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News.com.au
16 hours ago
- Business
- News.com.au
Scott Power: ASX health stocks fall in ‘lacklustre week'
ASX heath sector falls 1.1% over past five days The US FDA approves CSL's Andembry to prevent attacks of hereditary angioedema Clever Culture systems records its second consecutive quarter of positive cashflow operations Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his 'Powerplay' stock pick. The ASX healthcare sector has had what Morgans' senior healthcare analyst Scott Power described as a "lacklustre week". At lunchtime on Friday, the S&P/ASX 200 Health Care index (ASX:XHJ) was down 1.1% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) fell 0.55% for the same period. Markets have been influenced by global economic and geopolitical concerns, particularly escalating tensions between Iran and Israel. And it seems US President Donald Trump has not backed down from tariffs on pharmaceutical imports. A United States Department of Commerce investigation is underway under Section 232 of the Trade Expansion Act of 1962 – a provision that allows the president to restrict imports if they are deemed a threat to national security. Returning from the G7 Summit in Canada Trump reportedly told media on Air Force One tariffs on the sector were coming. "We're going to be doing pharmaceuticals very soon," he said. "That's going to bring all the companies back into America... at least partially back in." Power said Trump's latest comments were adding further jitters to the sector. "Until we get clarity there's going to be volatility," he said. Power's Powerplay – CSL gets FDA approval for Andembry The ASX's largest healthcare stock CSL (ASX:CSL) has notched a milestone with the FDA approving its Andembry (garadacimab) to prevent attacks of hereditary angioedema (HAE). Affecting about one in 50,000 people CSL said HAE was the first and only treatment targeting factor XIIa for prophylactic use to provide sustained protection from attacks of HAE in adult and pediatric patients aged 12 years and older. The approval was based on a pivotal phase III (VANGUARD) trial and ongoing open-label extension study, showing Andembry reduced the median number of HAE attacks by more than 99% (mean 89.2%), compared to placebo. Andembry is also the only treatment to offer once-monthly dosing from the start for all patients and is administered via an autoinjector. The drug is already available in Australia, the UK, EU, Japan, Switzerland and UAE. CSL said Andembry will be launched "immediately", with availability through third-party specialty pharmacy network before the end of June. In a note to clients, Morgans' healthcare analyst Derek Jellinek wrote that while Andembry's US approval had taken longer than expected, with application filing in December '24, it's good to see the drug greenlit before the end of '25 "despite the ongoing tumultuous environment" at the US Food and Drug Administration at the agency. "We view Andembry's unique MOA (ie upstream inhibition of key pathways leading to HAE attacks, so broader applicability), favourable safety profile and convenient dosing (every 4 weeks via subcutaneous injection) as key differentiators," Jellinek wrote. While Andembry is expected to impact Berinert sales – CSL's treatment for acute HAE attacks – Jellinek believes the effect should be modest. He wrote Berinert's revenue was forecast to remain steady in FY25 at US$242 million, accounting for less than 2% of CSL's total revenue. Sales are projected to ease slightly to US$230m in FY26 and US$225 million in FY27. However, this is more than compensated by anticipated growth in Andembry sales, which are expected to reach US$120m in FY26 and increase to US$220m in FY27. Morgans has an add rating on CSL and 12-month target price of $329.26. Clever Culture Systems delivers clever Q3 FY25 result Clever Culture Systems (ASX:CC5) has achieved its second consecutive quarter of positive cashflow operations with $500,000 net cash inflow in Q3 FY25 and is on track to achieve break-even or better for H2 FY25. During the quarter Clever Culture continued to execute on its commercialisation strategy for its APAS Independence instruments in the pharmaceutical market, building on success with big pharma companies Astra Zeneca and Bristol Myers Squibb (BMS). The instruments use artificial intelligence and machine learning software to automate the imaging, analysis and interpretation of microbiology culture plates. Since launching the product in March 2024, Clever Culture said it had