ASX health stocks higher in past five days in line with broader markets Christmas rally
\nSigma Healthcare up ~34% this week on planned merger with Chemist Warehouse
\nVolpara soars 46% this week on takeover news by AI-focused South Korean group Lunit<\/p>\n
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.\u00a0<\/p>\n
Severe pregnancy-related nausea and vomiting, known as hyperemesis gravidarum, can be extremely debilitating and in some cases,\u00a0 such as the high-profile case of Catherine Princess of Wales, require hospitalisation.<\/p>\n
But some good news \u2013 an international study involving scientists at the University of Cambridge,<\/a> researchers in Scotland, the USA and Sri Lanka may have found the culprit and a possible prevention.<\/p>\n Scientists believe the severity of maternal sickness relies on a foetal hormone named GDF15 and the mother\u2019s prior exposure before pregnancy.<\/p>\n Scientists studied data from women recruited to several studies and used several approaches including human genetics, new hormone measurement techniques in pregnant women\u2019s blood, and investigations involving cells and mice.<\/p>\n Researchers discovered a direct link between a woman\u2019s pregnancy-induced nausea and vomiting and the levels of GDF15 produced by the foetal part of the placenta, as well as her sensitivity to the hormone\u2019s nauseating effects.<\/p>\n GDF15 is typically produced at low levels in non-pregnant tissues. Women with low levels of GDF15 in their blood before pregnancy are at a higher risk of severe nausea and vomiting during pregnancy.<\/p>\n Furthermore, the team identified a rare genetic variation associated with lower hormone levels in the blood and tissues outside of pregnancy that significantly increases the risk of hyperemesis gravidarum.<\/p>\n Conversely, women with beta thalassemia, a hereditary blood disorder leading to naturally elevated GDF15 levels before pregnancy, tend to experience minimal or no nausea and vomiting.<\/p>\n The finding suggests a possible way for preventing pregnancy-related sickness by exposing women to GDF15 before they become pregnant to enhance their resistance to the hormone.<\/p>\n \u00a0<\/p>\n And ASX health stocks are looking quite healthy and resilient this week.\u00a0 At\u00a0\u00a0midday (AEDT) on Friday the S&P ASX 200 healthcare index (ASX:XHJ) was up 4.54% for the past five days, surpassing the benchmark S&P ASX 200 (ASX:XJO)\u00a0 which was up 3.96% for the same period.<\/p>\n Power says money is starting to flow in to the healthcare sector in a much welcome Santa rally. He says\u00a0 in some instances companies don\u2019t have to do much at all and their share prices move up in \u201ca case of the rising tide lifts all boats.\u201d<\/p>\n \u201cI think what we\u2019ve been saying is that we\u2019re expecting is a Christmas rally and mood of the market to improve and I think we\u2019re getting both,\u201d Power says.<\/p>\n \u201cFunds certainly seems to be flowing into a lot of the smaller cap names and small healthcare companies are benefiting which is good.\u201d<\/p>\n \u00a0<\/p>\n Pharmaceutical distributor and Amcal owner\u00a0Sigma Healthcare (ASX:SIG)<\/strong><\/a> has soared ~34% this week after its announcement of a planned merger with Chemist Warehouse, which would see the combined group (MergeCo) become a leading healthcare wholesaler, distributor and retail pharmacy franchisor.<\/p>\n SIG announced that it has entered into a proposed merger agreement with Chemist Warehouse Group (CWG) for SIG shares and $700 million cash consideration. <\/p>\n Upon merging CWG will own 85.7% of shares and SIG holders the rest (14.3%). A new credit debt facility from ANZ and NAB for $1 billion will be set up to help fund the transaction.<\/p>\n Power says MergeCo will have an indicative market cap of $8.8 billion, with an aggregate historical EBIT of $495 million, before synergies which is expected to be ~$60 million p.a. to be reached in four years.