Eddy Sunarto
On May 7, 2021 ScoPo’s Powerplays: Health sector trades sideways but M&A plays coloured the week 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
Healthcare finished the week down 0.26 per cent, compared to the broader market which rose just shy of 1 per cent.
In a historic first, Australians living with a rare form of epilepsy will have access to a medicinal cannabis drug, which is being listed on Australia’s Pharmaceutical Benefits Scheme (PBS) for the first time.
Epidyolex, a cannabidiol-based new treatment used in combination with at least two other anti-epileptic medicines on the PBS, will be available for Australians living with Dravet syndrome from 1 May.
Epidyolex is currently only the second medicinal cannabis drug registered for supply in Australia, and the first one to be subsidised by the Australian Government on the PBS.
“There’s been a lot of interest in medicinal cannabis, and this is the first product to come onto the market, and this product is owned by GW Pharma, so it’s a big international company,” Power explained.
But the theme for the week on the ASX has been M&A and capital raising.
Respiri (ASX:RSH) has made an unsolicited off-market play for fellow ASX-lister Adherium (ASX:ADR). The bid is for 100 per cent of all Adherium shares at 2.25c each, a 50 per cent premium to Adherium’s closing share price of 1.5c on 28 April.
Residential aged-care Japara Healthcare (ASX:JHC) received a non-binding 100 per cent takeover proposal from Little Company of Mary Health Care Ltd (Calvary), an Australian not-for-profit healthcare and aged care provider. Indicative offer price is at $1.04 a share, with the Japara shares now trading at 99c.
“We expect more consolidation in the aged-care space. And the key to watch for is the upcoming budget, where there might be additional funding for the sector,” Power said.
Power also pointed to a couple of capital raises that were announced during the week.
Race Oncology (ASX:RAC) has issued a new prospectus, and has come out of a trading halt. The company has secured funding of $5.4 million through a placement of 1.8 million shares. It intends to use the new capital to help develop the Bisantrene cancer drug.
Amplia (ASX:ATX) was another company to raise capital during the week, after completing a $3.8m institutional placement. The funds will be used for the company’s planned Phase 2 clinical trials in pancreatic cancer and pulmonary fibrosis, and provide it with working capital.
Announcements you might have missed
There were a few notable and significant announcements made during the week.
The company says that an article written on the Journal of the American College of Cardiology Abstract Supplement demonstrates the potential value of its SOZO HF-Dex product.
The conclusion from the abstract states that HF-Dex measurements near the time of hospital discharge may help identify individuals at higher risk for readmission, and may benefit from closer follow-up to reduce the likelihood of readmission.
The imuno-oncology company reported that that the Phase 1b clinical trial data for its B cell peptide cancer immunotherapy HER-Vaxx has been published in the prestigious American Association for Cancer Research journal Clinical Cancer Research.
It has been shown in pre-clinical studies and in Phase 1b and 2 studies to stimulate a potent polyclonal antibody response to HER-2/neu, a well-known and validated cancer target.
The cold cathode x-ray technology specialist is now debt-free, after repaying the $3 million debt facility to the South Australian Government Financing Authority.
The facility has been provided since 2016, with an interest rate of 7.75% or approximately $0.23 million per annum.
After repayment of the SAFA Facility, Micro-X will no longer have any corporate debt and will have cash of $34.0 million
“Micro-X is a company that we like. They’re well placed to grow the business across a couple of key platforms which include links into hospitals,” Power said.
In big caps announcements for the week, Resmed (ASX:RMD) revenue slipped by 3 per cent in the third quarter to $768.8 million, for a 3 per cent increase in net profit.
The company says the decrease reflects the ongoing recovery of core patient flow across its business, after revenue spiked by $35m in the prior year’s corresponding quarter as a result of Covid-19.
Ansell (ASX:ANN) was another big cap to make an announcement this week. The protective devices company now expects full year EPS to be in the range of US192¢ – US202¢ (up from previous guidance of US160¢ – US170¢ provided earlier).
“We think Ansell is very well priced. We’ve got a price target of $46, and their balance sheet is conservative, and provide a yield of 2.7%.”
Mach 7 is provides enterprise image management systems that allow healthcare enterprises to identify, connect, and share diagnostic image and patient care intelligence.
Power has a target price of $1.68, and he expects a strong second half. The company has recently won a five-year subscription (SaaS) deal with UVM for the eUnity viewer, with year-to-date FY21 contract sales values now $25m, a 92 per cent growth on FY20.
IPD Price at posting:
12.0¢ Sentiment: Buy Disclosure: Held
(20min delay)