completed sales and received orders from pharmaceutical customers for 13 APAS instruments, representing ~$6 million in revenue with a pipeline of 40 qualified opportunities. Clever Culture finished Q3 FY25 with a cash position of $2.2m. "Other top 10 pharmaceutical companies are expected to engage with CC5 following the AstraZeneca and Bristol Myers Squibb success," Power said. Emvision awarded $5 million government grant EMVision Medical Devices (ASX:EMV) has been awarded a $5 million federal government grant to further development of its First Responder portable brain scanner. The funds are by way of an Australian government Industry Growth Program (IGP) Commercialisation and Growth Grant. First Responder is EMVision's second product and distinguishes between bleed and clot strokes at the scene and is designed to be used by ambulances and by paramedics. The device should shorten diagnosis time, a crucial element in the patient getting the right treatment. EMVision's first commercial device – the emu bedside brain scanner – is also designed to rapidly diagnose stroke at the point-of-care with a pivotal trial underway to supports US Food and Drug Administration (FDA) de novo (new device) clearance. Audeara hits record, Micro-X gets milestone payment boost In other news of the week, specialist in listening solutions for people with hearing challenges Audeara (ASX:AUA) has delivered record revenue exceeding $3.64 million for the 11 months to end of May FY25. Audeara reported revenue for the 11-month period was up 14% on FY24 total revenue and 25% on FY23, which the company said signalled underlying strength of its ongoing operations. The company expects additional growth to materialise in coming weeks based on strong June 2025 trading. And leader in cold cathode x-ray technology for health and security markets Micro-X (ASX:MX1) has received $2.3 million in milestone payments for two projects. MicroX achieved milestone three under its development agreement with US Advanced Research Projects Agency for Health (ARPA-H) and Department of Homeland Security (DHS) for a full body CT scanner, delivering $1.4 million. The company also achieved milestone two under a strategic partnership deal with Billion Prima for a baggage and parcel scanning unit due for completion in 2025, delivering $900,000. "We are pleased to continue to deliver strong progress on these key development contracts with ARPA-H, DHS, and Billion Prima respectively, which is a testament to our focus and timely delivery on key projects," Micro-X CEO Kingsley Hall said. "We are also well advanced with the final stages of our Head CT development as we prepare to enter human imaging trials." 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. At Stockhead, we tell it like it is. While Clever Culture Systems, Audeara and EMVision are Stockhead advertisers, the companies did not sponsor this article.
News.com.au
13-06-2025
- Business
- News.com.au
Scott Power: ASX stocks fall as investors hear mixed news from Cochlear
ASX heath sector falls 1.1% over past five days, while broader markets flat as Middle East tensions flare Cochlear downgrades full-year profit expectations but launches a world first Monash IVF head Michael Knaap resigns after another embryo mix-up Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his 'Powerplay' stock pick. It was a big week of news for the ASX healthcare sector with the bourse's fourth largest biotech Cochlear (ASX:COH) downgrading its FY25 net earnings ~4% to $390-400 million, compared with prior guidance in February of $410-430m, on "slower-than-expected sales growth over the last few months". Morgans' healthcare analyst Derek Jellinek wrote in a note to clients consensus for the hearing tech company sat at $411m with Morgans at $412m. While Cochlear continues to expect implant units to grow ~10% in FY25, growth will be weighted to emerging markets as developed market growth has been impacted by slower-than expected market growth and a "small loss" of market share in a few countries. Cochlear now expects services revenue to decline by low double-digits compared to prior expectations for a single-digit decline. "COH believes ongoing work to identify and connect with recipients who could benefit from the latest sound processing technology, combined with the introduction of the new off-the-ear Nucleus Kanso 3 sound processor, which is expected to launch in EU and APAC mid-Jun-25, should lift services revenue in FY26," Jellinek wrote. Following a disappointing H1 FY25 result, Morgans highlighted risks in the services