Company Reports

We intend to cease coverage of Integral Diagnostics, Australian Clinical Labs, Healius and Nanosonics. We plan to cease coverage on or around June 30, 2026.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 50% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, some device patents expired in 2025, leading to slower volume growth in the medium term.

Nanosonics' interim 2026 constant-currency EBIT grew 15% on 8% sales growth and margin uplift. While gross margin fell 230 basis points on sales mix, operating expenses grew just 4% on lower research and development costs. Constant-currency guidance ranges were reaffirmed. Shares fell 10%.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 50% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, some device patents expired in 2025, leading to slower volume growth in the medium term.

Shares in Nanosonics recovered strongly in 2025, up 36%. In December, a new endoscope cleaning product, Coris, received regulatory marks to commence a controlled market release with select hospital partners in the UK, Ireland, and Australia from January 2026. US regulatory approval is ongoing.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 50% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, some device patents expired in 2025, leading to slower volume growth in the medium term.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 50% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, some device patents expired in 2025, leading to slower volume growth in the medium term.

Nanosonics increased fiscal 2025 revenue by 17% on strong consumables sales and cross-selling other products such as wipes and covers. Shares reacted positively, up 12%. But the firm guided to weaker gross margins and limited sales from its new endoscope cleaning product, Coris, in fiscal 2026.

While pharmaceuticals are still exempt from US tariffs, President Donald Trump has threatened a potential 200% tariff on these imports, perhaps from 2027. Reciprocal tariffs announced prior have also been delayed by a month to Aug. 1, 2025. Australian healthcare stocks barely reacted.

President Donald Trump unleashed a barrage of reciprocal tariffs on US trading partners that were more expansive and aggressive than the market was expecting. Pharmaceuticals are exempt for now but most medical devices are affected. Australian healthcare stocks broadly reacted negatively.

As we anticipated, Nanosonics’ next major product, Coris, has received US regulatory approval. Coris is designed to automate the cleaning of flexible endoscopes, particularly the complex channels prone to biofilm build up. The positive results from a clinical study in June 2024 demonstrate that Coris outperforms manual cleaning in biofilm removal in endoscopes. We foresee a promising future for Coris and forecast its sales to grow to AUD 100 million by fiscal 2034, accounting for 23% of our fiscal 2034 forecast group revenue. Coris underpins about 16% of our fair value estimate.

As we expected, narrow-moat Nanosonics’ interim fiscal 2025 sales rose 4% sequentially on the second half of last year to AUD 94 million. This was driven by consumables revenue growth of 10%, more than offsetting an 8% decline in capital sales. In addition to improved ultrasound procedure volumes, management spoke to cross-selling other consumable products used in the reprocessing workflow such as wipes and covers. We increase our fair value estimate by 2% to AUD 4.30, largely due to slightly higher forecast consumables revenue in North America, though our long-term estimates are largely unchanged. We forecast EBIT to grow at a five-year CAGR of 53% to AUD 72 million by fiscal 2029.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

We think recent earnings headwinds, such as hospital budgetary constraints, abnormally low ultrasound procedural volumes, and investment in its new product, are largely temporary. We forecast EBIT to grow at a five-year compound annual growth rate of 52% to AUD 71 million by fiscal 2029. We increase our fair value estimate by 5% to 4.20 for narrow-moat Nanosonics, largely due to the stronger US dollar. Shares in Nanosonics currently trade at roughly a 10% discount to our revised fair value estimate.

We think recent earnings headwinds such as hospital budgetary constraints, abnormally low ultrasound procedural volumes, and investment for Nanosonics’ pipeline product are largely temporary, and forecast EBIT to grow at a five-year compound annual growth rate of 51% to AUD 67 million by fiscal 2029. We maintain our AUD 4 per share fair value and earnings estimates for narrow-moat Nanosonics. Shares in Nanosonics have declined roughly 20% since October 2024 and currently trade at roughly a 25% discount to our unchanged fair value estimate.

As we expected, narrow-moat Nanosonics’ fiscal 2024 sales of AUD 170 million were flat in constant currency. While hospital budget constraints weighed on sales, particularly in the first half, conditions and ultrasound volumes improved. Second-half sales were up a strong 14% sequentially on the first half to AUD 90 million. The full-year EBIT of AUD 9 million was stronger than we expected, mainly on an upper end of guidance gross margin of 78%.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

We maintain our AUD 4 fair value estimate and earnings estimates for narrow-moat Nanosonics. The shares trade at a 27% discount to our fair value estimate, as our view that recent earnings headwinds will be largely temporary differs from the market's view. Recent profitability has been negatively affected by hospital capital budget constraints, abnormally low ultrasound procedural volume, and Nanosonics investing in its next major product, Coris, ahead of its expected launch in fiscal 2025.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.