Healthcare Dose: Mesoblast, Sonic, Sigma, AVITA, Fisher & Paykel

The Australian Medicare is the foundation of the health care system since 1984 and has three major divisions- public hospitals, medical services and medicines. One of the essential parts of Medicare is the Pharmaceutical Benefits Scheme (PBS) which helps in making drugs cheaper. There are more than 5,200 products which include branded, generic, biologic and biosimilar medications listed in PBS. In Australia, the Government usually funds most of the cost for medical services, in 2016-2017, the Australian Government spent approximately $5.5 billion on health research.

In this article we are discussing five ASX listed health care stocks-

Mesoblast Limited (ASX:MSB)

Melbourne headquartered, ASX listed regenerative medicine company Mesoblast Limited (ASX:MSB) is engaged in developing and commercialising new cellular medicines for the treatment of complex diseases. The company has a strong intellectual property position and has nearly 800 patents/patent applications belonging to 69 patent families. Mesoblast has a robust management team which is led by Chief Executive Dr Silviu Itescu, and the company employs nearly 80 employees in Australia, Singapore and the US.

The company recently reported the quarterly financial highlights for the period ended September 30, 2019. The key highlights for the first quarter FY2020 are-

• The company generated revenue of US$17.0 million for Q1 FY2020, which increased US$5.4 million as compared to Q1 FY2019.
• The R&D expenses of the company decreased to US$12.4 million for the Q1 FY2020, as compared to the first quarter FY2019 (US$18.5 million).
• The expenses in the manufacturing for Q1 FY2020 stood at US$2.7 million, decreased by US$1.6 million as compared to the Q1 FY2019.
• Cash on hand was US$34.5 million at September 30, 2019.
• Remestemcel-L for acute graft versus host disease (aGVHD)- Mesoblast submitted filling of Biologic License Application to the US FDA and would be informed by FDA for acceptance within a maximum of 60 days. If it would get approved from FDA, the launch is expected by next year.
• The company entered into a strategic partnership with Grünenthal, which is a global leader in the management of pain, for the development and commercialisation of MPC-06-ID, for the treatment of degenerative disc disease associated chronic low back pain.
• Mesoblast and InCHOIR agreed on a protocol which is for a confirmatory Phase 3 trial of Revascor. Revascor would be tested in the patients with a LVAD (left ventricular assist device) and end-stage heart failure.

Stock information-

The company’s stock was trading at $1.830 on 27 November 2019 (at AEST 1:14 PM) down by 0.543%, with a market capitalisation of nearly $987.49 million. The company has delivered a return of 45.45% on a YTD basis and 27.78% in last six months.

Sonic Healthcare Limited (ASX:SHL)

Rated as one amid the top-50 ASX listed health care company Sonic Healthcare Limited (ASX:SHL) is headquartered in Sydney. The company offers laboratory, pathology and imaging services to hospitals and health care practitioners. The company was established in 1987, and since its establishment, the company achieved an excellent growth to become the third-largest pathology/laboratory medicine company across the globe. Sonic is operating in eight countries with more than 36,000 employees.

Sonic Healthcare Limited recently updated the market with its AGM presentation, wherein, the company highlighted its performance in the fiscal year 2019 (year ended 30 June 2019)-

• Sonic generated revenue of $6.2 billion for FY2019, up by 11.6% as compared to the last fiscal year.
• The company’s underlying EBITDA growth for the fiscal year 2019 was at 6.7%.
• The EBITDA of SHL was reported at $1.1 billion, increased by 13.3% as compared to last fiscal year.
• Net profit growth of $550 million (15.6%) recorded for FY2019.
• Aurora Diagnostics acquisition completed in January 2019.

Outlook-

• Sonic Healthcare Limited has a well-planned pipeline of joint ventures, acquisitions and contract opportunities.
• More growth opportunities are expected in upcoming years by the geographical diversification made in the fiscal year 2019.

Stock Information-

The company’s stock was trading at $30.430 on 27 November 2019 (at AEST 1:17 PM), up by 0.762% with a market capitalisation of $14.34 billion. The stock has delivered a return of 38.53% on year to date basis.