segment (around 25% of sales), driven by slower-than-expected uptake of the Nucleus 8 sound processor, which was launched in FY23, and cost-of-living pressures delaying device replacements. But in some positive news, Cochlear also announced the launch of Nucleus Nexa, the world's first and only smart cochlear implant system, saying it was the "outcome of a 20 year investment in R&D". "A couple of key features include upgraded firmwear, the smallest sound processor and internal memory so that has actually countered the profit downgrade they've announced," Power said. Morgans has a hold rating on Cochlear with a 12-month target price of $285.55. Monash chief quits following another embryo mixup A new acting CEO has been appointed to steer the troubled Monash IVF Group (ASX:MVF), which fell ~27% on Tuesday after reporting another embryo implant bungle. Monash announced on Thursday CEO and managing director Michael Knaap had resigned with CFO and company secretary Malik Jainudeen appointed acting CEO. In the latest incident a patient's own embryo was mistakenly transferred to them, rather than their partner's embryo as specified in the treatment plan at Monash's Clayton laboratory in Melbourne on June 5. Monash said it was conducting an internal investigation to determine the cause of the incident and notified the relevant assisted reproductive technology (ART) regulators, the Victorian health regulator and its insurers. It comes after Monash revealed in April a woman had given birth to a baby that was not hers after receiving the wrong embryo at a Brisbane clinic. An independent review by Fiona McLeod AO SC regarding that incident is currently ongoing and has been extended, with the findings yet to be disclosed. Monash confirmed that its updated profit guidance, issued on May 20, remains unchanged, projecting an underlying NPAT of $27.5 million. Morgans maintains a speculative buy on Monash with a 12-month target price of $1. Israel strikes on Iran add to market uncertainty At 1.45pm on Friday the S&P/ASX 200 Health Care index was down 1.1% for the past five days, while the benchmark ASX 200 was flat for the same period. Markets took a tumble on Friday after reports of Israel strikes against Iran's nuclear sites with the Middle East bracing for retaliation. Power said the escalating conflict adds further complexity to global equity markets still very much being driven by macroeconomic factors and geopolitical tensions. "Markets are still very much broader macro driven including with US President Donald Trump's trade and regulatory policies," Power said. "Investors will now be closely monitoring the escalating tensions in the Middle East." Power's Powerplay: EBR completes raise, starts US rollout EBR Systems (ASX:EBR) is Power's stock of the week after announcing completion of a share purchase plan (SPP) and that the first US commercial patients have been implanted with its WiSE CRT System, the world's only wireless solution for pacing the left side of the heart. The procedures took place at St David's Medical Centre and the Cleveland Clinic, two of several leading US institutions participating in this pilot release of the WiSE CRT System, which was approved by the FDA in April. EBR said the cases represented two of the main indications for WiSE. "Clearly, the first commercial patients implanted with WiSE is a key milestone, as EBR has officially transitioned from a pure R&D focus to a commercial entity," Jellinek wrote in a note to clients. He said importantly, the implants were done in advance of reimbursement and the limited market release of WiSE, which remained on track for October, showcasing the unmet medical need in the initial US$3.6m total addressable market and belief in use of the device. "As this device is a novel treatment option requiring physician education, we view the LMR, targeting key heart failure centres in the US, as an appropriate strategic way to build familiarity and experience, prior to full market release," he wrote. "We see sales surpassing US$80m into CY29. "While certainly not a 'hockey stick', we believe it is a methodical, stage-gated rollout to build strong physician support and closely monitor clinical outcomes, helping to pique interest from any would-be suitor." The company also announced today it had finished its SPP raising $xxm and adding to a fully underwritten Institutional Placement raising $55.9m completed in May. Proceeds from the capital raise will be used to advance its US commercialisation strategy for WiSE. Morgans has a buy rating and 12-month target