The ASX healthcare sector is keeping its balance during market volatility. Pic: Getty Images
ASX health sector up 0.18% for the week, while broader market down 1.49% after Wall Street
Morgans upgrades ratings on Clinuvel but cuts 12-month share price on Avita Medical
EBR’s case volumes for its WiSE CRT System tripled quarter-on-quarter
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 finished the week in steady fashion, despite a sharp sell-off on Wall Street overnight on Thursday that rippled through global markets and the ASX.
At 1.45pm (AEDT) on Friday the ASX Health Care Index (ASX:XHJ) was up 0.18% for the past week, while the benchmark S&P/ASX 200 (ASX:XJO) fell 1.49%.
“The sell-off was due to Investors growing more pessimistic about the interest rate outlook,” Power said.
Despite the broader market sell-off, Power remains optimistic of a traditional “Santa Rally” into December. He said in a positive sign momentum had been building in the local healthcare IPO market.
Morgans is acting as joint lead manager and underwriter for Epiminder, which focuses on diagnostic and treatment tools for epilepsy and is due to make its ASX debut on December 1.
It is also a joint lead manager for the IPO of Saluda Medical, earmarked for December 5. Saluda was founded by former Cochlear executive John Parker, a long-time medical device inventor and researcher.
The company has developed a device to treat conditions such as chronic pain and movement disorders, which has secured US Food and Drug Administration (FDA) approval.
“The IPO market has stepped up in the last six months or so after not much interest, which is a good sign,” Power said.
EBR’s WiSE CRT system gains traction in US
Power’s pick from last week EBR Systems (ASX:EBR) has reported its Q3 CY25 results, reporting case volumes for its WiSE CRT System tripled quarter-on-quarter as the company ramps up its US commercial rollout following FDA approval in April 2025.
WiSE is the world’s only wireless endocardial (placed within the heart) pacing system in clinical use for stimulating the heart’s left ventricle.
Revenue rose to US$512,000, up 201% from the previous quarter, driven by nine successful WiSE implants despite limited reimbursement during the period.
It was paired with leadless pacemakers for four of the cases, including two with Medtronic Micra and two with Abbott Aveir, reflecting growing adoption of leadless pacing for heart failure as well as standard pacing.
EBR posted a net loss of US$12.2m, broadly in line with expectations, reflecting increased operating expenses tied to commercialisation activities.
EBR ended the quarter with US$73m in cash and short-term investments, providing more than five quarters of funding runway at its current burn rate.
During the quarter EBR reported growing physician engagement, with 14 new doctors trained, and 22 year-to-date, with eight new purchasing agreements signed.
A major highlight of the quarter was CMS approval for both NTAP and TPT reimbursement programs, completing a comprehensive Medicare pathway across inpatient and outpatient care.
“EBR are now moving into their limited market release phase, coinciding with the start of the US Medicare reimbursement programs, so getting doctors properly trained, sales staff in place and signing up hospitals,” Power said.
“The company is ticking all the boxes from our perspective and we think it is very well placed over the next few quarters to show material uplift in implant numbers.”
Morgans has a buy rating on EBR and 12-month target price of $2.86.
ReNerve lifts 70% after big US win
ReNerve (ASX:RNV) was up more than 71% on Thursday after its flagship NervAlign nerve cuff was approved for use across the US Department of Defense (DoD) and Veterans Affairs (VA) healthcare systems.
The approval allows NervAlign to be deployed throughout the DoD’s Military Health System, managed by the Defense Health Agency, which covers 51 military hospitals and 424 clinics. It can also be used across the VA’s 170 medical centres and over 1,193 outpatient facilities.
The Military Health System provides care to active-duty personnel, their families, and retirees, while the VA operates the US’ largest integrated healthcare network, serving millions of veterans. Together, these systems care for ~9.5 million patients.
Following the approval, ReNerve received both an initial and a repeat purchase order, reflecting early confidence in the NervAlign system.
“ReNerve is making solid progress building its portfolio of peripheral nerve which had its genius from CSIRO,” Power said.
“We expect the company will continue to generate growing sales as surgeons see the benefits of the products.”
Morgans upgrades Clinuvel as sentiment falls
Morgans has upgraded its rating on Clinuvel Pharmaceuticals (ASX:CUV) to a speculative buy from a hold, maintaining its 12-month target price of $14 following the company’s AGM, despite recording a third consecutive remuneration strike.
Clinuvel is down ~8% YTD. In a note to clients Morgans healthcare analyst Iain Wilkie wrote management remained upbeat but fell short of strongly guiding investors toward the upcoming catalysts.
“We view the risk/reward profile is more attractive at these levels with just under half the market cap cash backed and steady operating cashflow generation,” he wrote.
“It’s a polarising company, which can present sound trading opportunities when sentiment is low.