Sigma Healthcare Limited (ASX:SIG)

An ASX listed company Sigma Healthcare Limited (ASX:SIG) is a leading network of independent as well as franchised pharmacy stores. Sigma Healthcare Limited is engaged in offering an array of quality and both private & exclusive label goods.

On 26 November 2019, the company updated the market with Investors Day Presentation discussing the overview of the company and its plans. Key highlights from investors presentation are-

• Chemist Warehouse contract (MC/CW Group) for the supply of FMCG products for 4.5 years and the annual revenue expected from this is nearly $700-$800 million
• In the first half of the FY2020, the company grew non-CW sales at 6.9%.
• The company’s brands partners, such as Pharmacy Alliance are growing continuously.
• For the next year, SIG’s has a strong product pipeline for both independent wholesale customers and new branded opportunities.

Forecast for 2020-

• The company is expecting Revenues for warehousing and logistics to be ~2.5% of the sales revenue or more than $800 million.
• Sigma Healthcare would target the Pharmaceuticals, OTC Pharmacy sectors and Consumables-

Source: Investor’s presentation

The company’s stock was trading at $0.727 on 27 November 2019, down by 1.088% (at AEST 1:20 PM), with a daily volume of 2,279,450 and a market capitalisation of nearly $778.69 million. SIG’s outstanding shares were noted at 1.06 billion. The stock has delivered a return of 34.86% in the last six months.

AVITA Medical (ASX:AVH)

A health care company AVITA Medical (ASX:AVH) provides regenerative medicine therapy for the unmet needs in wounds, burns and aesthetics. The company’s medical devices work by an autologous suspension (REGENERATIVE EPIDERMAL SUSPENSION™), which helps to make natural healthy epidermis and can be easily sprayed on the areas (skin) requiring treatment. In 2018 the US FDA approved RECELL® System, which is AVITA’s first product for the treatment of acute thermal burns (patients ?18 years).

The company released its annual general meeting (AGM) presentation on 26 November 2019, highlighting the overview and the current market of the company.

The key highlights are-

• For RECELL market & distribution collaboration (Cosmotec/M3) was done in Japan.
• The United States product sales were A$10.8 million through September 30, 2019.
• The company received FDA approval for a clinical trial- pivotal Soft-Tissue Repair/Trauma.
• AVITA received positive clinical trials results in burns, in the United States.
• The company has a focused product Pipeline with robust growth potential-

Source: AGM presentation

In another recent ASX update, the company announced a collaboration with the University of Colorado for a preclinical research collaboration to establish proof-of-concept and explore the development of a spray-on treatment of genetically modified cells in epidermolysis bullosa patients.

The AVH stock was trading at $0.605 on 27 November 2019, down by 0.82% (at AEST 1:23 PM) with a daily volume of 7,307,528 and a market capitalisation of nearly $1.29 billion. The company has delivered a good return of 627.85% on a year to date basis.

Fisher & Paykel Healthcare Corporation Limited (ASX:FPH)

A New Zealand based health care player Fisher & Paykel Healthcare Corporation Limited (ASX:FPH) is engaged in offering medical devices for the treatment for diseases associated with the respiratory system. Fisher & Paykel is into designing new medical therapies and devices that are used for providing critical care to the patients.

According to one ASX update the company announced that it would release financial results for six months of the fiscal year 2020 (ended September 2019) on 27 November 2019.

F&P’s new OSA Full Face Mask for obstructive sleep apnea is now available for sale in the US and FPH has revised its revenue and earnings guidance for the fiscal year (closed 31 March next year).

In August 2019, the company provided full-year guidance based in an NZ:US exchange rate of 64 cents, according to this, the estimated operating revenue was ~NZ$1.17 billion and NPAT was nearly NZ$245 million to NZ$255 million.

Now the company upgraded the guidance on the basis of an NZ:US exchange rate of nearly 63 cents. The company is expecting a revenue of almost NZ$1.19 billion and NPAT at ~NZ$245 million to NZ$255 million.

The company’s stock was trading at $19.880 on 27 November 2019 (at AEST 1:25 PM), up by 1.325%, with a market capitalisation of $11.27 billion. The stock has delivered a return of 62.01% on year to date basis.

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