price of $2.86. Two positive studies for Avita Wounds management company Avita Medical (ASX:AVH) has announced the first clinical publication of its Cohealyx product, which is a collagen-based dermal matrix, in the Journal of Surgery. The publication includes two positive case reports on patients with complex hand wounds treated with Cohealyx. In both instances, the patients sustained full-thickness burns following syncopal episode (temporary loss of consciousness due to a drop in blood flow to the brain). The study showed significant acceleration of wound bed vascularisation and autograft readiness, achieving readiness within five to 10 days compared to the typical two to four weeks. "Clearly, a small sample size and this publication represents the first clinical validation of AVH's preclinical findings but it's a strong start and likely the first of many case-studies to come," Morgans' healthcare analyst Iain Wilkie wrote in a note to clients Avita also announced a new study of its flagship spray-on skin treatment Recell showed it reduced hospital stays by 36% compared to traditional skin grafts. Presented at the British Burn Association's annual meeting, the US-based study analysed outcomes for more than 6,300 patients treated with Recell between 2019 and 2024. All patients had burns covering less than 30% of their total body surface area. The findings showed Recell patients spent on average 6.2 fewer days in hospital, delivering an estimated $300m in healthcare savings over the five-year period. Wilkie wrote that the share price had continued to remain weak following series of missed guidance expectations and dwindling cash reserves. "The point with Avita is they've expanded their product range to treat more of the wound complex and what the market is concerned about is do they need to raise additional funds," Power said. "They've told the market they can see a pathway through to profitability or breakeven by the fourth quarter of this calendar year so as each quarter rolls on we will get more confident that they're able to achieve that." Morgans has a speculative buy rating on Avita and 12-month target price of $3.76. Imricor gets CE Mark for NorthStar Mapping System Imricor Medical Systems (ASX:IMR) has received CE mark (European) certification for its NorthStar Mapping system under the new, more stringent European Union Medical Device Regulations (MDR). NorthStar has been approved as a Class IIa medical device with the certification received ahead of schedule. Imricor is advancing technology for real-time interventional cardiac magnetic resonance (iCMR) ablations, enabling cardiac ablation procedures to be guided by live MRI imaging instead of traditional x-ray fluoroscopy. NorthStar is a key component of its product offering. The certifications follows on from recent European approvals received for its Advantage-MR EP Recorder/Stimulator (Advantage-MR), and its second generation Vision-MR Ablation Catheter. "Imricor will now phase out first generation products approved under the old EU regulations, replacing them with new MDR approved devices," Power said. "We expect sales momentum to steadily build over coming quarters." Power said next catalysts to watch for include additional sales orders in Europe and Middle East and US FDA approval for NorthStar. Imricor is also undertaking its Vision-MR Ablation of Atrial Flutter (VISABL-AFL) pivotal clinical trial to support FDA approval of its products, which it hopes to achieve in 2025. In Europe, where Imricor has already received regulatory approval for atrial flutter, the company has started a pivotal VISABL-VT clinical trial for its second indication, ventricular tachycardia (VT). Morgans has a speculative buy on Monash and 12-month $2.28 target price. 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.
News.com.au
23-05-2025
- Business
- News.com.au
Scott Power: ASX health stocks rise with capital raisings in full swing