<\/p>\n The deal will see SIG become a full-service wholesaler, distributor, and retail pharmacy franchisor, and likely sit within the S&P\/ASX200.<\/p>\n Concurrently, SIG has announced that it will complete a pro-rata accelerated non-renounceable entitlement offer for $400 million with the funds used to support inventory build of its Chemist Warehouse supply contract as well as providing funding for SIG\u2019s growth initiatives.<\/p>\n The merger is still subject to various approval, including from the competition regulator ACCC, which Power is confident they will get but the process takes time.<\/p>\n \u201cIt\u2019s obviously created a huge amount of interest given the strength of the Chemist Warehouse brand name,\u201d he says.<\/p>\n \u201cWhat they\u2019ve told the market is they don\u2019t expect to have the two groups merge together until the second half of next year.\u201d<\/p>\n Morgans has an Add rating for SIG and has revised its 12-month price target from 83 to 85 cents\/share which it has gone right through and is currently trading at ~$1\/share.<\/p>\n \u00a0<\/p>\n Health imaging company Volpara Health Technologies (ASX:VHT)<\/strong><\/a> soared more than 40% on Thursday after the company\u2019s board announced the takeover offer from South Korean company Lunit, Inc provides the most compelling value for shareholders.<\/p>\n Founded in 2013 and headquartered in Seoul, Lunit is a deep learning-based medical AI company. Its flagship Lunit INSIGHT suite is clinically used in approximately 3,000+ hospitals and medical institutions across 40+ countries.<\/p>\n The company had earlier offered shareholders in VHT, which specialises in the early detection of breast cancer, $1.15\/share in cash, worth around $300 million.<\/p>\n VHT has now entered into a scheme implementation agreement with Lunit, but a final shareholder approval will still need to be sought at a scheme meeting of shareholders expected to be held in early Q2 2024.<\/p>\n The deal is anticipated to speed up VHT\u2019s purpose \u201cto save families from cancer\u201d. By leveraging Lunit\u2019s internal radiologists and compatible technologies, VHT\u2019s collection of over 100 million images will be strategically enhanced with added AI skills and solutions.<\/p>\n \u201cIt was a pleasant surprise and Volpara has the support of their three major shareholders,\u201d Power says.<\/p>\n He says the scheme remains subject to VHT shareholder approval, New Zealand High Court approvals and New Zealand Overseas Investment Office consent.<\/p>\n \u201cWe\u2019ve been very bullish on Volpara for a long time and it\u2019s underperformed for probably two years so at least we\u2019ve been able to capture some of that share price back,\u201d Power says.<\/p>\n \u201cThe question becomes is this the final bid or does it attract more interest and we just have to wait and see how that pans out.\u201d<\/p>\n Morgans now has a Hold rating on VHT from Add and has moved its valuation and target price to be in line with the scheme of arrangement price of $1.15\u00a0 from $1.17.<\/p>\n \u00a0<\/p>\n Health imaging company Mach7 Technologies (ASX:M7T)<\/strong><\/a>\u00a0 is up ~9% this week after announcing a new five-year subscription deal with Sentara Healthcare for its Enterprise Imaging Platform and eUnity Diagnostic Viewer.<\/p>\n The renewed contract holds a total minimum value of $10.2 million and is expected to generate Annual Recurring Revenue (ARR) of about $2.0 million.<\/p>\n This signifies a $1 million increase in ARR compared to the current contract, and the new agreement will take effect on January 1, 2024.<\/p>\n Power says the contract also presents additional growth opportunities for M7T if the volume continues to surpass the current contract minimums.<\/p>\n Sentara Healthcare, situated in the Mid-Atlantic and Southeast regions of the US, stands as one of the largest health systems in the area.