ASX health sector lifts in line with broader markets as reporting season comes to end
\nMorgans upgrades Polynovo as total revenue rises 65.6% on pcp to $48.8 million\u00a0
\nNanosonics cites\u00a0hospital budgetary pressures as deferring purchasing decisions<\/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
People using GLP-1 receptor agonist drugs for weight reduction may not need to continue their use indefinitely, according to a new study by the University of Copenhagen and Hvidovre Hospital in Denmark.<\/p>\n
The medications, initially designed for diabetes, have caused a frenzy around their potential for weight loss.<\/p>\n
Shares in Danish drug maker Novo Nordisk, which makes the weight loss medicine Wegovy,\u00a0 rose more than 50% in 2023 propelling it to become one of Europe\u2019s most valuable companies. Nova Nordisk now has a market cap of ~US$543 billion.<\/p>\n
The study published in eClinicalMedicine<\/a><\/em> reveals that incorporating regular exercise with these medications increases the likelihood of sustaining a 10% weight loss per year even after discontinuing use.<\/p>\n In a randomised controlled trial involving 166 adults aged 18 to 65 with obesity, participants underwent an eight-week calorie-reduction diet, resulting in an average weight loss of 13.1kg.<\/p>\n Participants were then randomly assigned to four groups for 52 weeks involving weight loss drug Saxenda including:<\/p>\n Daily 3mg subcutaneous injection of Saxenda A year after stopping treatment, 109 participants returned for weight assessments. Those who received Saxenda and engaged in regular exercise during treatment were more likely to maintain a 10% reduction in their initial body weight, according to the researchers.<\/p>\n Individuals who engaged in regular exercise while taking Saxenda during the treatment phase were 4.2 times more likely to sustain their initial weight loss compared to those who took Saxenda without exercise.<\/p>\n For those who took Saxenda without exercise during treatment, the average weight regain was 6kg higher compared to those who received the combined treatment.<\/p>\n \u201cIn summary, supervised exercise combined with obesity pharmacotherapy has the potential to prevent body weight and fat mass regain after treatment termination compared with obesity pharmacotherapy without exercise,\u201d the study says.<\/p>\n \u00a0<\/p>\n And ASX health stocks are healthily gaining this week. At\u00a0 1pm (AEDT) on Friday the S&P\/ASX 200 healthcare index (ASX:XHJ) was down 0.2% for the past five days,\u00a0 while the benchmark S&P\/ASX 200 (ASX:XJO) rose 1.5% for the same period.<\/p>\n Power says as reporting season comes to an end there have been winners and losers with the market rewarding growth in companies.<\/p>\n \u00a0<\/p>\n Morgans has upgraded\u00a0 PolyNovo (ASX:PNV) <\/strong><\/a> from a hold to an add and increased its 12-month target price from $1.95 to $2.22 after the release of the wound care company\u2019s H1 FY24 results this week, which Power says were above market expectations.<\/p>\n Total revenue, including Biomedical Advanced Research and Development Authority (BARDA) funds was up 65.6% on pcp to $48.8m.\u00a0 Underlying EBITDA was $1.3m up from a loss of $2.5m, while.EBIT was $300k and NPAT was $2.7m.<\/p>\n PNV finished the period with a net cash balance of $45.6m.<\/p>\n PNV reported strong sales acceleration in H1 FY24 across all regions. The US, which is its most established region, saw sales growth of 41.7%, while rest of world sales were $10m up 122.2% which was driven by a strong growth in the UK, Australia\/New Zealand and Germany.<\/p>\n \u201cThere was really little to fault in what Polynovo has managed to achieve and certainly commentary from the company was very upbeat not only for the rest of this year but into the future,\u201d he says.<\/p>\n \u201cIf you look at the revenue growth coming through based on our numbers and consensus Polynovo is at 25-30% revenue for the next three years which is pretty impressive.\u201d<\/p>\n \u00a0<\/p>\n Health imaging stock\u00a0Mach7 Technologies (ASX:M7T)<\/strong><\/a> released its H1 Fy24 results which Morgans healthcare analyst Iain Wilkie wrote in a note to clients was in line with a recent trading update providing expectations and updated guidance following a marked shift to recurring revenues in new contracts.<\/p>\n \u201cIt\u2019s clear to us that the company continues to see this trend play out in its contract pipeline, and a trend which we view will result in a more sustainable and investor friendly business model,\u201d Wilkie wrote.<\/p>\n He wrote M7T\u2019s financials underscored its accelerating transition towards recurring revenues, with contracted CARR rising by 30% in the six months to reach $26.8m with 87% of sales orders in the half attributed to recurring-style subscription and maintenance contracts. Billable ARR has now reached $18.6m per annum.<\/p>\n \u201cThere is evidence of strong growth in their sales order book which places them very well over the next couple of years so again it\u2019s another example of a company growing its business well above normal market rates,\u201d Power says.<\/p>\n \u201cThe interesting thing with Mach 7 is they\u2019re transitioning to more software as a service (SaaS) subscription base models which will help their long-term growth.\u201d<\/p>\n Morgans maintains and add rating and 12-month price target of $1.56 for M7T.<\/p>\n \u00a0<\/p>\n Nanosonics (ASX:NAN)<\/strong><\/a> \u00a0has slumped ~15% in the past five days after releasing its H1 FY24 results with the disinfection device maker citing hospital budgetary pressures as deferring purchasing decisions.