ASX health stocks up 0.57% over past week, while the broader market is up 0.35% Wave of capital raisings as ASX-listed healthcare firms seek to strengthen their balance sheets Monash IVF's woes continue with company downgrading FY25 blaming softer market Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his 'Powerplay' stock pick. Power said there had been a plethora of capital raisings over the past couple of months as ASX healthcare companies look to replenish their cash reserves. In the latest capital raise announcements, EBR Systems (ASX:EBR) is boosting its balance sheet with firm commitments to raise $55.9 million through an institutional placement. EBR is also set to undertake a $6m share purchase plan to eligible shareholders. Together, the company will raise nearly $62m to progress commercialisation of its WiSE CRT system, the world's first and only wireless solution for pacing the left side of the heart. The raise follows US Food and Drug Administration (FDA) approval for WiSE in April. Oncology focused biotech Chimeric Therapeutics (ASX:CHM) has received firm commitments to raise $6.6m through a two-tranche placement to institutional, sophisticated and professional investors with cornerstone support from a US-based family office. Funding will focus on progressing CHM CDH17, a pioneering third-generation CAR T-cell therapy that targets the CDH17 protein as well as advancing its CORE-NK clinical trials. Developer of a new class of synthetic anti-infectives Recce Pharmaceuticals (ASX:RCE) has raised $8.4m raised across an entitlement offer and placement to support phase III registrational trials, which it said was the catalyst for revenue in CY26. And Island Pharmaceuticals (ASX:ILA) has raised $3.6m through a placement, including $100,000 subscribed for by directors subject to shareholder approval. Island said funding would provide flexibility to advance its lead asset ISLA-101 pending results from the phase 2a/b PROTECT trial in dengue fever. This includes potential progression to a larger phase II trial in key international regions where the mosquito-borne infection is highly prevalent. Mayne Pharma takeover wobbles as ASX healthcare rises Mayne Pharma (ASX:MYX) has sold off this week amid concerns its takeover deal could collapse. US-based Cosette Pharmaceuticals initiated a review of its ~$672m acquisition, citing a "material adverse change" in the Australian firm's business and finances. Mayne shareholders were due to vote on the court-approved scheme of arrangement on June 18. "I am presuming the vote will go ahead but there are a few issues to contend with," Power said. Meanwhile, the ASX healthcare sector is up for the week as the Reserve Bank of Australia (RBA) cut the cash rate by by 25bps to 3.85%. At 12.45pm (AEST) on Friday the S&P/ASX 200 Health Care index was up 0.57%% for the past three days, while the benchmark ASX 200 rose 0.35% for the same period. "It's been a more positive week and the lower interest rates does help move money back into the growth stocks and are better for equity markets generally," Power said. Monash downgrades FY25 profit guidance After confirming in April it had mistakenly implanted a woman with the wrong embryo resulting in the birth of a child, the woes for Monash IVF Group (ASX:MVF) continue with the company downgrading its FY25 guidance. Underlying NPAT is now expected to be $27.5 million from previous guidance of $30-31m. The downgrade was attributed to a softer market and operating conditions across all geographic markets in March, that worsened in April. Monash said May improved but not enough to offset weakness in the previous two months. "We suspect a number of factors were at play in April, including lower consumer sentiment (macro factors), impact of timing of Easter/ Anzac Day holidays and the lead-up to the election," Morgans' lead analyst on Monash Emily Porter wrote in a note to clients. "We also suspect Victoria continues to be the troublesome state, driven by weaker industry cycles (down ~10% taking a 4-month average to March) and we suspect possible market share loss in the region." Monash said it continued to monitor movements in new patient registrations, returning IVF patients, transfers to alternative providers (across Queensland and Australia) noting that performance since news of the Brisbane incident broke in April had been consistent with the months leading up to this date. "We see this as positive but think these will be important metrics to track in the coming 3-6 months," Porter wrote. "Interestingly, MVF did not provide an update on the findings of the independent report by Fiona McLeod AO SC into the incident. "Without clarity on the outcome of this review, we continue to see this as a likely overhang on the stock. Morgans have downgraded its NPAT forecasts for FY25 by 11% from $30.6m to $27.5m in line with updated guidance and have also lowered its NPAT forecasts for FY26/27 by 15%/16% respectively. "We have reduced our domestic cycle volumes driven by lower industry cycles and some loss of market share in FY26/27," Porter wrote. Morgans has upgraded its rating to a speculative buy but based on downward revisions to earnings reduced