ScoPo’s Powerplays: Biogen drama, M&A action, and profit-taking coloured the week in healthcare

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.
 

Theme of the week

Healthcare finished the week up 1.92 per cent, compared to the broader market which rose by 0.23 per cent.

The biggest news of the week came out of US pharma Biogen, which announced the US FDA had approved its Alzheimer’s drug, Aduhelm.

It was the first Alzheimer’s drug treating underlying causes to have been approved by the FDA for almost 20 years, but it did not come without controversy.

Dementia experts are still debating whether the clinical trials evidence has proven that the drug actually works.

This has led to the exodus of three members of the FDA committee panel in protest of the highly controversial approval.

The development however, has benefited one ASX-listed company, Cogstate (ASX:CGS).

Cogstate shares jumped by 50 per cent to $1.40 on the day of the announcement, and closed the week at $1.39.

The company is partnered with a Japanese pharmaceutical company Eisai, which in turn is a partner of Biogen. Eisai has exclusive rights to develop and distribute Cogstate’s digital cognitive assessment technologies.
 

Profit-taking and M&A

With the end of half-year approaching, Power says we’re coming to a seasonally weak part of the year, where there is bound to be some portfolio rebalancing and profit taking by investors.

Two stocks that had been the target of profit taking recently were immune-oncology stocks Imugene (ASX:IMU) and Immutep (ASX:IMM).

“With Immutep, they presented some data (LAG-3 related immunotherapy) at a cancer conference overseas, and their share price had gone up in anticipation of a progress there.”

Immutep’s share price gained almost 30 per cent this year, before profit-taking pushed it down by around 10 per cent this week.

Imugene’s share price, meanwhile, has rocketed by more than 3,300 per cent this year, but has lost 11 per cent during the week.

“With that rocket-ship type of share price appreciation, there was always going to be profit-taking coming in,” Power said.

M&A action meanwhile, has continued in the aged care sector.

Japara Healthcare (ASX:JHC) has received an upgraded offer from the Little Company of Mary Health Care for an all-cash price of $1.20.

The previous offer was $1.04, and Japara closed the week at $1.18, up by 2 per cent.

Power believes M&A activities and consolidation in the Australian aged care sector will continue due to the certainty following the Royal Commission and the Federal Budget.

“A whole heap of recommendations were made by the Royal Commission, which the government has implemented a vast number of.”

“Even before the pandemic, the aged care industry was already shaky, because the funding coming from the government was not meeting the cost rises. The share prices didn’t get beaten up, but then we had the pandemic and that put a lot of pressure on them.”

“But now with the additional money into the industry from the Federal Budget, we have certainty around funding,” Power explained.
 

Upcoming IPO

Point of care diagnostic test provider Lumos Diagnostics (ASX:LDX) is set to list on the ASX on July 5.

The company was founded in Melbourne in 2015, and its products include FebriDx which is a finger-prick blood test that can indicate if a person has a general bacterial or viral acute respiratory infection within 10 minutes.

Lumos has applied to the FDA for the test to be approved and if it is granted, it will be permitted to sell it in the USA and potentially with an easy pathway for approval in certain other juristictions too.

Lumos Diagnostics is seeking $63 million at $1.25 per share from investors and has hired Wilsons and Bell Potter as joint lead managers.
 

Announcements you might have missed

Clinuvel (ASX:CUV)
The company said its drug Afamelanotide has been administered to a first patient diagnosed with an acute ischaemic stroke (AIS) enrolled in a world’s first clinical trial. In total, six adult AIS patients will be evaluated in this Phase II CUV801 study.

Clinuvel’s main focus is actually on skin diseases. It’s currently progressing on the study of Sceness, to treat the xeroderma pigmentosum disease.

Universal Biosensors (ASX:UBI)
The company announced that it has recently made first sales of its Sentia device and free SO2 test strips to companies operating in France, Italy, Germany, Spain, Portugal and Switzerland.

Sentia is UBI’s new wine testing platform. It’s a handheld, portable device that offers on-the-spot results within 60 seconds.

“UBI’s technology has medical applications but in this particular case, testing the pH levels for the wine industry could lead to a whole range of other things. They’ve been setting up distribution partners around the world, so we’re expecting some sort of life from them,” Power told Stockhead.

Resapp Health (ASX:RAP)
The company said the Medgate AP’s pilot trial of ResApp’s smartphone-based acute respiratory test ResAppDx will now be extended by two months. This additional time will be used to collect further data and optimise Medgate’s integration of ResAppDx within its telemedicine services.

ResApp’s machine learning algorithms use sound to diagnose and measure the severity of respiratory conditions without the need for additional accessories or hardware.

Probiotec (ASX:PBP)
The pharmaceutical company announced an earnings guidance for FY21, and said that pro-forma revenues are expected to come in at $159m – $163m, a 50 per cent increase from its FY20 results. Based on this, EBITDA is expected to come in at $29 – $30m, a 75 per cent increase from FY20 actuals.
 

ScoPo’s Powerplay

Power’s pick of the week is Mach 7 (ASX:M7T).

Mach 7 is provides enterprise image management systems that allow healthcare enterprises to identify, connect, and share diagnostic image and patient care intelligence.

Power expects a strong second half from Mach 7 after a solid Q3, following a five-year subscription (SaaS) contract win from the University of Vermont Medical Centre for its eUnity viewer system.

“Their share price has been under a lot of pressure over the last couple of weeks, and it’s fallen to just above $1, which is way too cheap,” said Power.

Power has a target of $1.68 for M7T. The share price closed the week at $1.04.

 

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.

The post ScoPo’s Powerplays: Biogen drama, M&A action, and profit-taking coloured the week in healthcare appeared first on Stockhead.

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.

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