Buddying up: How small ASX healthcare stocks are teaming with giants for growth

Smaller ASX healthcare companies are partnering with larger companies to spearhead growth prospects.

ASX biotechs are partnering with healthcare giants to deliver growth plans. Pic: Getty Images

• Smaller ASX healthcare companies are buddying up with larger companies to spearhead growth

• Lumos Diagnostics partners with industry leaders to deliver point-of-care tests

• Wellnex has a global licencing agreement with one of the world's largest consumer healthcare companies Haleon, which owns Panadol

For healthcare companies, adopting a business-to-business (B2B) model and working with larger companies can help spearhead growth.

Whether it's deals for contract manufacturing, licencing, R&D or commercialisation, smaller companies can benefit from partnering with a big player.

Morgans senior healthcare analyst Scott Power told Stockhead there were several advantages for smaller companies partnering with larger ones looking to scale.

"It can be a logical, sensible step for smaller companies looking to grow," Power said.

"The larger companies have the infrastructure in place to build scale and volume."

Several smaller ASX healthcare companies are targeting business or partnerships with larger players, in turn boosting their revenue and growth prospects.

Microba inks deal with Sonic Healthcare

Microba Life Sciences (ASX:MAP), which has technology for measuring the gut microbiome, has a strategic partnership deal with pathology and radiology giant Sonic Healthcare (ASX:SHL), which acquired around ~20% in the company in 2022 for $17.8 million.

Under the deal, Sonic agreed to deliver Microba's microbiome gastrointestinal pathogen test MetaPanel into its major markets including Australia, Germany, the UK, Switzerland, US, New Zealand and Belgium.

The first of the commercial distribution arrangements gave Sonic exclusive distribution rights to deliver the MetaPanel test Australia-wide through its Sonic Healthcare Australia Pathology network.

In its recent Q2 FY25 report Microba said MetaPanel sales have continued to build across all major states since the test was launched in Australia through the Sonic network in March 2024, with a record sales month in December and January seeing a strong start to Q3 FY25.

"Sonic has all the infrastructure and the labs to be able to run the Microba test so it's a logical and sensible step for these small companies," Power said.

"Microba has also brought a business in the UK (Invivo Clinical) which they are using to sell their product line through the existing networks they already had in place."

Lumos targets partnerships for its product and services

Lumos Diagnostics (ASX:LDX) is well known for its point-of-care testing products.  In addition to marketing these diagnostic tests directly to consumers and individual healthcare providers, Lumos also partners with industry leaders including pharmaceutical and medical devices companies with established networks and sales channels.

Chief technology officer Sacha Dopheide told Stockhead Lumos also has a large services side, where it partners with businesses of various sizes to leverage its intellectual property, platforms and know-how.

"The businesses we work with often don't want to invest in a project themselves from the beginning and are either looking to partner with a company which already has the technology, mature platform and/or know-how to customise to their needs," she said.

"We partner a lot to develop products with other companies in both medical and non-medical fields."

Lumos last year, for example, signed two sizeable deals together with Nasdaq-listed Hologic Inc, a leading women's health company.

One deal was worth $10 million for intellectual property and another valued at $4.7m.

The agreements aim to develop a new version of Hologic’s existing product for detecting pre-term birth to make it compatible with Lumos’ special reader platform, offering better ways to connect and be more user-friendly.

Dopheide said during the Covid-19 pandemic Lumos also inked a deal with Diasorin, a global leader in Molecular Diagnostics, to develop a point-of-care testing platform.

"With the funds received from these deals we've been able to invest in expansion of our facilities, particularly in manufacturing and the equipment to go from small to medium volume up to high volume," she said.

"We've been able to further invest in development of our platforms.

"We also have an ongoing revenue stream from the development and manufacturing work we do with these businesses."

Lumos recently reported unaudited revenue of US$2.9m for S2 FY25, up 71% on the prior corresponding period. Product revenue was up 200% on pcp while services revenue rose 53% on pcp.

Wellnex has a deal with Panadol owner Haleon

Wellnex Life (ASX:WNX), which is preparing for a dual listing on the London Stock Exchange has built a diverse portfolio of consumer healthcare brands, including Pain Away, Australia’s leading topical pain relief brand, stocked at major pharmacy chains including Chemist Warehouse.

Wellnex also holds global licencing agreements with leading pharmaceutical players, including one of the largest consumer healthcare businesses in the world Haleon, which owns brands such as Panadol, Sensodyne, Voltaren, Advil, and Centrum.

Managing director Zack Bozinovski said a key driver of Wellnex Life’s expansion has been its contract manufacturing partnership with LSE-listed Haleon, struck in 2022 following the company’s development of a liquid soft-gel paracetamol formulation.

Products licensed to Haleon have secured marketing authorisations approval from the Therapeutic Goods Administration (TGA). They have been licensed to Haleon for use under the Panadol brand in Australia.

The company’s licensing and supply agreement with Haleon has since been extended with a launch of the soft-gel Panadol product in the UK in late February this year.

"The Haleon relationship is not only delivering incremental revenue growth to the company, but it also gives confidence to major corporate investors," he said.

Clever Culture systems targeting big pharma

Formerly LBT Innovations, Adelaide-based Clever Culture Systems (ASX:CC5) is now targeting big pharma with their APAS (automated plate assessment system) Independence instruments (culture plate readers).

The company announced in December it had received another order from AstraZeneca for four additional APAS Independence instruments, which use artificial intelligence and machine learning software to automate the imaging, analysis and interpretation of microbiology culture plates.

The company said its technology remains the only US FDA-cleared AI technology for automated culture plate reading and was being sold to microbiology laboratories in the pharmaceutical manufacturing sector for the reading of environmental monitoring culture plates.

"This is environmental testing within the manufacturing facilities," Power said.

Power said typically each instrument generated ~$1m in revenue including 50% hardware, maintenance and support costs.

"There is a recurring income stream coming through," he said.

"Their first major contract is with AstraZeneca, they've also won a deal with Bristol Myers Squibb and are looking to target the top 10 pharmaceutical companies who have manufacturing facilities around the world."

Clever Culture recently reported positive operating cash flow of $500,000 for Q2 FY25, with customer receipts of $1m.

Management has also guided the next two quarters being operating cash flow positive.

At Stockhead, we tell it like it is. While Lumos Diagnostics and Wellnex Life are Stockhead advertisers, they did not sponsor this article.

Originally published as Buddying up: How small ASX healthcare stocks are teaming with giants for growth