its 12-month target price from $1.34 to $1. Power's Powerplay: EMVision advances AI-driven stroke diagnostics Neurodiagnostics medical devices company EMvision Medical Devices (ASX:EMV) is Power's stock of the week after announcing it had advanced its AI-driven stroke diagnostics. Promising new data showing enhanced performance of its 'ischemia or not' algorithm was this week presented at the 11th European Stroke Organisation Conference (ESOC 2025) in Helsinki, Finland. EMVision said the emu RF-based model missed only one case in a limited sensitivity analysis of 20 ischemic test cases, compared to nine missed using first-line Non-Contrast Computed Tomography (NCCT). "They're basically adding AI to improve the learning of their emu product," Power said. EMVision have improved the sensitivity – the ability of the device to diagnose a disease – and the specificity, which is the ability to rule out false positives. "Previously the sensitivity was 85% and specificity 78%," Power said. "In the updated dataset the algorithm's performance has improved to 95% sensitivity and 80% specificity." EMVision said the recently started pivotal trial of its emu bedside brain scanner for diagnosing stroke to support US Food and Drug Administration (FDA) de novo (new device) clearance had been designed to also validate algorithm performance. Clarity kicks off phase III trial for prostate cancer test Clarity Pharmaceuticals (ASX:CU6) has kicked off its second registrational phase III trial AMPLIFY for their diagnostic test for prostate cancer. AMPLIFY is a study of 64Cu-SAR-bisPSMA Positron Emission Tomography, a phase III trial of participants with biochemical recurrence (BCR) of prostate cancer. The trial aims to investigate the ability of 64Cu-SAR-bisPSMA PET/computed tomography (CT) to detect recurrence of prostate cancer and will enrol ~220 participants at multiple clinical sites across the US and Australia. As a pivotal trial, the final results are intended to provide sufficient evidence to support an application to the US Food and Drug Administration (FDA) for approval of 64Cu-SAR-bisPSMA as a new diagnostic imaging agent in BCR of prostate cancer. "It's another good news story for the sector this week," Power said. Oral OSA drug not a 'major disruptor' to ResMed's CPAP tech ResMed (ASX:RMD) saw its share price retreat on Tuesday but recover the next day after privately held US pharma company Apnimed released top-line results from a phase III trial (SynAIRgy) evaluating lead candidate AD109 targeting obstructive sleep apnoea (OSA). AD109 is an oral drug that targets neurological pathways that contribute to airway collapse during sleep, in adults living with mild, moderate and severe OSA. The trial met its primary endpoint, which was mean change from baseline in the apnoea-hypopnea index (AHI) at 26 weeks. AD109 also demonstrated improvements in other secondary and exploratory endpoints. In a note to clients Morgans' healthcare analyst Derek Jellinek wrote that he was not too concerned about the effects of the trial on leader in sleep-related respiratory disorders ResMed. "While the study demonstrates AD109 is having an impact on OSA, consistent with prior trials, only top-line results were reported, so there is inadequate detail to determine extent of improvement on a per patient basis," he wrote. "It remains unknown in which patients the drug was most effective and best tolerated and how long the effect lasts." Although AD109 offers a non-invasive, oral alternative to OSA and continues to show promise in trials, Jellinek wrote Morgans have never viewed the drug as a "major disruptor to gold standard CPAP" (continuous positive airway pressure) therapy, especially for patients with moderate to severe cases. He said it may more likely be an option for those who cannot tolerate CPAP or with mild to moderate OSA, so unlikely to be a substitute for CPAP entirely. "We continue to view RMD in a strong competitive position, with technological offerings driving greater adoption of its products, along with its US tariff exemption status and added benefits from favourable trends in wearables and weight loss drugs," he wrote. Morgans has an add rating on Resmed and a 12-month target price of $44.07. The views, information, or opinions expressed in the interview in th is 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. At Stockhead, we tell it like it is. While EBR Systems, Island Pharmaceuticals, Recce Pharmaceuticals and EMVision Medical Devices are Stockhead advertisers, the companies did not sponsor this article.
