Good morning, Armchair Army,
Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
Skittish.
That’s probably the best way that I can describe the state of the small-cap healthcare markets right now.
Investors are in the “sell first… ask questions later” mode.
Not on the back of news…
But on just small downward movements in the share price that tip things over the edge for investors.
My uncle, a staunch yield investor, went to the bullion shop and bought some physical gold last week.
Never in my wildest imagination.
We are approaching “extreme fear”:
(Source: CNN)
… but what is the old Buffett saying?
Be fearful when people are greedy and greedy when people are fearful.
I look at some investment opportunities on the ASX today and think… boy, they look attractive.
Discounts galore.
So… what is happening?
Well…
The risk-free rate is rising.
US 10-year bonds are trading above 5%.
It has NOTHING to do with the companies and EVERYTHING to do with the market re-pricing broad-based risk.
The big question is timing.
Will things continue to get worse?
Or will we bounce back?
THREE observations I made in the market last week that suggest the market may be oversold… and investors are jumping at shadows.
But first…
The Pulse Check
Island Pharmaceuticals (ASX: ILA) completes screening and preparing 22 non-human primates for its dose optimisation study in Marburg virus. (ILA)
🪑 30-day study; topline results shortly after; dosing should commence this quarter.
Algorae Pharmaceuticals (ASX: 1AI) has entered into an agreement with Umedica, granting it exclusive Australian rights to distribute eight pharmaceutical molecules. (1AI)
🪑 The portfolio is growing, and the pharmaceutical business will be a major focus in 2027.
Genetic Signatures (ASX: GSS) responded late Friday afternoon to BCAL’s letter, demanding clarification of BCAL’s merger intentions (if there are any). (GSS)
🪑 Gloves are off… It’s all getting a bit messy now.
I’ll have a full “state of play” article this week between GSS, BDX and MAP.
Pro Medicus Limited (ASX: PME) signs a 7-year, A$24M contract with Billings Clinic-Logan Health for its Visage 7 platform. (PME)
🪑 💪
Imugene (ASX: IMU) reports a new Complete Response and Partial Response in its Phase 1b trial of azer-cel. (IMU)
🪑 I find it really hard to track this clinical trial with every patient announcement.
Pacific Edge (ASX: PEB) announces potential Medicare price increases to US$1026 (up 35%) for Cxbladder Monitor and US$1058 (up 39%) for Cxbladder Triage. (PEB)
🪑 Good result.
Still waiting for that coverage determination to take effect (it’s still in draft for the moment) before US sales can take off again.
AdAlta (ASX: 1AD) secures an Advance Overseas Finding, anticipating over A$1 million for its FY26 R&D Tax Incentive. (1AD)
🪑 Nice. The Advance Overseas Finding lets you claim the R&D refund for activity done overseas.
ReNerve Limited (ASX: RNV) 12-month preclinical results for NervAlign® show nerves regenerate, animals recover well, and walk better. (RNV)
Cryosite (ASX: CTE) reports a 17% revenue increase to $4.6M and a 16% rise in NPAT to $0.7M. (CTE)
🪑 CTE delivered another good quarter, with all numbers moving in the right direction.
Also, the TGA audited the new Auburn facility (which I visited), and it should be up and running soon.
ECS Botanics Holdings Ltd (ASX: ECS) grew cannabis product sales 13% quarter-on-quarter to A$5.49 million. (ECS)
🪑 Nice quarter again.
The OzSun brand appears to be resonating with customers - 44.5% YoY growth (18.2% QoQ).
It will be interesting to see how the UK launch goes in November (ECS's biggest growth market).
Mesoblast (ASX: MSB) reports Ryoncil® net revenue of US$28 million (up from US$19 million in the prior corresponding period, but down from US$36 million last quarter). (MSB)
EBR Systems (ASX: EBR) appoints Dr Robert Canby as Chief Medical Officer. (EBR)
Botanix Pharmaceuticals (ASX: BOT) announces the resignation of Danny Sharp and Stewart Washer. (BOT)
Dimerix (ASX: DXB) announces Chair Mark Diamond's retirement. (DXB)
Markets move in cycles.
Bull markets → Bear markets. Fear → Greed. Hope → Despair.
(and back again)
It’s like a beautiful dance.
The collective psyche of “everyone” sways in unison between the cycle's edges.
Right now we are in the “Extreme Fear”.
Which is driving a lot of trading and decisions.
Sell first, ask questions later.
Skittish (is how I’d describe it).
THREE examples from last week
FIRST, Mesobalast (ASX: MSB).
The company reported the FYQ1 sales for its stem cell product for aGvHD.
US$28 million.
This came in under last quarter (US$36 million) but well above the previous comparable quarter (US$19 million).
Drug sales (particularly for small-indication orphan drugs) can be seasonal, and the “summer Q1 period” tends to be weaker overall as doctors who prescribe the drugs are on holiday.
The market immediately sold off… then, over the course of the day, basically recovered back to square one:
Sell first, ask questions later.
SECOND, Amplia (ASX: ATX, held).
Down 20%.
…on no news.
The ASX asked for a “please explain”, and this might have been the shortest response to a price query I’ve ever seen:
(Source, ATX)
Still… they traded $1.3M of stock.
(second largest volume day since April)
My take?
Stocks fell because there were more sellers than buyers.
(Duh!)
… and one large seller pushed through the 10-cent support level.
This created a cascading effect, with large volumes as stop losses were hit and technical traders exited the stock.
A support level is a price point where buying demand has historically been strong enough to stop a stock from falling further.
Falling through a support level suggests sellers are outweighing buyers' demand...
And the stock will need to find new support at a lower price.
THIRD, Avecho (ASX: AVE).
I wrote about this last week…
The market was “spooked” by one big seller, leading to huge selling volume.
The stock is essentially trading back to where it was BEFORE the successful interim result.
So… what’s happened?
What’s changed in the market?
It’s all got to do with the risk-free rate.
A great “repricing” of risk assets coming?
The risk-free rate is the return investors get on a 10-year US Treasury bond.
The market collectively calls this the risk-free asset.
(because the US Treasury is unlikely to default…)
Still, as inflation rises, oil prices go up, and the US Government prints money, the “risk” on the 10-year US Treasury rises.
Above 5% yield.
That’s where we’re sitting at today.
… and this is essentially the new “risk-free rate” that investments must beat to attract capital.
In the glorious “bull market” days of 2020 and 2021, the “risk-free rate” was less than 1%.
Everyone is “risk on”.
Over the last six months, the risk-free rate has climbed above 5%.
As the risk-free rate climbs, investors demand higher returns.
With upside generally fixed, the only variable that moves is price.
So a higher return profile (at the same level of risk) pushes prices down on ALL risk assets.
This is what is happening…
A great re-pricing of risk.
We are approaching “extreme fear”:
(Source: CNN)
But the question is…
Will this be a short flash in the pan?
OR
A prolonged challenge for asset risk?
Because fortunes are PLANTED in the bear market and HARVESTED in the bull market.
But who knows.
… I’m just the Armchair Analyst.
See you all tomorrow,
The Armchair Analyst
What is an armchair pick?
An Armchair Pick is an invite-only spot I reserve for my highest-conviction investment ideas.
It's a paid arrangement, but to align myself, I only take my fee in shares - half escrowed for 6 months, half for 12.
It is general commentary only, not personal financial advice or a recommendation to buy, sell, or hold. Always see the disclosure at the top of the article and do your own research.
