Good morning,
Welcome to today’s edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.
The markets this week remind me a lot of that DJ Khaled/T-Pain song from 15 years ago…
Up. Down. Up. Down. Up. Down. Up. Down.
Disaster from Immutep, then a bull case result from Amplia.
Inflation is increasing, and everyone is just wondering… what will happen in Iran?
Markets are forward-looking,
Which means they're also extremely reactionary.
Every headline, every tweet (and Trump has put out a few beauties this week), every press conference moves the dial.
And when circumstances normalise, the market snaps back just as fast as it fell.
A friend asked me this week: "But isn't healthcare a defensive industry? People still get sick regardless of inflation."
True.
For healthcare companies with products in the market and revenues coming in, that logic holds.
But for the type of investments I make (the real speculative stuff), rising inflation is not a friendly environment.
Early-stage biotechs are cash burners, not cash generators.
When inflation goes up, interest rates follow…
Borrowing becomes more expensive.
Investors become less willing to fund risky projects.
And the present value of future profits is reduced.
Cash now is better than cash later.
When inflation goes down, interest rates follow too…
Investors are looking for risk-on assets.
Cash is decreasing in value.
Biotechs become investible.
Last week, the Reserve Bank lifted the cash rate to 4.1% in a tight 5-4 decision, and more increases are expected throughout the year.
It's a direct response to the oil price shock from Iran.
As global circumstances change, so do the forward-looking values of growth companies.
(No analyst had a rate rise this early pencilled into their biotech forecasts at the start of the year.)
It’s a tough environment right now, particularly trying to decipher what is real and what is noise.
How long will this last… and what will the cascading inflationary effects be that change the investment thesis for risk-on assets?
But with volatility comes opportunity.
Some of my best-ever investments have been in the bear market (you just get a better price on the stock).
What I’ve been doing is culling non-core positions, dollar-cost averaging into the ones I believe in.
It's uncomfortable, but as Churchill said: never let a good crisis go to waste.
Let’s dive in…
The Pulse Check
Lumos Diagnostics Holdings (ASX: LDX) requests a trading halt pending an announcement on the FDA response to the FebriDx CLIA waiver application. (LDX)
🪑 This is a big catalyst that the market has been waiting for 🍿.
Clarity Pharmaceuticals (ASX: CU6) signs a large-scale Manufacturing Supply Agreement with Theragenics for copper-64 production. (CU6)
EchoIQ (ASX: EIQ) secured an agreement with the Mayo Clinic to deploy its FDA-cleared AI-based heart failure detection software across the Mayo Clinic's 80+ hospital network in the US. (EIQ)
🪑 Totally missed this one yesterday. Nice work EIQ.
4DMedical (ASX: 4DX) deploys its CT: VQ™ at Mayo Clinic, the sixth leading U.S. academic medical centre to adopt the technology since FDA clearance. (4DX)
🪑 Mayo Clinic procurement officer signing off on everything before the Easter Break, it appears. First EIQ, now 4DX.
Genetic Technologies (ASX: GTG) will not proceed with the acquisition of Ellerfield Private Wealth. Two more directors in, two directors out. (GTG, GTG)
🪑 Bit of a fight for control over this shell in suspension.
As promised, here is the full Amplia (ASX: ATX) update report from Evolution Capital analyst Jacob Hoeing, who helped me set the bull/bear/base case scenario for Amplia results last Friday. (Report)
M&A, Big Pharma Wants a Wife
Gilead will acquire privately held Ouro Medicines for US$1.68B upfront plus up to $500M in milestone payments, adding a number of autoimmune assets to its immunology pipeline. (Reuters)
Sanofi has inked a deal for rights to an early-stage T-cell engager targeting autoimmune diseases from Kali Therapeutics, for US$180M upfront and $1.05B in development milestones. (FirstWorld Pharma)
🪑 Two deals in the autoimmune space in one day.
See you all tomorrow,
The Armchair Analyst.
