Power said.
Power’s pick this week is Volpara, the New Zealand breast-density imaging company, which is due to report its fourth-quarter earnings soon.
“This is their fourth quarter, and it is seasonally their strongest quarter, so we’ve got strong expectations of a strong report coming out at the end of April,” Power said.
Volpara shares finished the week down 0.7 per cent; Morgans has a price target of $1.92 on the company.
Last week’s pick, Antisense Therapeutics (ASX:ANP), finished the week down 10.9 per cent to 20.5c – so could be a buying opportunity for those who didn’t get in earlier.
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Barry Stroman was a reporter for Zerg Watch, before becoming the lead editor. Barry has previously worked for Wired, MacWorld, PCWorld, and VentureBeat covering countless stories concerning all things related to tech and science. Barry studied at NYU.