<\/p>\n The results follow NAN releasing a negative trading update in January.<\/a> Revenue was $79.6m, down 2% on pcp which was in line with the trading update, while EBIT was $3m, which was what Morgans forecast.<\/p>\n Half year capital revenue of $21.9 million fell 15% on pcp, which NAN says \u201cprimarily related to delays in expected upgrade unit sales\u201d.<\/p>\n NAN says upgrades to its latest probe sterilisation device Trophon 2 of 620 units were down 23% on pcp with customers extending use of their existing Trophon EPR devices due to budgetary constraints.<\/p>\n Gross profit margin of 79.7%, was up from 78.9% on pcp with NAN saying the stronger gross margin was driven by revenue mix and the positive impact of foreign exchange rates.<\/p>\n Despite the market challenges faced in the first half, NAN says its expects both more unit and revenue growth in H2 FY24 .<\/span><\/p>\n \u201cThey\u2019ve called out that hospital budgets are still quite tight so their growth is more skewed to the second half,\u201d Power says.<\/p>\n While Morgans maintains an add rating for NAN it has reduced its 12-month target price to $3.50 from $3.88.<\/p>\n \u00a0<\/p>\n Power says pathology provider Healius (ASX:HLS) <\/strong><\/a>\u00a0has a history of \u201cunderperformance across multiple divisions which they\u2019ve now sold with the restructure really yet to deliver any meaningful returns\u201d according to it\u2019s latest H1 FY24 results.<\/p>\n \u201cIt\u2019s been a chronic underperformer for 10 years,\u201d Power says.<\/p>\n HLS recorded underlying EBITDA of $159.1m with underlying EBIT of $15.7m, which was in line with guidance.\u00a0 Revenue related to Covid testing was $1.7m, contrasting with the $56.1m in pcp.<\/p>\n Additionally, HLS highlighted a non-cash impairment charge of $603.2 million in the pathology segment\u2019s goodwill. HLS FY24 guidance was maintained with EBITDA of $359\u2013$369m and EBIT of $70-$80m.<\/p>\n In a note to clients, Morgans healthcare analyst Derek Jellinek wrote \u201cpathology was the main drag, negatively impacted by cycling out of Covid-19 testing, combined with low volumes and cost inflation\u201d.<\/p>\n He wrote Lumus Imaging division was \u201cahead of target\u201d on strength in the hospital and community segments, and Agilex Biolabs showed \u201cpositive signs\u201d on increasing new contracts.<\/p>\n Morgans maintains a hold rating on HLS but has reduced its 12-month target price to $1.32 from $1.37.<\/p>\n \u00a0<\/p>\n \ufeff<\/span><\/span><\/span><\/p>\n \u00a0<\/p>\n Brisbane-based medical software technology company ImpediMed (ASX:IPD)<\/strong><\/a>\u00a0 is Power\u2019s stock of the week, despite posting a net loss of $9.7m, above Morgans\u2019 forecast of $9m in H1 FY24.<\/p>\n Half year revenue of $4.8 million, compared with $5.7 million in pcp was put down to an end of IPD\u2019s AstraZeneca clinical trial program.<\/p>\n Operating expenses were flat YoY at $17.1m, and up 9% from the preceding half due to costs related to previous CEO and CFO stepping down.<\/p>\n EBITDA loss was $9.3m down 6% on the pcp. Operating cash outflow was $6.8m with a cash balance as at December 31, 2023 of $36.9m.<\/p>\n SOZO SaaS revenue was up 23.1% to $4.3m with a total of 557 SOZO units in the field, up from 500 units at June 30, 2023.<\/p>\n IPD\u2019s device, the SOZO, is the only FDA cleared and clinically validate BIS system for the early prevention of lymphedema.<\/p>\n BIS for prevention of breast cancer-related lymphoedema is now included in the globally referenced NCCN Guidelines and MASCC Guidelines.<\/p>\n SOZO is available in the US, Australia, New Zealand, Hong Kong, UK, Ireland, Denmark and Sweden.<\/p>\n During H1 FY24 UnitedHealthcare, the largest Private Payor in the US updated coverage policy to allow reimbursement claims for relevant CPT code without clinical review.<\/p>\n The company says 14 states in the US reached critical mass (80% population covered for reimbursement from private payors or Medicare). No states had achieved critical mass in pcp.<\/p>\n IPD has identified 11 high-priority states for commercialisation based on factors such as potential patient population, medical leadership in lymphoedema prevention, and payor coverage, with seven of these already reached critical mass.<\/p>\n All 11 high-priority states are expected to attain critical mass by April 2024.<\/p>\n During the half Dr Parmjot Bains was appointed as managing director and interim CEO, while McGregor Grant was appointed as executive chair and interim CFO.<\/p>\n \u201cUnder new management ImpediMed will have a clear focus on building the instal base (sales) and cost control which investors will reward,\u201d Power says.<\/p>\n Morgans maintains a speculative buy rating on IPD with 12-month target price of 20.4 cents.<\/p>\n \u00a0<\/p>\n \ufeff<\/span><\/span><\/span>\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 Mach 7 at the time of writing this article.<\/em><\/p>\n <\/span><\/p>\n The post ScoPo\u2019s Powerplays: Health stocks fall as tight hospital budgets hurt Nanosonics<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nPlacebo instead of Saxenda
\nExercise without weight-loss medication
\nSaxenda with regular exercise.<\/p>\nTo markets\u2026<\/h2>\n
Morgans upgrades PolyNovo<\/h2>\n
\u2018No surprises\u2019 with Mach 7 results<\/h2>\n
Tight hospital budgets hurt Nanosonics<\/h2>\n
Healius continues to be \u2018chronic underperformer\u2019<\/h2>\n
The PNV, M7T, NAN & HLS share price today:<\/h2>\n\n
ScoPo\u2019s Powerplay \u2013 ImpediMed has clear US growth focus<\/h2>\n
The IPD share price today:<\/h2>\n\n