Three Stocks from the Health Care Sector: ATX, SOM & M7T

In this article, we would discuss three healthcare stocks from ASX. On 23 July 2019, these companies have released significant updates pertaining to their respective business. The Australian benchmark index was trading at 6,780.6, up by 55.4 points (on 24 July 2019, at AEST 12:31 PM). Besides, SOM’s stock was trading up by 2.874% at A$1.79, while ATX stock was trading down by 6.452% at a price of A$0.010. Concurrently, M7T’s stock was trading flat at A$0.77 (as on 24 July 2019, at AEST 12:35 PM).

Amplia Therapeutics Limited (ASX: ATX)

On 23 July 2019, Amplia Therapeutics reported that it received positive results from the laboratory of Dr Alan Serrels at the University of Edinburgh. Accordingly, Dr Alan Serrels is a researcher in FAK biology and an advisor to Amplia. Besides, he led a group that presented the preclinical models showing the effects of FAK inhibitors in a squamous cell carcinoma (SCC) cancer disease model.

Reportedly, the company has an intention to proceed as a combination cancer therapy utilising AMP945. The recently completed experiments were designed to provide the understanding of the effects of AMP945 as the only sole treatment. Besides, it expects that future studies would undertake AMP945 along with other immune-oncology products.

As per the release, the data had suggested that while using it as a single agent in Dr Serrels’ SCC cancer disease model, AMP945 imparts several effects, which were consistent with a potential to restore the patient's own antitumour immune response.

Effects of AMP945 in Mouse SCC Model (Source: Company’s Announcement)

Following are the effects of AMP945 in the mouse SCC cancer disease model which includes:

• Post the treatment of fifteen days, tumour volumes in mice treated with AMP945 were close to half compared in the mice treated with the non-active control vehicle alone.
• The pY397 FAK levels remained undetectable, depicting complete inhibition of FAK in vivo.
• A statistically substantial decrease in tumour-associated CD206+ macrophages and granulocytic myeloid-derived suppressor cells. CD206⁺ macrophages and gMDSCs are both known to contribute to suppression of antitumour immune responses, as well as contributing to tumour growth and metastases. (Panels A and B)
• A statistical remarkable lessening of tumour-associated endothelial cells, indicative of reduced angiogenesis (formation of new blood vessels) in the tumour tissue. (Panel C)

SomnoMed Limited (ASX: SOM)

On 23 July 2019, SomnoMed Limited announced the unaudited quarterly results for the period ended 30 June 2019. Accordingly, the company’s total core revenues for the quarter stood at $15.8 million, consequential to full-year unaudited revenue of $59 million that has been slightly below the guidance of $60 million. Besides, the total revenues of the group were of $63 million after considering the closed Renew Sleep Solutions (RSS) revenues.

North America: As per the release, the revenue had been supported by the North America dental sales, recording a 31% jump during the Q4 2018-19 against the prior year, and this depicted the turnaround in the performance in the region. Besides, the total North America sales revenues increased by 16% for the quarter, the collective business includes direct dental, managed care, licensees, other revenues and the sales from the closed Simple Sleep Services business (S3).

Europe & Asia: Despite experiencing slower than anticipated growth in Holland & Sweden, the revenue grew by 9% for Q4 as per the announcement. Reportedly, the main reasons for the slower growth in Holland & Sweden were related to the short-term external factors, and SomnoMed is actively addressing the reasons. Besides, the revenue growth in Asia was 8% during the quarter along with an annual regional growth rate of 16%.

COAT™ Market (Source: Investor Presentation, February 2019)

Accordingly, hospitals in Holland are facing capacity issues, and the company is addressing them, by working with those impacted hospitals to facilitate the patient pathway to COAT™ treatment. However, the high acceptance of COAT™ attained in Holland & Sweden is nearing the level of CPAP. Therefore, the company expects the additional growth in COAT™ treatment could be at the expense of CPAP. Concurrently, the company believes that the outlook for Europe appears positive, with less developed economies gaining momentum. Also, the growth rates have been above 20% for the quarter and even more in some cases, which includes Germany, France, Switzerland, Ireland, Denmark and the UK.

Reportedly, the company attended the Annual Sleep Conference in San Antonio, Texas, which presented the industry developments within both the dental (AADSM) and medical (APSS) communities. Concurrently, the company’s ‘SomnoDent AVANT™’ was presented for the first time, which is an oral appliance product with FDA approval. Also, it was appreciated at the conference, as it indicated improved efficacy over previous products in the range following the clinical trials.

Cash Position: As per the release, the ending cash position by June 2019 period was of $8 million, and the company repaid previous interim working capital facility before 30 June 2019. Subsequently, it secured an overdraft facility for upcoming operating funding requirements from HSBC Bank.

Change of Interests of Substantial Holder: The company further notified that on 19 July 2019, there was a change in the interests of the substantial holder- National Nominees Ltd ACF Australian Ethical Investment Limited. The substantial holder post the change of interests has 6,579,750 person’s votes with the voting power of 10.48%.

Mach7 Technologies Limited (ASX: M7T)

On 23 July 2019, Mach7 Technologies Limited released the June Quarter Business Update (Q4 2019), cash flow report, and the Investor Presentation as well.

Cash Flow Target: In the June Quarterly Business Update, M7T mentioned that previously, in March, the company announced free cash-flow break-even target for the twelve-month period ending on February 2020. Accordingly, the company’s position of the cash has been better following the declaration of its goal, and is consistent with achieving the unrestricted cash-flow break-even for the above stated twelve-month period of time. Besides, it expects that the flow levels pertaining to cash would vary from one quarter to another, mainly on the back of the timing of aid through renewed contracts and payment terms and conditions for fresh sales. Consistently, the anticipations were in line for Q4FY19 period, and the company notified that operating cash outflows for the quarter period stood at $0.4 million along with $2.9 million for the fiscal year. Further, the company also achieved a record cash receipts from customers at $10.3 million; this was propelled by the sales and recurring revenue, and the level of cash receipts would meet the company’s existing current run-rate for annual expenses.

Growing Sales: Reportedly, the company continued to add customer base and signed with Children’s of Alabama, a children hospital located in Birmingham, Alabama, a deal valued at $0.8 million. Following the quarter end, the company also penned a contract with Advocate Aurora Health; this customer acquisition represents sales in excess of $5.7 million, and it would result in $0.5 million per year to the recurring revenue once implemented. As of 23 July 2019, the company’s contracted yearly recurring revenue remains to increase and was recorded at $8.5 million.

Revenue Models (Source: Company’s Investor Presentation)

Software Deployments: As per the release, the company started recognising revenue and cash from the Hospital Authority of Hong Kong (HAHK), and the revenue, cash would be received over the five-year term of the contract along with fluctuations in each quarter. Also, the implementation at the Sampson Regional Medical Center is well advanced and approaching first use. Besides, a few other revenue streams are scheduled to go-live this year, including Children’s of Alabama, Sentara Heathcare, and The University of Vermont.

Product Innovation: Reportedly, the company also released the latest version of Mach7 Platform, and the new features have been created for back-end IT staff and clinical users which demonstrates the rising thrust for better efficiency in healthcare organisations. Also, it includes more personalised worklists, instant messaging featuring rapid image sharing. In addition, it is equipped with procedure folders to assist with teaching, lectures, specialised workflow, assisted diagnosis and more.

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