Health Check: ASX health shares ride the US midterm ‘blue wave

• Investors see the Democrats’ Congressional sweep as a Good Thing for healthcare – but the ‘how and why’ gets murkier.
• ASX healthcare stocks bolted out of the blocks today, up around 2.75%
• Neuren ups earnings guidance on Rett syndrome drug sales

Before the American people spoke so resoundingly with their pencils yesterday – and not even Donald Trump had the temerity to claim Republican votes were rubbed out – some market gurus opined that a Democrat Congressional pushover would be bad for markets.

The thinking went that Democrat control of Capitol Hill would stymie the ability of the White House – and politicians generally – to ‘get things done’.

As evidenced by the Dow’s 3% surge overnight, investors actually don’t like pollies doing things outside of the Washington bubble.

“In many ways this is a victory for the ‘swamp’ and they return to business as usual,” says Ord Minnett’s market veteran Richard Morrow.

Investors seem enamoured with another facet of inertia. That’s preventing one particular politician – his initials are D.J.T. – from doing stuff such as imposing punitive tariffs on friendly countries.

Will Dems restore public health funding?

While red-faced market watchers will be revising their Dem Deadlock Disaster scenarios, they pretty much got it right with healthcare stocks.

The broad-brush idea is that the Democrats will take a more amenable stance on public health funding. This includes winding back proposed Medicaid cuts and restoring Affordable Care Act subsidies.

This was evidenced by an overnight surge in US hospital shares, led by Community Health Systems (up 16%).

MFS Investment Management opines that better funding would lower health insurance premiums, enabling more US consumers to gain coverage.

“Coverage expansion is also likely to improve hospital finances and prescription volumes.”

On drug prices, MFS says, the Dems are likely to demand more transparency on Most Favoured Nation (MFN) drug pricing deals.

Given that MFN aims to reduce pharma prices for Americans, we don’t think the blue side of politics would be totally opposed to it.

Both parties also are likely to support greater domestic drug manufacturing – and less reliance on China – as being in the national interest.

Throw in separate Medicare drug price negotiations and it makes for a complex US healthcare regulation picture. As usual.

On the biotech (research) side, hopes abound for stronger funding of the National Institutes of Health (NIH) and other medical research institutions.

Healthy day for US medical stocks

What’s all this mean for ASX healthcare stocks?

Denis Denuto should be long retired – or disbarred – by now, but it is all about the vibe.

The warm and fuzzy stuff was enough to send the S&P/ASX200 healthcare sector up 2.75%, compared with the broader market’s 1.7% increment.

Overnight the Nasdaq biotech index gained 2.7%.

Neuren Pharmaceuticals (ASX:NEU) led the local gains, surging 16% although the drug maker also upgraded earnings (see below).

Shares in radiology imager ProMedicus (ASX:PME) shot up almost 8%.

The market gods shone on the besieged Cochlear (ASX:COH) , up 5%.

The hearing implant maker has been weighed down partly by poor US consumer sentiment. This may improve given the midterm political certainties have gone.

Shares in the US-focused radiopharmaceutical play Telix Pharmaceuticals (ASX:TLX) gained 4.5%. The biggest ASX healthcare stock, CSL (ASX:CSL) , edged up 1.4% (also see below).

ASX health stocks exposed to US drug pricing include CSL, Neuren, Telix, Mesoblast (ASX:MSB) , Clinuvel Pharmaceuticals (ASX:CUV) and Botanix Pharmaceuticals (ASX:BOT)

Arguably they have their reimbursement ducks in a row already.

But more supportive policy settings may help companies that might launch US drugs in the foreseeable future.

These include Dimerix (ASX:DXB) , Recce Pharmaceuticals (ASX:RCE) , Island Pharmaceuticals (ASX:ILA) ,Imugene (ASX:IMU) and Actinogen Medical (ASX:ACW) .

Island and Imugene shares gained around 10%

As with Pro Medicus and radiology, more visits to the doc mean more pathology tests.

That benefits Sonic Healthcare (ASX:SHL) , which gleans $2 billion (19%) of its revenue from the US.

Sonic shares boomed 2% this morning.

Neuren ups guidance on Daybue sales surge

Neuren has upgraded full-year guidance after its US marketing partner reported a 39% surge in Daybue (trofinetide) sales.

Sold via the Nasdaq-listed Acadia Pharmaceuticals, Daybue is Neuren’s breakthrough drug for the childhood neurological disorder Rett Syndrome.

Acadia reported September (third) quarter sales of US$140 million, driven by a more palatable formula called Daybue Stix.

More than half of US Daybue users are now on Daybue Stix, compared to 40% at the end of the June quarter.

Thus, Acadia has bumped up full-year sales expectations to US$505-520 million, from the previously guided US$480-510m.

Neuren pockets royalties from these sales. For the quarter these amounted to US$16.4 million, 51% higher year-on-year.

The company now guides to calendar 2026 trofinetide income of US$91-93 million, compared to previous guidance of US$53-56m.

The number includes a US$35 million milestone payment resulting from October’s launch of Daybu (without an ‘e’) in Germany.

Time for a CSL breather, says broker

Broker Morgans has called time on the “remarkable recovery” of CSL shares, which have more than doubled from their June nadir.

The firm “remains constructive” on CSL’s underlying franchises and longer-term earnings potential.

But “the recovery has been driven principally by a restoration of confidence rather than a material improvement in near-term earnings expectations”.

Morgans says with management execution risks remaining, “further upside will increasingly require evidence of sustainable earnings growth, rather than simply [a] re-rating.”

In other words: the vibe ain’t enough.

CSL has guided to flat revenue for the year to June 2027, with a 5% underlying net profit increment.

Morgans has downgraded CSL from a ‘buy’ call to a ‘hold’.

But the firm has also hedged its bets by upping its ‘target price’ from $187 a share to $210/sh.

Rhythm gets into the GP groove

Blood-based bowel assay developer Rhythm Biosciences (ASX:RHY) well knows that if you sell via busy GP clinics, you must not interrupt workflow, er, rhythms.

In this vein, the company reports that about 95% of Australian GP practices now can order its Colostat test online. This is via the MedicalDirector and Best Practice networks.

The company also has a network of more than 130 collection sites (4Cyte Pathology) across the eastern seaboard, compared with 100 in August.

Today, Rhythm also said that docs using the Best Practice (Bp) Premier portal could order online, rather than having to download a form and fill it in.

Given doctors’ notoriously bad handwriting, that’s surely a good thing.

About 80% of local GPs use Bp Premier, the most of any GP software platform.

Rhythm last week reported a 56% surge in Colostat orders for the September quarter, albeit off a derisory revenue base.

About 20% of docs ordering the tests are repeat requesters.

Sadly, this progress has done nothing for Rhythm’s discordant share price, which has slumped 21% over the last month and 53% year to date.

At Stockhead we tell it like it is. While Dimerix, Recce and Island are Stockhead advertisers, the companies did not sponsor this article.

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