Business Insider
12-05-2025
- Business
- Business Insider
Polynovo (CALZF) Gets a Buy from Morgans
Morgans analyst Scott Power maintained a Buy rating on Polynovo (CALZF – Research Report) today and set a price target of A$1.69. The company's shares closed last Thursday at $0.94. Protect Your Portfolio Against Market Uncertainty Discover companies with rock-solid fundamentals in TipRanks' Smart Value Newsletter. Receive undervalued stocks, resilient to market uncertainty, delivered straight to your inbox. According to TipRanks, Power is ranked #8478 out of 9472 analysts. Polynovo has an analyst consensus of Moderate Buy, with a price target consensus of $1.47. Based on Polynovo 's latest earnings release for the quarter ending December 31, the company reported a quarterly revenue of $59.54 million and a net profit of $3.34 million. In comparison, last year the company earned a revenue of $47.15 million and had a net profit of $2.69 million
News.com.au
09-05-2025
- Business
- News.com.au
Scott Power: ASX health stocks fall but quarterly reporting was ‘overall positive'
ASX heath sector falls 1.3%, trailing ASX 200 up 1.1% as macro picture remains uncertain but 'little bit better' Soft-tissue repair company Aroa Biosurgery reconfirms FY25 reported revenue guidance of NZ$81-84 million Medical imaging softer solutions Mach7 Technologies delivers 'mixed' quarterly result ahead of leadership change Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 27 years, gives his take on the ASX healthcare sector for the week and his 'Powerplay' stock pick. At 3pm on Friday, the S&P/ASX 200 Health Care index was down 1.4% for the past five days, while the benchmark ASX 200 was up 1.1% for the same period as Power said "the macro picture remains still quite uncertain but a little bit better". "We've got the federal election out of the way, which provides some certainty now," he said. "The issues remain the same, growth is slowing, consumers are tightening their belts a bit with cost of living still at the forefront of a lot of people's minds." Power said focus will now be on the Reserve Bank of Australia when it meets on May 20 to see if Australia's central bank cuts the cash rate from 4.10%. "If they lower rates, it will reflect progress in controlling inflation but a slowing economy," he said. "They'll want to bring interest rates down to keep growth at a sustainable level." Quarterlies overall positive as Aroa reconfirms FY25 guidance Power said the latest quarterly results season has been "overall positive", with most of the companies under Morgans coverage "hitting expectations". New-Zealand-based soft-tissue repair company Aroa Biosurgery (ASX:ARX) posted its Q4 FY25 results, reconfirming FY25 guidance for reported revenue in the range of NZ$81-84 million – Morgans forecast NZ$81.1m – and normalised EBITDA of NZ$2-4m with Morgans forecast is NZ$2.8m. "Probably the most important one was Aroa," Power said. "Given they had a couple of downgrades during the year, it was important to see them reconfirm guidance for FY25." Aroa reported cash receipts for Q4 FY25 were NZ$20.1m, up from NZ$18m on the previous corresponding period (pcp). Myriad sales were up 32% on pcp, and Ovtiex sales, via Aroa's US partner TelaBio, were up 17% on pcp. During the quarter Myriad Matrix and Myriad Morcells were assigned permanent unique Level II Healthcare Common Procedure Coding System (HCPCS) codes by the Centers for Medicare & Medicaid Services (CMS) in the US. The body of peer review clinical evidence continues to grow with more than 100 studies published to validate Aroa's extracellular matrix (ECM) platform which helps improve clinician adoption. "Management also believes the 10% US tariff on imported goods from New Zealand would likely be offset to some extent by its other commercial arrangements which makes sense to us," Power said. He said compared with its ASX peers Aroa was trading at attractive levels. "Also, recent international merger and acquisition activity in the wound care space supports a higher valuation for ARX," he noted. "We expect ARX will grow its revenue on average by 20%+ pa for the next three years, driven mainly by its Myriad product." Morgans has revised its recommendation to speculative buy for Aroa and maintains a 12-month target price of 93 cents. With a March financial year-end Aroa will report its full year results on May 27. Mach7 delivers mixed result ahead of leadership change Morgans healthcare analyst Iain Wilkie has described the Q3 FY25 results of specialist in medical imaging software solutions Mach7 Technologies (ASX:M7T) as "mixed" with a small net decline in contracted annual recurring revenue (CARR) offset by stronger positive operating cashflow. "Performance YTD has been fair but relatively subdued following delays to the Veterans Affairs (VA) contract and only one new material contract," Wilkie wrote in a note to clients. "We continue to view new contract growth as more a function of timing (long-lead time) versus demand. Wilkie wrote Mach7's baseline business continues to perform well, however, has been poised for several years to break into profitability which "frustratingly hasn't quite materialised". However, Wilkie believes Mach7 remains compelling given its low valuation, strong industry tailwinds, and highly rated product. "A modicum of success we view as likely