September pressure is building for ASX healthcare stocks as the broader market sells off. Pic: Getty Images<\/p>\n
ASX healthcare loses 3.66% in past five days as broader markets fall in September sell-off
\nUS FDA rejects EchoIQ\u2019s application for AI-driven heart failure tool Echosolv HF
\nAroa\u2019s positive interim results from MASTRR Registry show low infection rates for Myriad bioscaffold products<\/p>\n
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Healthcare and life sciences expert Scott Power, a senior analyst at Morgans Financial for 27 years, and his team share their insights on the ASX healthcare sector for the week.<\/p>\n
The ASX healthcare sector has broken its winning run, playing into the historical playbook of September being a weaker month for markets.<\/p>\n
Healthcare surged 18.83% in August<\/a> to be top performing ASX sector for the month and rose in the first week of September.<\/p>\n However, concerns about higher interest rates along with escalating tensions in the Middle East have seen the sector fall in line with broader markets this week.<\/p>\n The XHJ has also fallen 3.66% over the past five days, while the benchmark S&P\/ASX 200 (ASX:XJO) fell 3.14%.<\/p>\n \u201cHealthcare has been rallying pretty strongly since the beginning of July but it\u2019s giving some of that back now,\u201d Power said.<\/p>\n \u201cSeasonally, September is the weakest month ahead of what are typically stronger months heading into the end of the year and into January.<\/p>\n \u201cIf we follow seasonal patterns we\u2019ll have a few more weeks of sogginess in the markets and then things should start to pick up.<\/p>\n \u201cHigher oil prices and interest rates heading up around the world also put pressure on stock markets and in particular the growth or risk on-sectors like healthcare.\u201d<\/p>\n \u00a0<\/p>\n \u2018Heartache, not heart failure\u2019 for EchoIQ<\/p>\n Heart disease diagnostic company Echo IQ (ASX:EIQ)<\/a> has seen its share price sink more than 50% this week after a regulatory setback with the US Food and Drug Administration (FDA) for its AI-driven heart failure tool Echosolv HF.<\/p>\n EIQ applied for clearance under the 510(k) predicate device path, but FDA deemed the device to be not substantially equivalent to anything else.<\/p>\n Echo IQ is reviewing its options, including an appeal, a mediation or a resubmission.<\/p>\n In a research note Morgans healthcare analyst Iain Wilkie wrote rejection pushed back the company\u2019s \u201cbiggest near-term catalyst and revenue driver\u201d.<\/p>\n \u201cThe determination landed day 264 of the FDA\u2019s 270-day clock, leaving the agency no scope to seek further information and forcing a decision on what it had,\u201d he wrote.<\/p>\n \u201cManagement confirms a single outstanding statistical point, not a safety or clinical issue, and says the letter invites resubmission.\u201d<\/p>\n \u201cWe read this as a file closed on expiry rather than a technology rejected, and the 510(k) route stays open.\u201d<\/p>\n Wilkie \u201cviews the validity of the tool as intact\u201d and wrote that several options remained for EIQ.<\/p>\n These include seeking an informal review through the FDA\u2019s Center for Devices and Radiological Health (CDRH) ombudsman, lodging a 517A appeal or De Novo request within 30 days, or preparing a new 510(k) submission using re-analysed data.<\/p>\n \u201cBecause the objection is analytical rather than structural, we see resubmission as the highest-probability path,\u201d Wilkie wrote.<\/p>\n Morgans retains a \u2018speculative buy\u2019 call but estimating clearance delayed by 12 to 24 months has cuts it per-share valuation from $1.85 to $1.10.<\/p>\n \u00a0<\/p>\n Aroa delivers Myriad MASTRRclass<\/p>\n