ASX health stock rise in past five days along with broader markets
Wound care company Polynovo achieves its first ever $10m+ revenue month in April
Power says Neuren selloff a “complete overreaction” after US partner Arcadia’s latest results
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.
Olive oil, touted for a range of medical benefits, could be associated with a lower risk of dementia-related mortality according to a new study.
Published in the journal JAMA Network Open, the study examined data of more than 92,000 participants from the Nurses’ Health Study (1990-2018) and Health Professionals Follow-Up Study (1990-2018), a period of 28 years.
The population included women from the NHS and men from the HPFS who were free of cardiovascular disease and cancer at baseline. During the study period, there were 37,649 total deaths and 4,751 dementia-related deaths.
The study found consumption of more than 7 grams daily of olive oil was associated with a 28% lower risk of dementia-related death compared with never or rarely consuming olive oil, irrespective of diet quality.
The study found substituting 5 grams daily of margarine and mayonnaise for olive oil correlated with 8% to 14% decreased risk of dementia-related deaths.
However, substitutions with other vegetable oils or butter didn’t yield a significant risk reduction.
“In US adults, higher olive oil intake was associated with a lower risk of dementia-related mortality, irrespective of diet quality,” the researchers wrote.
“Beyond heart health, the findings extend the current dietary recommendations of choosing olive oil and other vegetable oils for cognitive-related health.”
To markets…
And while finishing in positive territory, the ASX health sector could do with some more olive oil this week. At 12pm (AEDT) on Friday the S&P/ASX 200 healthcare index (ASX:XHJ) was up 0.7% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) rose 1.69% for the same period.
After a strong start to the week on Thursday the sector fell in line with broader markets but picked up again on Friday with Power saying the broader macro economic and geopolitical picture is the driving force.
“If bond rates go up the market comes down and if bond rates go down the market goes up a bit,” he says.
“We’re just in this period where there’s still a lot of cash sitting out there looking for a home but it’s come off the boil since the beginning of April.
“Basically from November through to March we had a good run and quite a few secondary capital raisings came through over that period of time but it has really slowed down a little bit over the past six weeks or so.”
Power says there are a lot of companies with upcoming catalysts, which is a good way for investors to play the sector during this volatile time.
“You want to hone in on companies which are expected to deliver some news and obviously if its good news that is what you want to jump onto and take a targeted approach over the next while,” he says.
Polynovo reaches record revenue in April
Power’s top pick for last week was wound care company PolyNovo (ASX:PNV), which is up ~7% this week after achieving $10.1 million in revenue (unaudited) for April, up 68.6% on the same time last year.
PNV says its US business grew strongly, with monthly sales of $A6.9m (unaudited), up ~75.0% on the same time last year.
US sales were strong, reaching $6.9m, which is about 75% more compared to the same time last year. Sales in other parts of the world were $2.4m (unaudited), up ~68.2% compared to the same time last year.
PNV saw particularly good growth in the UK/Ireland, Australia/New Zealand, Hong Kong, and Germany.
“If you look at what they delivered in the first half and extrapolate a little bit into the second half they are on target to hit sales of greater than $100m for the financial year,” Power says.
“We’re siting on $104m and consensus is just above $100m so that’s been rewarded and we’re encouraged with that announcement.”
Morgans has an Add rating and 12-month target price of $2.22 on PNV.
Neuren selloff a ‘complete overreaction’
2023 sector market darling Neuren Pharmaceuticals (ASX:NEU) fell 4% in trade on Thursday (11% in morning trade before recovering) after reporting a Q1 CY24 earnings update by its US partner Acadia Pharmaceuticals (NASDAQ: ACAD).
Net sales of NEU’s lead drug DAYBUE (trofinetide) drug to treat Rett Syndrome in the US came in at US$75.9m, below its guidance of US$76 to US$82m, and below the Q4 2023 sales of US$87.1m.
NEU put the decline down to some seasonal effects, including refills due in January actioned in December prior to the holidays, and reduced Rett clinic days in January.
Plus, the company says more patients bailed on treatment during Q1 after a surge of new patients in previous quarters.
But NEU says it’s seeing new patients hopping back on board, with numbers climbing in the last six weeks.
About 25% of the 5,000 diagnosed Rett syndrome patients in the US have commenced therapy. Furthermore, 58% are still on board after nine months of treatment, which is 10% higher than in clinical trials.
Anticipated payments to NEU for DAYBUE include:
Q1 2024 royalties of $11.6m
Full-year 2024 royalties of between $61m and $70m plus sales milestone revenue of $77m
Acadia have reiterated the full-year 2024 guidance for net sales of between US$370m and US$420m
NEU became the market darling of the biotech sector in 2023 with its share price rising more than 200% during the year after receiving US FDA clearance for trofinetide to treat Rett Syndrome in adult and paediatric patients two years of age and older.
Power says the share sell-off of NEU on Thursday was “a complete overreaction” and presented a buying opportunity.
“Their marketing partner in the US Acadia reported their quarterly results which were in line with what the market was expecting and they’ve reconfirmed their full year guidance but despite that the market just slammed it down,” he says.
“We see it as a pretty good buying opportunity.”
NEU is due to report results for its Phase 2 clinical trial for Pitt Hopkins before the end of this quarter.
EBR regulatory timelines intact
Power says cardiac company EBR Systems (ASX:EBR) appears to be on track to submit the final final module of its pre-market approval (PMA) application to the US Food and Drug Administration (FDA) in Q3 CY24 for its WiSE Cardiac Resynchronization Therapy (CRT) system tech.
EBR has pioneered the WiSE Cardiac Resynchronization Therapy (CRT) system tech – literally the size of a cooked rice grain – which employs proprietary wireless methods to provide pacing stimulation directly inside the heart’s left ventricle.
The system has been granted US FDA breakthrough device designation with four out of five modules for premarket approval submitted. EBR is targeting FDA approval in Q1 CY25 for WiSE following its fifth module submission.
EBR’s positive SOLVE-CRT pivotal study results have been presented at leading global conferences, including the European Heart Rhythm Society Meeting and the 2024 Emergence Conference.
Well-credentialed Erik Strandberg has been hired as chief commercial officer to lead EBR’s US commercial strategy.
“That submission to the FDA should happen fairly shortly and again that has given the market a fair bit of confidence so the share price has been moving up nicely,” Power says.
“We think when the submission goes in the market will reward the company.”
Morgans has a speculative buy rating on EBR and increased its 12-month trading price to $1.57 from $1.49.
The PNV, NEU & EBR share price today:
ScoPo’s Powerplay – Mach 7 ‘doing everything right’
Enterprise Imaging solutions company Mach7 Technologies (ASX:M7T) is Power’s pick of the week.
M7T recently reported its Q3 FY24 results including 20% growth in annual recurring revenue and record contracted annual recurring revenue of $28.2m.
The company says it expects to be cashflow positive in FY24 due to careful cost management, increased fees for licence renewals and improved receipts predictability for subscription contracts.
Power says the outlook remains strong for M7T with its continuing trend toward subscription contracts make the company a more attractive proposition to a wider range of investors.
“It does seem like it is doing everything right operationally and they have had a strong third quarter,” Power says.
“Mach 7 is one of our key picks in the sector and I feel like it has really turned the corner.
“In terms of stocks to watch Mach7 stands out.”
Morgans has an add rating on M7T and a 12-month target price of $1.56.
The M7T 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 Mach 7 at the time of writing this article.
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