“This would be now, with sentiment sitting bottom-of-the-barrel as ongoing strategy, competitive threats, and management’s approach to capital deployment continues to limit investor demand.”
Clinuvel recorded its third consecutive remuneration strike with shareholders voting against the adoption of the remuneration report at a rate of 39.7% in 2023, increasing to 52.8% in 2024 and 63% this year.
“Despite or perhaps because of ongoing concerns around transparency, capital allocation, and disclosure, the stock is trading at historically low valuation levels (PE 14.7x vs 32.4x 5-year average, EV/EBITDA 6.6x vs 31.3x 5-year average), which we view as attractive for a trading opportunity,” Wilkie wrote.
Wilkie believes in the near term, its franchise for rare metabolic disorder Erythropoietic Protoporphyria (EPP) remains highly profitable and continues to generate substantial free cash flow, providing further downside support.
“While competitive risk exists over the medium term, we see limited threat to cash flows in the short term and worthy of positioning CUV as a trading opportunity,” he wrote.
Upcoming catalysts include updates on Clinuvel’s vitiligo program, PhotoCosmetics highlighted as a future revenue stream and progress on CEO succession planning.
Morgans cuts target price of Avita Medical
Morgans has reduced its 12-month target price for wound-care house Avita Medical (ASX:AVH) from $2 to $1.35 while maintaining a speculative buy after reducing its revenue guidance for CY25 in its latest quarterly.
Commercial revenue for the quarter was $17.1m, representing a 13% decrease compared to the previous corresponding period (pcp) and prompting another guidance downgrade to $70-$74m, compared with prior
guidance of $76-$81m.
“While OpEx dropped 24% year-on-year and the cash position was boosted by a recent placement, ongoing sales weakness means cash burn remains high and the balance sheet is still under pressure,” Wilkie wrote in a note to clients.
“Management has largely set the fixed cost base, but with top line growth lagging, reaching breakeven by Q2 CY26 looks increasingly challenging without a turnaround in sales momentum.
“Key watch here remains the decreasing cash reserves sitting at US$23.3m, which represents less than two quarters of cash vs burn [rate].”
He wrote revenue growth remained slow due but should improve with three of seven Medicare Administrative Contractors (MACs) having published CPT codes for its Recell system to treat acute, non-burn trauma and surgical full-thickness wounds.
The rest are expected by late November. The company also recently announced New Technology Add-on Payment (NTAP) reimbursement from the Centres for Medicare & Medicaid Services (CMS) when using its Recell system for the same indications.
“While the new NTAP reimbursement for non-burn wounds is a positive development, the financial benefits flow to hospitals rather than AVH directly so the impact on the company’s sales will depend on how quickly hospitals change their practices,” Wilkie wrote.
He also noted that while Avita had negotiated a Q4 debt covenant reset, easing immediate financial pressure, future covenants into 2026 haven’t changed “so the risk isn’t gone”.
“After 18 months of guidance downgrades, trust in the name is low,” Wilkie wrote.
“There’s nothing disastrous in this quarter’s result, but also nothing to spark fresh enthusiasm.
“For now, it’s a waiting game. AVH needs to deliver a few positive quarters and shore up the balance sheet before confidence returns in a meaningful way.”
Power’s Powerplay: Tetratherix achieving milestones
Tetratherix (ASX:TTX) is Power’s pick of the week after posting its Q1 FY26 cashflow report and holding its AGM with the wound management company on track both clinically and regulatory across key verticals of bone regeneration, tissue spacing and tissue healing.
Tetratherix, which made its ASX debut on June 30, finished the first quarter of the new financial year in a strong cash position of $24.8m with no debt, enabling continued investment in R&D and manufacturing scale-up and sufficient funding for 8.6 quarters.
Tetratherix has developed a proprietary polymer platform enabling the targeted delivery of cells, drugs and biologics, to treat a range of conditions across bone regenerative, tissue spacing, and tissue healing.
Key priorities for Q2 FY26 include:
Advance TUTELA trial for its Tutelix tissue spacing product in Cohort 2 for prostate cancer treatment towards pivotal US FDA trial for potential 510(k) approval
Continue Tegenix/Tegen EOS FDA animal studies for bone regeneration with submission on track
Progress TetraDerm Cohort 3 for complex reconstructive surgeries
Optimise Optelex formulation and performance for tissue spacing during eye surgery
Support BioOptix joint venture fundraising and strategic partnerships
Complete fit-out and relocation to new manufacturing facility in Alexandria in Sydney
Power said FDA 510(k) clearance for Tegenix was expected in H2 FY26.
“They have delivered since listing in terms of hitting key regulatory and clinical milestones,” Power said.
“The cadence of news flow is expected to continue and maintain investor interest,”
Morgans maintains a speculative buy on Tetratherix and a 12-month target price of $5.76.
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 and ReNerve are Stockhead advertisers, the companies did not sponsor this article.