to yield a material shift in sentiment," Wilkie wrote. Mach7 started an on-market share buy-back in March purchasing $1.2m worth of stock to date. Former head of NZ-based breast imaging software company Volpara Technologies Teri Thomas has been appointed managing director and CEO, starting on July 1. Volpara was last year was taken over by South Korea's Lunit for ~$200m. "Again, Mach7 is one of those companies on the verge of building a sustainable, profitable business, which the market is looking for and their contract pipeline has been growing but perhaps not at the pace we would have liked but sustainable profit is in sight," Power said. Morgans maintains an add rating and 12-month target price of $1.37 on Mach7. Power's Powerplay: EBR applies for key reimbursement EBR Systems (ASX:EBR) has applied to the US Centers for Medicare & Medicaid Services (CMS) for the Transitional Pass-Through (TPT) reimbursement scheme for the WISE CRT System for outpatients. The application follows US Food & Drug Administration (FDA) approval of WiSE, the world's first and only wireless solution for pacing the left side of the heart. Morgans' healthcare analyst Derek Jellinek wrote in a note to clients that the TPT program was designed to provide additional reimbursement for certain new or innovative medical devices, drugs, and biologicals that do not have an established payment rate. He said the aim was to encourage the adoption of innovative technologies by ensuring that hospitals are adequately compensated during the initial period (from 2-3 years) when these products are introduced into the market. CMS has already proposed approval of the WiSE for new technology add-on payment (NTAP) reimbursement to treat inpatients beginning October 1, 2025. TPT reimbursement for WiSE is expected to be effective from the same date. "We believe submission for TPT reimbursement is yet another key milestone," Jellinek wrote. "Not only does it underpin a critical value proposition to support adoption of WiSE for outpatients, but when combined with the proposed approval of NTAP reimbursement to treat inpatients, should help to broaden patient access while lowering barriers to accelerate market acceptance." Morgans has a speculative buy on EBR and 12-month target price of $2.86. "Following FDA approval the EBR share price has actually fallen, with a fair amount of expectation built in and we were a little surprised at how deep the retracement has been," Power said. "Having said that, EBR are in a good position for a targeted launch of WiSE and will be very specific in getting the products in the right hands and ensuring the doctors are properly trained and early sales are successful." Early days in strategic realignment for MicroX Adelaide-based cold cathode X-ray machine developer Micro-X (ASX:MX1) raised $4m during Q3 FY25 and a further $2.4m from strategic partner Billion Prima, a Malaysian security technology company. Additionally, Micro-X entered a development agreement with Billion Prima for $3.2m to commercialise a baggage and parcel scanning unit over the next 12 months. The agreement together with cash receipts from customers and other project work resulted in a cash balance of $5.1m as of March 31, 2025. Micro-X has realigned its business to focus on medical imaging, deprioritising security and defence. "The realignment makes sense and the business is funded to execute on the strategy," Power said. "It's early days in the realignment and customer receipts from imaging are still modest, although a major US hospital is evaluating the Rover+ mobile x-ray unit which could result in material sales over time. "The share price has come under a lot of pressure like so many of these microcaps over the last 24 months and it's important they start delivering in terms of getting some big sales orders for their mobile x-ray device and make progress on their contracted projects, which they will see money for when hitting milestones." Morgans maintain a speculative buy recommendation and 12-month target price of 17 cents for Micro-X. Morgans upgrades PolyNovo after Macquarie conference Morgans upgraded wound-care company PolyNovo (ASX:PNV) from a hold to a speculative buy and its 12-month target price from $1.37 to $1.69, after the company's presentation at this week's Macquarie Australia Conference. PolyNovo highlighted that strong growth was returning with consensus having revenue at ~20% for next three years. "The company highlighted a record month in March with total sales of $11.9 million , up 71% on pcp and with sales of $84.4m, up 31.1% for nine months," Power said. Pharmaceutical distributor Sigma Healthcare (ASX:SIG), which completed its merger with discount pharmacy chain Chemist Warehouse in February, also reported strong growth at the conference and in an ASX trading update. Sigma reported normalised EBIT growth for the group of ~36% for nine months YTD was consistent with Chemist Warehouse Group's H1 FY25 growth. "The Chemist Warehouse and Sigma merger is all coming together and they have provided enough information that the business is tracking well," Power said. Morgans has an add rating on Sigma with a 12-month share price of $3.12. 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. At Stockhead, we tell it like it is. While EBR Systems is a Stockhead advertiser, the company did not sponsor this article.
