Australian healthcare rebounds strongly

The reputation of the Australian healthcare sector as a safe haven for investors is expected to be reaffirmed in 2022, after sluggish underperformance this year.

The healthcare sector underperformed in 2021, experts say, but is expected to perform well next year.

Australia’s healthcare sector’s reputation as a safe haven for investors is expected to be reaffirmed in 2022, after sluggish underperformance this year, experts say.

In another year affected by the COVID-19 pandemic and lockdowns, the healthcare sector has followed a trajectory eerily similar to that of 2020: a sharp decline in March, followed by a bumpy recovery.

But Morgans research analyst Iain Wilkie said the industry’s “shocked” performance in 2021 is not expected to weigh on the outlook for 2022 and beyond.

“We’ve seen a big shift to more cyclical coins and some of the health names have suffered a bit,” he says.

Positive health outlook

But as Wilkie points out, the industry has a strong long-term track record; Over the past five years, the ASX 200 healthcare index has gained an astounding 121%.

“But in the long run, healthcare is one of the most profitable industries year over year, and it’s seen as a safe haven in that regard, and it will come back quite strongly.

“I have a positive outlook and I think we will see more deals and more ceiling increases.

“There is also an increasing emphasis on environmental and social governance (ESG), and health ticks many boxes in this area.

“The exit from COVID will continue to play out for a few years and as the virus becomes less of a concern the market will relax a bit more.

“And any company with clinical-stage assets looking to conduct trials can look forward to 2022 in multiple jurisdictions, as there is less risk of regulatory delays.”

Successes in immuno-oncology

While this is a volatile performance for the industry as a whole, there are certain subsets of healthcare that have enjoyed boom years.

Nowhere has this been seen more clearly than in immuno-oncology, which aims to develop treatments that take advantage of the body’s immune system to fight cancer.

Imugene Limited is perhaps the most successful example in the industry, having gained 370% this year, and over 500% when the stock peaked in early November.

A clinical-stage immuno-oncology company developing a range of new immunotherapies, Imugene has two drug candidates in phase II trials: HER-Vaxx and B-Vaxx.

In early September, Imugene revealed positive data for its phase 2 HER-Vaxx trial in gastric cancer, while in November, the stock hit an all-time high following news that the company had has entered into a clinical trial supply agreement with the big pharmaceutical names Merck and Pfizer.

“Imugene was an absolute ripper,” says Wilkie. “It really started a fire under this area.”

And although he does not work in the nascent field of immuno-oncology, Wilkie has also named Pharmaxis Ltd (ASX: PXS, OTC: PMXSF), another cancer drug developer, as a promising company; it gained 22% this year.

“Pharmaxis will have major results in calendar year 2022, especially in its bone marrow cancer trials and wound care,” he said.

“She has enough money to run her clinical programs and she has an approved cystic fibrosis drug on the market.

“Cystic fibrosis treatment alone won’t set the market on fire, but with an approved drug in the background, the blue skies on the rise for Pharmaxis are fantastic. “

Another broker, Taylor Collison, agrees; he raised his outlook on the company to outperform.

-Daniel Paproth

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