ASX healthcare stocks went on a roll in August and continued their premiership performance into September. But perhaps steer clear of any maritime-themed AV gimmicks? Pic: Getty Images
Fundies back the come-from-behind healthcare sector
Healius divestment makes sense, but headwinds remain
Mayne settles decade-old US civil case
Forget the weekend heroics of the Brisbane Lions, Newcastle Knights and the Wallabies: ASX healthcare stocks are the real winners as institutional investors flock to the once-maligned cohort.
Morgan Stanley’s analysis of domestic fund manager positioning in August shows that these investors increased their overweight position in healthcare stocks.
CSL (ASX:CSL) led the way, becoming the top held ‘active position’ across the market.
Three months ago no-one wanted to know about the stock. In a similar vein, the Novocastrian rugby league team ‘won’ the wooden spoon last year.
“Healthcare extended its lead as the most preferred sector and this was reflected at the stock level with a sharp increase in active CSL holdings,” Morgan Stanley says.
Indeed, CSL is the biggest healthcare stock by some margin.
The fundies were also happy to be overweight in ResMed (ASX:RMD), the second-biggest ASX healthcare play.
In other sectors, fundies have been keen on communication services and discretionary stocks (albeit skewed towards gambling).
They remain overweight in insurers and materials (resources), but have trimmed their position in the banks.
Meanwhile, RBC Capital Markets this month moved to an ‘overweight’ call on a slew of healthcare stocks.
This followed a profit reporting season that was “generally much better” than the firm feared.
“We are now expecting positive earnings growth across the sector,” RBC said.
Apart from CSL and Resmed, RBC also is keen on Ramsay Health Care (ASX:RHC) , Fisher & Paykel Healthcare (ASX:FPH) and Nanosonics (ASX:NAN).
The firm retains its overweight call on radiology chain Integral Diagnostics (ASX:IDX).
Healius sharpens focus with Agilex sale
Still on medical imaging, shares in Healius (ASX:HLS) have halved over the last year.
But the pathology chain’s sale of its Agilex Biolabs clinical trials division should bolster the company’s balance sheet.
Having said that, Macquarie Equities contends the benefits of the sale don’t exactly offset the sector’s challenges. These include wage increases and sluggish demand.
Healius on Friday said it intended to sell Agilex to Novotech Health, for an enterprise value of $160 million and cash proceeds of $155m.
Private equity majority-owns Novotech, a global clinical research organisation.
Hmmm.
The market greybeards insist that one should never buy from private equity – but we guess there’s no rule against selling to them.
“The sale strengthens the balance sheet and provides capital management optionality,” Macquarie says.
“But pathology earnings remain challenged by ongoing wage pressures from the Fair Work Commission gender undervaluation case, subdued GP attendances and execution risk around margin recovery initiatives.”
The sale culminates a strategy review that Healius kicked off in May, after several unsolicited approaches from “credible parties” to buy Agilex.
Post-transaction Healius moves to a net cash position, having had net debt of $33 million at June end.
The company will elaborate on its use of funds closer to the deal closing.
The Foreign Investment Review Board and the Australian Competition and Consumer Commission need to green light the transaction.
If all goes to plan, Healius should complete the deal in the second half of calendar 2027.
Give us more time, says Paradigm
Having tentatively flagged that its shares would emerge from suspension today, Paradigm Biopharmaceuticals (ASX:PAR) has pleaded for more time to sort through the aftermath of last week’s failed pivotal knee osteoarthritis trial.
Now, the company on Wednesday expects to provide more information on its financial position, notably its arrangement with convertible note investors Obsidian Global.
This should enable Paradigm to lift the voluntary suspension, with a gruesome sell-down no doubt ensuing.
The shares entered trading halt last Monday, having last changed hands at 24.5 cents. This valued the company at $124 million.
Aft is turning Japanese
Auckland-based specialty drug maker AFT Corporation (ASX:AFT) has signed a deal to license and commercialise its combination analgesic Maxigesic IV in Japan.
The compact, with Mikasa, gives AFT an entree into the world’s third-largest pharma market.
Under the agreement, AFT grants Mikasa an exclusive licence to seek approval to sell the drug in Japan and commercialise it.
AFT develops and supplies the product. The company also receives upfront licence fees and development milestones linked to regulatory submission progress and reimbursement pricing.
Royalties should follow post-launch.
Sold as Combogesic in Japan, Maxigesic combines paracetamol and ibuprofen into a non-opioid injectable combination.
Melding the two doesn’t sound like rocket science.
But obtaining approvals can be not so straightforward.
In any event, Maxigesic stands as the world’s top-selling over-the-counter combo painkiller.
Over the years, AFT has zeroed in on medical needs which the big players have ignored.
“There are quite big holes because big pharma will focus on the really big markets,” founder and CEO Dr Hartley Atkinson says.
Mayne settles US action for … not much
Mayne Pharma (ASX:MYX) has settled a decade-old US civil complaint for chump change of US$750,000.
No fewer than 49 US states and territories initiated the case, spurred on by an industry-wide anti-trust investigation into the US generic pharmaceutical sector.
In November 2023 Mayne said the action appeared to be closed.
Mayne today said it had “consistently and strongly defended” its position.
“The decision to settle reflects a pragmatic commercial judgment, rather than any change in the company’s view of the claims.”
In other words: have you seen how much those Philadelphia attorneys charge per hour?
Micro-X funding extension is in the bag
Still on US affairs, the Department of Homeland Security has extended a contract with Micro-X (ASX:MX1) to develop a miniaturised computed tomography (CT)-based baggage scanner for self-screening at airports.
Worth US$750,000 ($1.05 million), the eight-month extension will enable the company to deliver an upgraded version of the scanner.
This device will include improvements from existing prototypes, “further maturing” the design for scale manufacturing.
While Micro-X now focuses primarily on medical CT – notably stroke detection – the company hopes the baggage project can continue to commercial stage with third-party funding.
At Stockhead we tell it as it is. While Micro-X is a Stockhead advertiser, the company did not sponsor this article.