<\/p>\n It ranks among the top 20 largest non-profit integrated health systems nationally, operating with 30,000 employees and managing 12 hospitals in Virginia and northeastern North Carolina.<\/p>\n \u201cThat is good news for M7T,\u201d Power says.<\/p>\n \u00a0<\/p>\n The countdown is nearly over for Power\u2019s pick for last week Neuren Pharmaceuticals (ASX:NEU)<\/strong><\/a> to release its long-awaited results of Phase 2 clinical trial of NNZ-2591 in Phelan-McDermid syndrome (PMS) results.<\/p>\n The 2023 market darling of the biotech sector has entered a trading halt pending release of the results, anticipated for Monday.<\/p>\n In March the USA FDA approved its compound trofinetide (now called DAYBUE) for Rett\u2019s syndrome, the first drug for the treatment of the rare neurological disorder which emerges in infancy.<\/p>\n However,\u00a0NEU CEO Jon Pilcher told\u00a0Stockhead<\/em>\u00a0<\/a>upon FDA approval of DAYBUE\u00a0that NNZ-2591 is even more valuable to the company.<\/p>\n \u201cI\u2019ve been saying for a long time it\u2019s worth a lot more to us than trofinetide,\u201d Pilcher says.<\/p>\n \u201cThey are both involved in the biology of IGF-1 in the brain, which is growth factor critical for normal brain development and maintenance.<\/p>\n \u201cThe number of patients we are looking to target with NNZ-2591 is five times the patients of Retts syndrome.\u201d<\/p>\n Power says NNZ-2591 is NEU\u2019s second generation compound, a smaller peptide, and easier to manufacturer with patients\u00a0 receiving lower doses.<\/p>\n \u201cWe have been waiting for this very event and will find out the answer very soon so it will be big news for Neuren,\u201d he says.<\/p>\n \u201cWe are confident it will be positive and continue to attract investors into the sector more broadly.\u201d<\/p>\n \u00a0<\/p>\n <\/span><\/span><\/p>\n \u00a0<\/p>\n While all eyes have been on SIG this week, Power reckons investors shouldn\u2019t overlook its rival EBOS Group (ASX:EBO).<\/strong><\/a><\/p>\n Power says the three major pharmaceutical distributors are SIG, EBO and Wesfarmers (ASX:WES).<\/strong><\/a><\/p>\n \u201cThere has been a little bit of weakness with the excitement in Sigma and we have seen the share price in Ebos\u00a0 drift back a bit and I think that has probably been overdone,\u201d Power says.<\/p>\n \u201cI think EBOS is a good one not to forget about.\u201d<\/p>\n EBO announced earlier this year the loss of its Chemist Warehouse contract, worth about $1.1 billion in revenue, saying it won\u2019t be renewed beyond the expiry date of June 30, 2024.<\/p>\n EBO\u2019s loss was to the gain of SIG, which announced it would supply the chemist retail giant both Pharmaceutical Benefits Scheme (PBS) medicines and Fast-Moving-Consumer-Goods (FMCG) products.<\/p>\n The company appears to be now on a search for an acquisition to fill the loss of a lucrative Chemist Warehouse contract.<\/p>\n With the Chemist Warehouse contract finishing Morgans is forecasting a 3% decrease in EPS in FY25,\u00a0 however it believes EBO will resume double digit growth in FY26, which is in line with their 10-year history.<\/p>\n Power says EBO are well diversified, a good acquirer and integrator of businesses so it is confident that deficit will be filled in the next couple of years.<\/p>\n \u00a0<\/p>\n \ufeff<\/span><\/span><\/span><\/p>\n \u00a0<\/p>\n 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.<\/em><\/p>\n Disclosure: The author held shares in Mach7 Technologies at the time of writing this article.<\/em><\/p>\n <\/span><\/p>\n The post ScoPo\u2019s Powerplays: ASX healthcare up as \u2018rising tide lifts all boats\u2019<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"To markets\u2026.<\/h2>\n
Sigma soars on Chemist Warehouse merger<\/h2>\n
Volpara soars on takeover offer<\/h2>\n
Mach 7 contract extension<\/h2>\n
Neuren in trading halt pending trial results<\/h2>\n
The SIG, VHT, M7T & NEU share price today:<\/h2>\n\n
ScoPo\u2019s Powerplay \u2013 Don\u2019t overlook EBOS group<\/h2>\n
The EBO share price today:<\/h2>\n\n