ASX health sector falls broader market with some key names ailing in reporting season
CSL Phase III trial fails to meet primary efficacy endpoint but delivers solid H1 FY24 results
Neuren Pharmaceuticals falls 13% on Friday after short sellers target US partner Acadia Pharmaceuticals
Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, explains what the movers and shakers have been doing in health and gives his ASX Powerplay.
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Unlike current drugs requiring repetitive use Vegas and his colleagued turned to chimeric antigen receptor (CAR) T cells.
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To markets…
And ASX health stocks are needing some rejuvenation this week. At 12.45pm (AEDT) on Friday the S&P ASX 200 healthcare index (ASX:XHJ) was down 4.1% for the week, while the benchmark S&P ASX 200 (ASX:XJO) was flat for the same period.
The ASX’s biggest healthcare company CSL (ASX:CSL) weighed heavily on the sector this week. The blood products giant delivered strong double-digit growth for H1 FY24 but also sustained a setback with its Phase III AEGIS-II trial of CSL112, not meeting its primary efficacy endpoint.
The CSL112 drug is a treatment for reducing the risk of major adverse cardiovascular events (MACE) in patients following an acute myocardial infarction (AMI).
Much anticipated results of the Phase III study showed it failed to meet its primary efficacy endpoint of MACE reduction at 90 days. As a result, there are no plans for a near-term regulatory filing.
There were no major safety or tolerability concerns with CSL112, and CSL says it will continue to analyse the findings and share the full results in the coming months.
Power says Morgans were cautious on the clinical trial and that proved to be the correct stance.
“It was disappointing as had it been positive it would’ve been a massive leg up for CSL but it wasn’t and the underlying business remains very robust,” he says.
Power says CSL’s H1 FY24 results were broadly in line with expectations, with double-digit underlying top and bottom line growth and strong operating cash flow.
Revenue was $US8.05 billion for the half year, up 11% on a constant currency basis. CSL’s preferred measure net profit after tax and amortisation was 11% higher at $US2.02 billion.
Total revenue for the company’s plasma Behring division was up 14% to $5,238 million. Immunoglobulin sales rose 23%.
“Their plasma business has seen volumes improving and margins looking good and that’s 60% of their business,” Power says.
“The influenza vaccine part of the business is doing OK and had a massive kick during Covid obviously but is back to more normal type levels.
“CSL say their new business Vifor which is for iron deficiency and kidney disease is being well integrated and on track with a few headwinds in terms of regulatory and pricing issues but they see them as short term rather than structural.”
CSL has reaffirmed its full year net profit guidance of $US2.9-$US3 billion, up 13-17% on pcp, which Power says implies a solid H2 FY24.
Morgans is sticking with its positive Add rating on CSL but has reduced its 12-month target price from $328.20 to $315.40.
Neuren falls as short sellers target partner Acadia
2023 darling of the biotech sector Neuren Pharmaceuticals (ASX:NEU) has fallen more than 13% on Friday before a pause in trading after a short seller targeted its big US partner NASDAQ-listed Acadia Pharmaceuticals Inc.
Culper Research is shorting Acadia claiming concerns over Trofinetide, now sold under the brand name Daybue, which it licenced from NEU and launched in the US last year.
The report cited higher than reported safety issues, and subsequently higher discontinuation rates than consensus suggests.
Culper Research also suggest Daybue peak annual revenues of US$316 million to occur in 2024 and decline over time versus sell-side estimates of US$880 million peak, building over a number of years.
In an announcement to the ASX following the research report NEU says there are numerous analyst research reports published on Acadia and on Neuren, many incorporating surveys of US physicians, that present a different view to Culper Research.
“In its J.P. Morgan Conference presentation on 9 January 2024, Acadia reiterated guidance for net sales of DAYBUE in Q4 2023 of US$80 million to $87.5 million,” NEU says.
“Net sales of US$67 million and US$23 million were reported for Q3 2023 and Q2 2023 respectively.”
NEU says in that presentation, Acadia updated the data on persistence of DAYBUE treatment, with 76% remaining on therapy after six months based on confirmed discontinuations, or 68% based onconfirmed discontinuations and patients who were 60 days past their scheduled refill.
