No Christmas miracle yet for healthcare, but a few standout stocks are still scrubbing in. Pic: Getty Images
Healthcare slides 1.3% for the week despite the wider market lifting 0.7%
Immutep surges 46% on lucrative global licensing deal with Dr. Reddy’s
PolyNovo wins Morgans upgrade as new leadership team takes charge
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 has logged another week in the red and, without a Christmas miracle, looks set to end 2025 as the worst of the 11 sectors, down ~23% YTD.
At 1.30pm (AEDT) on Friday the ASX Health Care Index (ASX:XHJ) was down 1.3% for the past week, while the benchmark S&P/ASX 200 (ASX:XJO) was marginally up 0.7%.
While the US Federal Reserve this week cut interest rates by a quarter point for the third time this year, it was a different narrative in Australia.
Sticky inflation saw the Reserve Bank of Australia (RBA) hold the official cash rate at 3.60% at its December meeting on Tuesday, with a hawkish RBA Governor Michele Bullock even hinting at a possible hike in 2026.
“It has been a pretty tough year and I have moderated and changed my views throughout the year,” Power said.
“I was reasonably bullish from the middle of the year thinking healthcare had underperformed long enough and there would be a rotation into the sector.
“To a small extent that happened in November but has retraced and the index is down around 23% for the year.”
Large caps weigh on index as CSL slumps 36% YTD
Power said large caps have weighed heavily on the ASX healthcare index in 2025, led by its biggest component – blood-products giant CSL (ASX:CSL) – which is down around 36% year to date.
“It’s had profit downgrades, a couple of missteps in terms of communicating with markets around cost-cutting and divesting their vaccine division CSL Seqirus,” he said.
Power said other large caps have also underperformed including global pathology operator Sonic Healthcare (ASX:SHL) and hearing technology player Cochlear (ASX:COH), down 15% and 10% respectively YTD.
Sleep disorder device maker ResMed (ASX:RMD) is in the green, but up only around 3%.
“Of the majors there have not been too many shining stars,” Power said.
Hopes remain of a Santa rally
However, Power hasn’t given up on a Santa rally in 2025 to revive the healthcare sector from its year-long malaise.
“I saw some stats recently showing that the Santa rally usually kicks in by mid-December,” he said.
“It’s largely driven by people heading off on holidays, which means less trading activity – and often a bit more buying – so share prices tend to edge up over the next couple of weeks.”
Immutep soars on lucrative partnering deal
Immuno-oncology drug developer Immutep (ASX:IMM) is up 46% for the week after announcing a lucrative commercialisation deal with Indian-based Dr. Reddy’s Laboratories for eftilagimod alfa (efti).
Under the deal Dr. Reddy’s receives exclusive rights to develop and commercialise efti in all countries outside of North America, Europe, Japan, and greater China.
Immutep in return will receive US$20 million (~A$30m) upfront and will be eligible to receive potential regulatory development and commercial milestone payments of up to US$349.50m (~$528.40m), plus double-digit royalties on commercial sales.
The company is also in line for double-digit royalties on commercial sales and will continue to hold the global manufacturing rights to efti across all markets and will supply Dr. Reddy’s.
Efti is a first-in-class novel immunotherapy that directly activates the immune system to fight cancer, which is under evaluation in TACTI-004 (KEYNOTE-F91), a phase III trial for the first-line therapy of advanced or metastatic non-small cell lung cancer.
It is is also being investigated in other indications including head & neck cancer, breast cancer, and soft tissue sarcoma.
“That was a pretty big deal that Immutep announced with Dr.Reddy’s and is providing them with important funding from an upfront payment and depending on clinical success there will be more milestone payments come through,” Power said.
“The deal has put Immutep in a solid position and the share price has responded positively.”
Morgans upgrades PolyNovo after changing of the guard
Morgans has upgraded wound-care company PolyNovo (ASX:PNV) following changes to its board and the appointment of new CEO Bruce Peatey, who most recently ran the US, Canadian and Latin American markets for global dental products company Dentsply Sirona, based out of the US.
Peatey has relocated to Melbourne and is going to be based at PolyNovo’s headquarters in Port Melbourne.
Power said PolyNovo reported a strong Q1 FY26 result and was EBITDA positive, with group sales up 33.3% to $34.7m and total revenue of $37.6m represented by US sales up 33.4%, rest of world up 33% and NovoSorb MTX up 174.8% to $2.9m.
Morgans forecast FY26 revenue of $148.6m, up 16.8% and EBITDA of $16.4m.
The analysts have upgraded PolyNovo to a buy from a speculative buy and increased its 12-month target price to $2.03 from $1.69.
