Health Check: Aussie biotechs avoid DEFCON-1 alert amid tariff war – but it’s no time to be off guard

A report from Bell Potter shows that while US-facing biotechs should be on high alert, the likely impact of tariffs is manageable.

Full alert! Only the first salvo has been fired in the war on tariffs. Pic via Getty Images

• Bell Potter rates Nanosonics as 'sell' as it gets granular on likely tariff impacts for ASX biotechs

• Lumos and Mesoblast win crucial US reimbursement 

• Did you hear about Audeara’s robust quarterly?

With the effluxion of time since Liberation Day, analysts have been delving deeper into how US tariffs might affect their business.

The answer still is murkier than the Yarra River, because (a) Donald Trump is yet to impose his threatened pharmaceutical tariff, (b) some medical devices appear to be exempt and (c) the Chinese tariff is open for negotiation.

Still, Bell Potter has devised a one to five scale of risks to individual companies, 'one' being no impact and  ‘five’ being “highly material”.

It’s the reverse of the five-level military DEFCON scale, where DEFCON-1 means imminent war.

Luckily there are no stocks on this apocalypse ranking.

Nanosonics, Aroa Biosurgery and Trajan Group all received a level four rating, mainly because they have a significant US sales and source product from elsewhere, but the companies all have reasons to remain confident of navigating through potentially high tariff seas.

In a separate note on Nanosonics (ASX:NAN) today, Bell Potter estimates a tariff would add $2.5 million to the probe steriliser's cost of goods sold, or COGS.

This is “not large in absolute value, but sufficient to warrant a 9% earnings downgrade in 2025-26 and 2026-27.”

Nanosonics makes it Trophon sterilisers – and soon-to-be released Coris units – in Sydney.

But the consumables required to operate the units are made in the US, so there may be scope to absorb some costs there.

In any event, Bell Potter as downgraded its call on Nanosonics from a ‘hold’ to a ‘sell’.

This is not so much because of the tariff tussle but because of Nanosonincs' “exceptionally resilient” share price run since the company posted “modest" half year revenue increase.

Negating and absorbing the impact

Trajan Group (ASX:TRJ) meanwhile makes its scientific instruments locally and in Malaysia, but also has four manufacturing sites in the US. The company plans to reorganise its operations to negate any impact.

And Aroa Biosurgery (ASX:ARX) makes most of its revenue in the US but imports its ovine-derived wound treatment devices from New Zealand.

Aroa CEO Dr Brian Ward recently said while there might be a short-term margin hit, Aroa’s margins were generous enough to absorb any impact.

Wound care house PolyNovo (ASX:PNV) is ranked level two.

Polynovo derives about three-quarters of its sales from the US, but sources material elsewhere.

The firm expects Polynovo would incur a modest $600,000 earnings impact in 2025-26, with a $1.5 million hit in 2026-27.

But some of its capital equipment partners rely on stuff made elsewhere and “this could impact Telix’s COGS over time”.

Collateral winners?

A host of companies are rated level one because – duh – they don’t export to the US.

They might even benefit if rivals are ensnared by tariffs.

Others both sell and manufacture in the US, such as EBR Systems (ASX:EBR) and Anteris Technologies (ASX:AVR).

Hear! Hear! A robust quarter for Audeara

The March quarterly reports are starting to flow, with hearing technology group Audeara (ASX:AUA) this morning reporting record receipts of $1.64 million, up 46% year on year.

Put another way, Audeara’s receipts of $3.9 million for the first nine months of 2024-25 are ahead of the $3.5 million tally for the entire 2023-24 year.

Audeara provides products such as earbuds to improve hearing clarity and headphones compatible with cochlear implants.

The company has forged a tie-up with George & Matilda Eyecare, which will offer Audeara products across its 115 practices.

Eyecare? You heard correctly. Specsavers is also big on hearing services these days.

Audeara also reports a US$817,000 order from musical instrument maker Avedis Zildjian, following a $2.1 million initial order last February.

This tie-up relates to Audeara’s Perfect Tune “personalised listening” tech.

ASX duo win crucial US payment coverage

Lumos Diagnostics (ASX:LDX) and Mesoblast (ASX:MSB) have won crucial US coverage – or expanded payment – for their approved diagnostics and drugs respectively.

In the case of Lumos, its rapid virus-versus-bacteria diagnostic Febridx will be reimbursed at US$41.38 per test, under the public Medicare system.

“Medicare is an important part of U.S. healthcare reimbursement, comprising 20%-24% of the US reimbursement payor mix,” Lumos says.

Mesoblast says coverage for Ryoncil, its stem cell therapy for graft-versus-host disease has been extended to 100 million lives under public and private coverage.

It’s always nice to be paid!

Echo IQ shares debut in the US

Fresh from gaining US Food & Drug Administration approval for its cardiology tool, Echo IQ (ASX:EIQ) has listed its shares on the US over-the-counter OTCQB Venture Market.

A specialist investing platform, OTCQB avoids the prohibitive cost and compliance burden of a Nasdaq listing.

Echo IQ’s status as an ASX-listed company frees it from the burdensome compliance costs of a full US listing.

At the same time the US Securities Exchange Commission recognises OTCQB as an  established public market.

The platform turned over US$478 billion in 2024 (25% higher than 2023 volume). Of this volume, US$415 billion was attributable to international securities trading (up from US$92 billion previously).

The listing followed Echo IQ's recent US roadshow, which “highlighted strong interest in Echo IQ’s commercialisation objectives”.

In October last year the FDA approved Echo IQ AS, to detect aortic stenosis (arterial calcification).

Like black ice, the condition can be hard to see and just as hazardous.

Via an integration partnership with imaging workflow house Sclmage, Echosolv AS is used in 36 US hospitals.

The company also plans to trial a variant called Echosolv HF, for – you guessed it – heart failure.

At Stockhead, we tell it as it is. While Audeara, Aroa Biosurgery, EBR, Trajan and Lumos are Stockhead advertisers, they did not sponsor this article.

Originally published as Health Check: Aussie biotechs avoid DEFCON-1 alert amid tariff war – but it’s no time to be off guard