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Speaker 1: Welcome to Fear and Greed investing series brought to you

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Speaker 1: by Vanta specialists in Compliance lead Growth. I'm Seana Aylmer.

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Speaker 1: Australia is home to a very strong healthcare sector. I

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Speaker 1: wanted to take a closer look at the companies in

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Speaker 1: this space and see how investors should think about them.

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Speaker 1: As always, this is general information only and you should

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Speaker 1: seek independent advice before making investment decisions. Steve Ween is

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Speaker 1: the Managing director Equity Research at Jardin Australia, heading up

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Speaker 1: their healthcare team. Steve, Welcome to Fear and Greed.

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Speaker 2: Thanks Sean upfront.

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Speaker 1: Why does Australia have such a voluminous healthcare sector? Why

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Speaker 1: are we so big in healthcare?

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Speaker 2: With quite an eclectic healthcare space when you think about

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Speaker 2: the areas of specialty. We've got a company like CSL

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Speaker 2: which derives its a majority of its drugs from blood plasma.

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Speaker 2: There's not a company like that in the ASX other

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Speaker 2: them CSL. And then we have like Cochlear, which is

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Speaker 2: leading I mean it would have seventy five percent market

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Speaker 2: share globally and Cochlear implants. Then we've got Resmet. He

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Speaker 2: was the number one sleep apnear provider. So they are

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Speaker 2: very different areas and it's just a vagary of some

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Speaker 2: very innovative people. CSL came out of the government, but

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Speaker 2: the other two were some pretty impressive individuals that forged

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Speaker 2: that technology early on.

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Speaker 1: Now, the last tree months has been good twelve months

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Speaker 1: for the healthcare sector, and our CSL perhaps is a

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Speaker 1: little bit outside that. What I mean, what is happening

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Speaker 1: at CSL's our third biggest company, perhaps the company in

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Speaker 1: the top ten that most of us know least about

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Speaker 1: almost you know, what's the diagnosis for CSL for the

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Speaker 1: next twelve months or so?

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Speaker 2: Yeah, So CSL was hit hard during COVID, and the

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Speaker 2: main reason being it derives, as I mentioned, majority of

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Speaker 2: its drugs human plasma. The problem they've had is that

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Speaker 2: during COVID, nobody was donating plasma, and this is their

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Speaker 2: lives the most important raw material for manufacturing their pharmaceuticals.

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Speaker 2: So then coming out of that, it was trying to

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Speaker 2: bring people back to the donation clinics to actually provide it.

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Speaker 2: And then it's a roughly about a nine to twelve

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Speaker 2: month manufacturing cycles. So the blood or the plasma collect

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Speaker 2: today will not appear as a product that's available for

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Speaker 2: sale for another twelve months, so as we start ramping

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Speaker 2: up the collection and then the manufacturing. It's been a

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Speaker 2: very slow re entry back into the market and everyone's

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Speaker 2: been waiting for their earnings to sort of replicate what

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Speaker 2: they were like pre COVID, and we're not quite there yet.

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Speaker 2: There's something like an eight hundred and fifty basis point

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Speaker 2: improvement in margins required to get back to where we were,

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Speaker 2: and it's coming, but it's just taking a long time.

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Speaker 1: Cocklear, you mentioned that seventy five market share in that area.

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Speaker 1: I mean, that's an incredible success story. Can it keep going?

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Speaker 2: I believe it can. Its latest focus is on the

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Speaker 2: adult community and ault and elderly, and that is a

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Speaker 2: hard cell. Initially to try and get someone who's elderly

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Speaker 2: with the degenerative hearing condition to actually commit to what

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Speaker 2: would be a fairly life changing, very invasive piece of surgery.

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Speaker 2: So that is a difficult process to actually convince them

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Speaker 2: to go down this path. But ultimately they either opt

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Speaker 2: out of life and sit in the corner and don't

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Speaker 2: listen to much, or they can be part of it.

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Speaker 2: And increasingly we're seeing the adults slash elderly adopt this

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Speaker 2: surgical procedure sooner and as a result, that is where

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Speaker 2: the growth is coming from. But Cockler has been very

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Speaker 2: innovative in this process. They're doing a lot of R

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Speaker 2: and D around various iterations of this product, including the

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Speaker 2: electrode that goes into the inner ear. They've been able

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Speaker 2: to fine tune that so that they can connect to

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Speaker 2: more nerve endings. There's a whole range of things that

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Speaker 2: they've been able to innovate with regards to the processor,

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Speaker 2: being able to link it and buy a bluetooth, to

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Speaker 2: streaming devices to pick up telephones. So they've been very

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Speaker 2: much at the forefront of this technology and that's why

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Speaker 2: the market share is so strong and continues to increase.

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Speaker 1: So finally, I just want to talk about it company

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Speaker 1: that perhaps for many people who don't know about. We

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Speaker 1: all have heard of some of the names they've been

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Speaker 1: talking about, Integral Diagnostics. I know you cover that one

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Speaker 1: as well. Tell me about that group.

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Speaker 2: So this is a diagnostic imaging company that's just completed

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Speaker 2: a merger with Capital Health, which is another imaging provider

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Speaker 2: within the Australian context. The aggregation of these two businesses

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Speaker 2: is a very complementary fit and what we as one

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Speaker 2: of our key stocks that we prefer within the Australian

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Speaker 2: healthcare space. But one of the things we like about

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Speaker 2: it is the government is deregulating MRI licenses and essentially

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Speaker 2: you're seeing partially funded from Medicare MRI machines will be

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Speaker 2: upgraded to being fully funded. Ultimately. The government's trying to

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Speaker 2: address the lack of accessibility to MRIs, very long waiting

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Speaker 2: lists to actually get an MRI. I'm sure people listening

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Speaker 2: to this have experienced that, and so this will encourage

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Speaker 2: people to go through this very important diagnostic process. It's

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Speaker 2: very accurate, it's far better than an X ray and

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Speaker 2: it could even sort of ultimately surpass the use of

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Speaker 2: X rays. And as a result, we see some very

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Speaker 2: attractive upside to the earnings potential of this newly created group.

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Speaker 1: Steve, thanks for your time today, No bond's at all show.

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Speaker 1: That was Steve ween A, Managing Director Equity Research at Jarden.

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Speaker 1: Remember to get to your own independent advice before making

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Speaker 1: investment decisions. This is Fear and Greed Summer Investing series

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Speaker 1: I'm Sean Elmer. Enjoy your day,