“That’s a function of the new CEO being appointed and some board changes, which we think have created a lot more certainty for the company,” Power said.
PolyNovo has also completed construction of a new manufacturing facility in Melbourne to expand production fivefold.
An additional $2.5m in capital expenditure is required for commissioning, which is forecast to be completed during H2 CY26 and funded from existing cash reserves.
On the clinical and regulatory front, PolyNovo is also planning to submit to the FDA premarket approval (PMA) for full thickness burns for NovoSorb, with approval expected in late CY26.
“PolyNovo’s NovoSorb technology has gained rapid market traction, initially in burns and extending into trauma,” Power said.
“Our discussions with surgeons imply the product is highly effective.
“We believe the growth trajectory both geographically and by indication will see revenue grow by approximately 20% pa for the next three years.”
Cogstate falls after downgrading H1 FY26 revenue guidance
Neuroscience tech company CogState (ASX:CGS) has fallen this week after downgrading its H1 FY26 revenue guidance, attributed to timing related deferrals.
In a business update Cogstate said it now expected revenue for H1 FY26 of US$25 to $26m, which is a 5 – 9% increase on the prior corresponding period (pcp), but below the previously guided 18 – 20% growth.
In a note to clients Morgans’ healthcare analyst Iain Wilkie wrote that revenue was shifting into the back half of FY26 due to timing delays in recognition, despite solid underlying sales performance.
“The pipeline continues to sit at record levels, with ongoing conversion across a broader range of indications, including Alzheimer’s, other dementias, Parkinson’s, psychiatry, schizophrenia, sleep disorders and rare diseases,” he wrote.
However, Wilkie noted that when combining the H126 result and the H2 FY26 backlog, the implied full-year revenue was around US$47 -$48m, which is below the current consensus estimate of ~US$57.7m for FY26.
Margins for H1 FY26 are also expected to be lower due to reduced near-term revenue and ongoing investment in growth areas such as R&D, expansion in APAC, data engineering and AI development.
“While the near-term revenue and margin outlook is softer due to timing, underlying business momentum appears strong,” Wilkie wrote.
“The record pipeline and significant contract wins across a broader range of indications support the medium-term growth story.
“Near-term, investors should expect a back-end loaded FY26 and given the new gap between the updated guidance and consensus, would be fair to expect consensus estimates to be revised lower.”
Nanosonics secures key approvals for Coris
Infection control company Nanosonics (ASX:NAN) has secured regulatory registration for its Coris endoscope cleaning system in Australia, the European Union and the UK.
Coris is the world’s first automated system specifically designed to clean the internal channels of flexible endoscopes.
Nanosonics said a controlled market release (CMR) was set to begin in the UK, Ireland, and Australia from January 2026.
“These certifications mark a pivotal step in commercialising Coris, enabling initial deployments with select hospital partners in key markets,” Morgans healthcare analyst Iain Wilkie wrote in a note to clients.
In the US, CMR will is set to start following FDA 510(k) approval for expanded scope indications, which is currently under review and expected in H1 CY26.
“The regulatory progress de-risks the commercialisation timeline and positions NAN for early revenue generation in Australia, the UK, and Ireland, with US expansion pending FDA clearance,” Wilkie wrote.
“Given the relative sales contribution from the US market, the core focus will continue to remain firmly planted there, and (investors will) continue to look toward execution of the CMR (feedback from initial sites), hospital uptake, and subsequent broader rollout (linked to timing of 510k approvals) as the key catalysts.”
Morgans has a buy rating on Nanosonics and a 12-month target price of $5.
Power’s Powerplay: EBOS ‘flying under the radar’
Power said pharmaceutical distributor EBOS Group (ASX:EBO) was gearing up for a strategic transition year in 2026, completing its multi-year distribution centre renewal program, including the new Kemps Creek facility in western Sydney and the Perth Contract Logistics site.
These investments are expected to unlock capacity, automation and efficiency benefits, driving operational leverage from FY27.
The EBOS share price has fallen ~30% since its FY25 result in August, when FY26 guidance came in at 7% below expectations of 10%, in what Power described as an “excessive” reaction by investors.
At its October AGM, EBOS reaffirmed FY26 underlying EBITDA growth of ~7% with guidance of $615-$635 million, underpinned by scale in healthcare distribution, a national logistics footprint and strong demand for specialty medicines.
Power said EBOS was a high-quality healthcare name with a diversified portfolio of revenue generating assets across hospitals, community pharmacy including the Terry White franchise, medical devices and animal care.
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.
The author held shares in CSL at the time of writing this article.