NEU says the after-hours Acadia share price on February 15, 2024 Eastern Time was up 1.19% with the US drug company’s Q4 FY23 earnings announcement scheduled for February 27, 2024.
ProMedicus sinks despite strong H1 FY24 result
Health imaging stock ProMedicus (ASX:PME) announced another record half year results which met expectations. H1 FY24 net profit was $36.3 million 33.3% higher than the pcp with revenue of $74.1 million, up 30.3% on pcp.
This was a record half for the company in terms of revenue and net profit, as well as new sales.
PME announced a fully-franked interim dividend of 18 cents/share.
In his note to clients Morgans analyst Iain Wilkie says key for the half was progress in the cardiology business.
“Commentary along with further external investments in the field suggests work still to be done to gain market traction, although commerciality sounds just around the corner,” he wrote.
While PME has risen ~49% in the past year but its share price tumbled 13% following release of what was considered still a strong H1 FY24 result.
“Our view was that given the valuation and strong run up into the results, PME needed to produce a convincing beat to move the dial,” Wilkie wrote.
“Nevertheless, it’s a company far from ex-growth with a strong pipeline and customer volume growth well above industry averages.”
Morgan’s maintains its hold recommendation and has lifted its 12-month target price from $74 to $85.
“We view PME as one of the highest quality businesses on the ASX with high margin and long contracted revenue base, providing significant baseline earnings support,” Wilkie wrote.
“Valuation remains the only concern here and continue to wait for some share price weakness to add to positions.
“Key catalysts remain around progress in other departments (cardiology/pathology) and new contract growth size/cadence.”
Positive journal publication for ImpediMed
Brisbane-based medical software technology company ImpediMed (ASX:IPD) got a lift during the week with a leading journal eClinicalMedicine, part of The Lancet Discovery Science, publishing Multinational Association of Supportive Care in Cancer (MASCC) guidelines, which specifically include bioimpedance spectroscopy (BIS) as a recommended option to identify early signs of lymphoedema.
IPD’s device the SOZO is the only FDA cleared and clinically validate BIS system for the early detection of lymphedema.
The MASCC guidance was generated by a global panel, including participants from Japan, USA, Hong Kong, Canada, Italy, Denmark, Australia, Spain and UK. IPD says the recommendations support its US and global sales efforts.
BIS for prevention of breast cancer-related lymphoedema is now included in the globally referenced NCCN Guidelines and MASCC Guidelines.
SOZO is available in the US, Australia, New Zealand, Hong Kong, UK, Ireland, Denmark and Sweden.
“It basically says from all the research that has been done one of the options is to use ImpediMed’s technology with the early detection of breast cancer-related lymphoedema,” Power says.
“That is a good piece of news and that share price has popped up a bit on the back of that because it’s really got hammered following their second quarter results which were below expectations.
“I must admit I was surprised at how far the share price got knocked but it’s clawing its way back now.”
Morgans has a speculative buy rating on IPD, reducing its 12-month target price from 22 cents to 20 cents following its Q2 Fy24 result.
Due to report half year results next week are leading supplier of protective equipment for the healthcare sector Ansell (ASX:ANN), Medical diagnostics company Sonic Healthcare (ASX:SHL) pharmaceutical distributor EBOS and fertility play Monash IVF Group (ASX:MVF).
The CSL, NEU, PME & IPD share price today:
ScoPo’s Powerplay – Avita to deliver FY23 results
US headquartered wound care company Avita Medical (ASX:AVH) is Power’s pick of the week and due to report its full year FY23 results next week. In January AVH provided preliminary FY23 results with revenue of $49.8 million at 84.5% gross margin, which was in line with revised guidance.
Quarterly and full year guidance for FY24 was provided, with 57-69% growth expected yoy. The company has also announced it had signed a distribution agreement with Stedical Scientific to commercialise FDA approved PermeaDerm biosynthetic wound matrix in the US.
“Avita is one of our key picks for reporting season,” Power says.
“We’re confident they will deliver some good results and give encouraging guidance around calendar 2024 and also when they expect to be profitable in 2025 which is what we’re looking for there.”
Morgans has an Add rating on AVH and 12-month target price of $6.40.
The AVH share price today:
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.
Disclosure: The author held shares in CSL and Sonic Healthcare at the time of writing this article.
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