Scott Power: S&P/ASX 200 Health Care Index falls but which stocks are up on positive news?

Morgans healthcare analyst Scott Power notes that while the S&P/ASX 200 Health Care index is down 1.4% over the past five days, some firms have soared on positive news.

Several ASX healthcare stocks have had positive news. Pic:Getty Images

• ASX health stocks fall 1.3% in past five days, while broader market is marginally up 0.7% 

• Neuren soars on sale of priority review voucher and $50 million share buyback

• Neurizon releases positive preclinical results on lead drug candidate NUZ-001 

Healthcare and life sciences expert Scott Power, who has been a senior analyst with Morgans Financial for 26 years, gives his take on the ASX health care sector for the week and his ‘Powerplay’ stock pick. 

Power reckons the focus for Australian and global markets has still been the US elections and re-election of President Donald Trump along with the US Federal Reserve's next rate move.

At 3pm (AEDT) on Friday the S&P/ASX 200 Health Care index (ASX:XHJ) was down 1.3% for the past five days, while the benchmark S&P/ASX 200 (ASX:XJO) was marginally up 0.7% for the same period.

"The market is just digesting everything with what is happening in the US and the Fed has its next interest rate decision on December 18 – and the expectation is they'll cut interest rates again, which will be a helpful run into Christmas," Power said.

"People are placing bets and you can see there's been a couple of big share price moves."

He said one big share price move has been from Neuren Pharmaceuticals (ASX:NEU) following recent updates. The company is up ~16% in the past five days and 28% in the past month.

Investors were excited to hear NEU's Nasdaq-listed, US partner Acadia was selling a priority review voucher (PRV) for US$150m, for which it will receive one third (US$50m).

The PRV was attached to the US FDA approval of trofinetide (sold under the brand Daybue in the US to treat Rett Syndrome). The Rare Pediatric Disease PRV program incentivises treatments for serious rare childhood diseases, allowing PRVs to be used for faster reviews or sold to other companies.

Acadia also reported record net sales of Daybue amounting to US$91 for Q3 CY24 and translating to an additional A$13.2m in income for NEU, with nine-month YTD royalties now sitting at A$37.5m.

The result showed net sales for Daybue breached the US$250m level for the year, which will trigger an additional US$50m (~A$75m) milestone payment for NEU.

With its September cash balance sitting at $210m and several windfalls set to boost it further, NEU also announced a $50m on-market share buyback.

"The consensus price target is still over $26 so there's still some good upside and Neuren feels like it wants to keep moving higher," Power said.

Week of positive news for Neurizon

Neurizon Therapeutics (ASX:NUZ) (formerly PharmAust) had positive news on several fronts during the week including results of preclinical studies showing the potential of its lead drug candidate NUZ-001 to be a transformative treatment for both ALS and other neurodegenerative diseases.

Results showed that NUZ-001 worked in a unique way to stop the aggregation (clumping) of the TAR DNA-binding protein 43 TDP-43, a protein that builds up in ALS and contributes to disease progression.

Furthermore, the studies showed NUZ-001 also improved the electrophysiological function of TPD-43 mutated M337V motor neurons.  Managing director and CEO Dr Michael Thurn presented the positive preclinical data on NUZ-001 a the 7th Annual ALS Research Symposium.

In a note to clients Morgans healthcare research analyst Iain Wilkie wrote the positive preclinical results supported the efficacy seen in the phase I MEND study and bolstered confidence in moving forward with clinical trials. NUZ plans to start the next phase of clinical trials in early 2025.

"These are important findings which not only highlight the potential of NUZ-001 for ALS but also open up possibilities for its application in other neurodegenerative diseases characterised by TDP-43 aggregation," he wrote.

NUZ also announced it had received a positive opinion from the European Medicines Agency in relation to its application for orphan medicinal product designation (OMPD) for its lead drug candidate NUZ-001 to treat amyotrophic lateral sclerosis (ALS).

Wilkie wrote the OMPD – pending official approval from the European Commission in December – would provide NUZ with significant incentives, including reduced regulatory fees, free protocol assistance, and most importantly, 10 years of market exclusivity in the EU.

For Wilkie the immediate-term catalyst remains NUZ’s entry into the prestigious HEALEY ALS Platform Trial in the US.

"We view NUZ as a strong proposition in the rare disease space with significant near-term catalysts in a condensed timeframe and precedent for an accelerated approval pathway," he wrote.

Morgans has a 'speculative buy' rating and 12-month target price of 42 cents on NUZ.

Power's Powerplay – Aroa to report H2 FY25 results

Completing the trifecta of ASX wound-care companies as his top picks for the past couple of weeks – including Avita Medical (ASX:AVH) and PolyNovo (ASX:PNV) – Power's latest Powerplay is Aroa Biosurgery (ASX:ARX).

ARX is due to report its H1 FY25 results on November 26. New Zealand-headquartered ARX posted a solid Q2 FY25 cashflow result, highlighted by receipts from customers up 35% on PCP and reduction in cash burn as it looks to be operating cash flow positive in H2 FY25.

"That share price has got a little bit of a lift under it," Power said.

"We're expecting they'll reconfirm their full-year guidance of between NZ$80 to $87 million with revenue growth of 25% and a small EBITDA for the full year."

Morgans has an add rating and 12-month target price of $1.05 on ARX.

MedAdvisor up 16% on review to maximise shareholder value

MedAdvisor (ASX:MDR) rose 16% on Thursday after announcing it had initiated a formal review to evaluate strategic options to maximise shareholder value.

"The board believes that its current market valuation doesn’t reflect the full value of its Australian and US businesses," MDR said in an announcement.

MDR said the review would consider various initiatives but there was no guarantee of any changes. The medtech intends to continue with its current plans, including the Transformation 360° project, during the review, which is expected to take up to three months.

MDR does not plan to make acquisitions or raise capital during this period.

MDR offers pharmacy-driven patient engagement solutions, helping over 33,500 US pharmacies improve medication adherence and safety. In Australia, over 95% of pharmacies use MDR software to enhance workflow and connect with 3.7 million patients.

"It will be interesting to see what transpires over the next couple of months while they have independent people look at the potential for the different parts of their business," Power said.

Fraility raises risk of dementia

An international study led by a University of Queensland researcher and published in JAMA Neurology reveals that frailty significantly raises the risk of dementia, but early intervention may be crucial for prevention.

Dr David Ward from UQ’s Centre for Health Services Research tracked the data of nearly 30,000 participants across four long-term studies in the UK and US, enabling researchers to identify shifts in health and function up to 20 years before a dementia diagnosis.

"The accumulation of age-related conditions is indicative of increasing frailty, which we found accelerates up to nine years prior to a dementia diagnosis," Ward said.

"Our findings show with every four to five additional health problems there is on average a 40% higher risk of developing dementia, while for people who are fitter the risk is lower.

Frailty is considered a health state related to ageing where multiple organ systems lose their resilience, making individuals more likely to experience adverse health outcomes like falls, disability and hospitalisation.

Study co-author, Professor David Llewellyn from the University of Exeter Medical School, said the research was one of the most comprehensive examinations of the link between frailty and dementia.

"This study is crucial because it identifies frailty as a significant predictor of dementia risk, offering a potential pathway for early intervention to improve health outcomes," Llewellyn said.

At Stockhead, we tell it like it is. While Aroa Biosurgery and Neurizon are Stockhead advertisers, the companies did not sponsor this article.

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.

Originally published as Scott Power: S&P/ASX 200 Health Care Index falls but which stocks are up on positive news?