Good morning,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
In 2004, the band Green Day released one of the greatest albums of all time.
Driving yesterday with the 9-minute ballad Jesus of Suburbia on full blast in my car stereo, it struck me…
The Australian stock has been running its own version of this legendary album over the past fortnight.
It starts out with the title track: American Idiot
(No prizes for guessing who that might be in our allegory).
The Boulevards of Broken Dreams are our stock trades…
Down 25% on no news and on low volumes.
What starts out as conviction slowly becomes a hymn called faith and misery.
Navigate the small-cap market with rage and love…is the story of my investing life.
It’s a lonely road.
Honestly, just wake me up when the bear market ends.
But yesterday, there was a glimmer of hope.
Hope?
Not quite a full-blown homecoming…
But still.
A Green Day.
Alright, enough of that… what actually happened?
Yesterday, Trump signed a 2-week ceasefire agreement with Iran to open the Strait of Hormuz.
(Source, Sky News Australia)
This would allow the free flow of oil from the Gulf to the rest of the world, increasing energy supply.
Last week, I wrote about why the oil markets matter for biotech investors.
As global circumstances change, so do the forward-looking values of growth companies.
In a high-inflation, high-interest-rate environment, capital flows to bonds, energy, and cash-generating businesses.
In a low-interest-rate, ‘risk-on’ environment, capital swings to growth stocks and technology businesses.
The green bounce yesterday (particularly in higher risk stocks) was a reflection that ‘this might not last as long as we expected’.
But waking up this morning to the headline "Iran shuts Strait of Hormuz," the sentiment may be short-lived.
(Source, AFR)
What the bounceback does tell me, though, is that there is money sitting there on the sidelines.
Waiting for any sign that this war is over before deploying into the stock market.
Before the war in Iran, the market was going strong…
I don’t think the long-term outlook or trajectory has changed, but there is now volatility for investors to navigate.
Let’s dive in…
The Pulse Check
AVITA Medical (ASX: AVH) secures a 10-year BARDA agreement worth up to $25.5M to ensure emergency access to its burn healing product. (AVH)
🪑 Nice announcement. BARDA is clearly interested in burn-healing products, with Vericel securing a US$197 million contract last week as well.
Immutep (ASX: IMM) provides a broad investor update on the company’s future after the failed Phase 3 clinical trial in non-small cell lung cancer. (IMM)
🪑 This was a good update and worth a read for IMM investors. I hope that long-term shareholders get some answers from the ‘root cause analysis’.
Mesoblast (ASX: MSB) secured FDA IND clearance for its registrational trial in Duchenne muscular dystrophy. (MSB)
EBR Systems (ASX: EBR) reports strong commercial rollout from the limited market release of its leadless pacemaker device. Generating around ~US$2.3M in revenues. (EBR)
🪑 Last week, I had a good conversation with EBR’s head of corporate development, Andrew Shute.
After securing FDA approval of its leadless pacemaker in April last year, it appears that the commercial rollout is firmly on track.
CARETEQ (ASX: CTQ) completes the $5M sale of subsidiary Embedded Health Solutions. (CTQ)
M&A, Big Pharma Wants a Wife
Gilead acquires Tubulis for US$3.15B upfront plus up to US$1.85B in milestones, adding next-generation Antibody-Drug Conjugate (ADC) capability and two key assets. (BioCentury)
🪑Tubulis ADC product is a payload-delivery platform for oncology/cancer drugs, indicating that big pharma is willing to pay for additional tools to their toolkit to improve their own assets.
The company that immediately came to mind for this acquisition was ASX-listed Starpharma (ASX: SPL), which has its own payload delivery technology it is developing with various partners.
See you all tomorrow,
Here is to another Green Day!
The Armchair Analyst
