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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.
Themes of the week
On Friday afternoon, the ASX200 was on track to finish the week up 0.65 per cent for its fifth straight week of gains – although the ASX healthcare index (ASX:XHJ) was headed for its second straight week of losses, tracking down 2.26 per cent.
“Another pretty positive week,” says Scott Power. “It certainly seems like there’s a Christmas rally coming. I think Santa Claus is going to be pretty kind to most market participants.”
The holidays arrived early for Telix Pharmaceuticals (ASX:TLX) investors, whose shares had gained 21.5 per cent for the week (to $3.96 around 3pm on Friday) following a spate of positive announcements from the Melbourne-based nuclear medicine company including the acquisition of a Swiss company and the decision to proceed with a phase 3 trial for its prostate cancer therapy product.
Since making its ASX debut in late 2017, Telix shares are up more than sixfold from their IPO price of 65c, giving the company a market capitalisation of $1 billion and making it the third-biggest biotech on the bourse (behind Mesoblast (ASX:MSB) and CSL (ASX:CSL)).
“It’s been a ripper,” Power said.
And speaking of Mesoblast – it was up five per cent for the week, to $4.30, after its lead drug candidate, remestemcel-L, was granted fast track status in the United States to treat COVID-19.
“That’s good news for them,” Power said.
Rhythm Biosciences (ASX:RHY) also had investors smiling this week as it appointed a French company as the global manufacturer of its ColoSTAT blood tests the company hopes will replace faecal tests to detect bowel cancer.
RHY shares were up 12 per cent yesterday to 83.5c, having gained 59 per cent for the week and a whopping 634 per cent on the year.
“They’re on an absolute tear,” said Power. “This is very close to commercialisation, so that’s a positive.”
Fellow cannabis company Medlab Clinical (ASX:MDC) was up 23.8 per cent for the week, to 26c, after reporting progress in its observational study of using a cannabinoid formulation to treat cancer-induced bone pain. There’s been 668 participants enrolled in the study, 33.5 per cent of the total.
Mach 7 (ASX:M7T) was up 5.3 per cent to $1.285 after the enterprise imaging company gave investors an update at its annual general meeting.
“They were upbeat about the pipeline of tenders they have in front of them,” Power said.
“There’s some really good catalysts for them.”
There was also a good catalyst for Impedimed (ASX:IPD), which Power has been talking up in this column since mid-October – when IPD shares were trading around 8c apiece.
The Brisbane-based medical device maker finally released a metadata analysis of using its bioimpedance spectroscopy products to detect lymphoedema, or limb swelling, following breast cancer. The devices are 81 per cent more accurate than using tape measurements, the analysis found.
“That’s a very significant milestone for them,” Power said. The data could be used to convince insurance companies to pay for the company’s SOZO device.
IPD shares reached a high of 18.5c on Monday, when the news was announced, before falling on Tuesday and Thursday. For the week they closed down 6.3 per cent to 15c – but still up nearly 90 per cent in the seven weeks since they were first mentioned here.
Morgans’ price target on the company is 20c.
Moving on from the ASX, the health care headline of the week was of course the United Kingdom authorising the Pfizer/BioNTech COVID-19 vaccine for use.
“We would expect that it would be very quickly approved in the US and EU,” Power said. Covid vaccines are about a $US39 billion ($52 billion) market opportunity, Morgans estimates.
As mentioned, Power is bullish on Mach7. Morgans has a price target of $1.49 on M7T shares, which closed at $1.30 on Friday.
Power is also watching Control Bionics, which is listing on Monday under stock code CBL in a float underwritten by Morgans.
The medtech company makes devices aimed at people with a high degree of physical incapacity, such as those with spinal cord injuries or ALS (amyotrophic lateral sclerosis).
“It’s really a technology that enables people with very limited movement communicate,” Power said.
Overall, Power said he foresees a Christmas rally that extends into next year.
“We’ve got through the US election, we’ve got vaccines coming through, and we’ve got plenty of government stimulus,” he said.