A look at 3 Healthcare Stocks- PBP, VHT, VRT post New Normal

Summary

• Post coronavirus, new normal has transformed businesses including the health care sector, wherein, pharma and biotech entities have been witnessing outsourcing of clinical development to enhance the medical care quality at economical costs.
• PBP intends to make higher investments to deliver high quality products to its clients with exceptional customer service and would continue to focus on cost control measures.

• Moving ahead in FY20 and FY21, VRT is dedicated towards developing diagnostic revenue and non-IVF day hospital revenue in Australia. Also, to deal with effects of coronavirus, in terms of preserving liquidity, VRT has begun taking a range of initiatives to lessen costs and minimise cash outflow.

It has been six months since the outbreak of coronavirus that had been causing chaos all around the globe. With companies shut down worldwide, the scale of the destruction had been unmatched. Furthermore, the global supply chain has also been massively impacted, led by this outbreak.

The pandemic-led lockdowns have had compelled people to stay at home and work from home as well. These new measures have given rise to new-found trends like remote working, accelerating technological expansion, etc. In fact, businesses now need to re consider staff compensation, with bulk of them providing productivity from home. In numerous countries, authorities are also making changes in policies to assist both employees and employers to get through such difficult times.

The ‘new normal’ has changed numerous businesses, and here are a few emerging healthcare trends we would like to throw light upon. Recently, pharmaceutical & biotechnology companies have been witnessing outsourcing clinical development to improve quality of medical care at cheap costs. The medical service industry touts to be a key part of the recent healthcare mechanism, given the ever-increasing demand of healthcare management.

It is worth stating that medical services companies are positioned to benefit from encouraging trends, which comprises of new drug approvals, an accelerated pace of innovation, capable drug launches, rising importance of biosimilars, cost-cutting implementations, an aging population, escalating insurance coverage, the rising middle-class, insatiable demand for new drugs, and an ever-growing health care spending.

Let’s dig deeper and look at three ASX-Listed healthcare stocks.

Probiotec Limited (ASX:PBP)

A leading Australian pharmaceutical company, Probiotec Limited is mainly betrothed in production, manufacturing, and distribution of a broad range of medicine and over the counter (OTC) pharmaceuticals.

Change in Director’s Interest: On 30 June, PBP notified the market that Geoffrey Ronald Pearce has ceased to be a director in PBP effective 30 June 2020.

1HFY20 key Financial Highlights: During the six months ended 31 December 2019, the Company reported total sales revenue amounting to $44.1 million, up from $33.03 million reported in the year-ago period. Underlying EBITDA for the period skyrocketed 68% from the prior corresponding period and came in at $6.2 million.

Underlying NPAT for the period stood at $2.4 million, indicating an increase of 85% year over year. Net profit after tax on reported basis came in at $1.8 million, up 65% on pcp. Underlying earnings per share increased 92% year over year and came in at 3.7 cents per share. During the period, the board declared an interim dividend at 1.5 cents per share.

What to Expect: PBP remained well recognised, with all its manufacturing and packing sites and remain fully functional throughout COVID-19 led crisis. Further, it has been taking essential actions to manage the current situation and continues to trade firmly.

The Company in its trading update in April stated that it observed an increased level of need and uplifts in orders, relating to cough, cold & Flu, and immunity products. The increased level of demand for its products appeared likely to continue through first half of FY21. Going forward, the Company plans to make higher investments to deliver high quality products to its clients with exceptional customer service. PBP continues to focus on cost control measures, while investing to support its growth outlook.

Stock Performance

PBP has a market cap of $144.32 million, with ~ 74.78 million outstanding shares. On 1 July 2020, PBP was trading at $1.95, up by 1.036% (at AEST 2:45 PM).

Volpara Health Technologies Limited (ASX:VHT)

Volpara Health Technologies Limited is a New Zealand based health sector company, which is engaged in providing health solutions relating to breast cancer. The Company’s cancer software platform screens patients and aids in providing personalised care for them.

FY20 Performance: Revenue for financial year 2020 closed 31 March came in at ~NZ$12.6 million, up 153% year over year. The increase was primarily aided by higher subscription revenue, which soared 106% year over year. During the period, percentage of women in the US, having a Group product applied to their images and data stood at over ~27%. Notably, team expansion and scaled up operations, led to an operating loss of NZ$22.96 million in FY20. Loss after tax was up 73% year over year.

The Company’s gross margin stood at 86% in FY20, up from 83% year over year. Operating costs for the period increased to NZ$36 million from NZ$17.1 million in FY19, due to higher investment in the business for growing the sales, marketing and customer success teams’ capability along with costs incurred after the acquisition of MRS buyout. Moreover, adding resources into engineering for R&D and strengthening the executive team with new roles in operations, people and customer success also led to an increase in operating expenditure.

Outlook: Going forward, VHT expects to increase its US sales team along with its APAC & European team with a full suite of products. Further, the Company’s product suite has expanded over the last few years, allowing for increased ARPU from new and existing customers. The momentum is expected to continue, going forward. The company is also working towards restraining costs and optimizing work, with the integration of MRS Systems.

The Company’s efforts for R&D and product improvement will continue to innovate its product suite with the expanded engineering and science teams. VHT continues to innovate data for extracting value for women and investing in engineering team with a strong R&D pipeline. Volpara remains on track to focus on long-term SaaS contracts, which stands to benefit even with COVID-19 outbreak. The Company’s cash collection continues to be strong & shows no signs of any significant churn risks.

Stock Performance

VHT has a market cap of $341.52 million with ~ 249.28 million outstanding shares. On 1 July 2020, VHT was trading at $1.45, up by 5.839% (at AEST 2:45 PM).

Virtus Health Limited (ASX:VRT)

Virtus Health Limited is engaged in providing assisted reproductive services, fertility care services and related specialised diagnostic and day hospital services.

Change in Director’s interest: On 17 June, VRT announced that one of its directors Ms Kathryn Munnings acquired 162,037 performance rights effective 11 June 2020.

Sneak Peek at 1HFY20 Financial Performance: For the 6 months period closed 31 December last year, revenue went up 1% and stood at $142 million. EBITDA for the year came in at $39.5 million, up ~21.9% on pcp. Notably, revenues from international operations grew to 21% of group revenue. EBIT for the period came increased from $25.8 million reported in 1HFY19 to $26.9 million.

The Company’s profit after income tax came in at $15.5 million, up 3.7% on pcp. It was primarily impacted by CEO transition and recruitment costs. Diluted earnings per share for the period came in at 18.48 cents, up 2.1% year over year. The Company declared an interim dividend of 12 cents per share (fully franked) in 1HFY20, which was to be paid by 16 April 2020.

Going forward in FY20 and FY21, VRT is focussed on growing diagnostic revenue and non-IVF day hospital revenue in Australia. In order to deal with the impacts of COVID-19, VRT has recently taken a range of initiatives to reduce costs and minimise cash outflow to preserve liquidity.

Virtus has reduced the fixed remuneration for senior executives and has decided to defer the payment of the interim dividend. It also aims to grow International revenue in existing locations and is focused on cost-cutting initiatives. Higher investments in scientific research and new technologies including Artificial Intelligence helps the Company to deliver improved patient experience.

Stocks Performance

VRT has a market cap of $227.5 million with ~ 80.39 million outstanding shares. On 1 July 2020, VRT was trading at $2.99, up by 5.654% (at AEST 2:44 PM).