1Q-Stocks Fall Sharply
In this blog post, the Bloom Burton equity research team summarizes the performance of the Canadian healthcare sector during 1Q-2020, and provides commentary on select stock movements and overall market trends.
Our analysis includes all Canadian publicly-listed healthcare companies, defined as companies that are Canadian headquartered and/or listed on Canadian exchanges, with an enterprise value (EV) of C$10 MM or greater. Our definition of healthcare includes companies operating in the following areas: therapeutic R&D; commercial therapeutics; healthcare services; healthcare IT; medical devices; medical supplies; diagnostics; and consumer health. We do not include medical cannabis producers (unless they are developing cannabis-based products under the traditional drug development regulatory process) or companies that operate long term care facilities. Based on these criteria we identified 93 companies.
We classify companies as “Tier 1” and “Tier 2” based on their EV – Tier 1 companies are those with EV of >C$100 MM and Tier 2 are those with EV of <C$100 MM (for a complete listing of companies included in Tiers 1 and 2 of Bloom Burton’s “blog universe”, please see Appendix 1 at the end of the blog).
- The 93 Canadian healthcare companies included in Bloom Burton’s 1Q-2020 blog were collectively down -19.8% in the quarter but despite the weakness, outperformed the S&P/TSX Composite Index (-21.6%) and the S&P/TSX Venture Composite Index (-32.5%). The first quarter decline is a reversal from 4Q-2019 where Canadian healthcare stocks appreciated +16.5% (vs +2.4% for the S&P/TSX Composite Index and +3.4% for the S&P/TSX Venture Composite Index in 4Q-2019). The dismal performance of the overall market during 1Q-2020 was due to investor concern over the global impact of COVID-19 and the oil pricing war between Russia and Saudi Arabia.
- Canadian healthcare stocks generally follow the performance of healthcare stocks south of the border, however, in 1Q-2020, U.S. healthcare stocks performed better, with the NASDAQ Biotechnology Index (NBI) down -10.4% and the NYSE Pharmaceutical Index (DRG) down -11.3%. As in Canada, the NBI outperformed the broader U.S. markets (S&P 500 Index down -20.0%; NASDAQ Composite down -14.2%), despite the poor performance on all fronts. U.S. healthcare stocks performed better than Canadian stocks since they are generally larger and better capitalized than their Canadian counterparts, and thus considered lower risk.
- Among Canadian healthcare companies, larger Tier 1 companies performed equally to smaller Tier 2 companies (both down -19.8% this quarter).
- Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the only ones that were positive this quarter were diagnostics (5 companies: +11.1%) and veterinary (1 company: +6.9%), but both these subsectors consisted of only a few companies. All other subsectors were negative this quarter, with the worst performing being consumer health (8 companies: -32.6%), commercial therapeutics (13 companies: -30.5%), medical devices (11 companies: -28.2%) and healthcare services (13 companies: -26.1%), likely due to the greater exposure of these subsectors’ revenues and profits to the impacts of COVID-19.
Tier 1 Company Performance
- Overall, we included 39 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 1Q-2020 return of -19.8%.
- The number of Tier 1 decliners (28) was higher than the number of advancers (10) this quarter.
Notable Tier 1 advancers in the quarter were:
- BELLUS Health – The stock rose +42.6% during 1Q-2020 due to a series of positive events, including: a competitor validating BLU-5937’s target (P2X3) with positive topline phase 3 topline results in chronic cough; BELLUS announcing the completion of enrollment in its phase 2 chronic cough study; and the company acquiring the remaining intellectual property rights to BLU-5937 from adMare BioInnovations.
- Antibe Therapeutics – Despite stock volatility due to broader market moves, Antibe finished 1Q-2020 up +35.6%, continuing the gains from the beginning of the year, in anticipation of topline data for Antibe’s phase 2b trial for ATB-346 in osteoarthritis, expected in 1H-2020.
Notable Tier 1 decliners in the quarter were:
- Milestone Pharmaceuticals – The stock was down -88.5% during 1Q-2020, after the company announced topline results from its phase 3 study for etripamil in PSVT, which missed the primary endpoint.
- Acasti Pharma – The stock finished 1Q-2020 down -83.4%, after the company reported topline results from its phase 3 study of CaPre in severe hypertriglyceridemia, which did not meet the primary endpoint.
- Oncolytics Biotech – The stock was down -67.8% in 1Q-2020, slowly declining and erasing any gains from 4Q-2019, on the back of the presentation of preclinical and clinical data.
- CRH Medical – The stock declined -58.2% in 1Q-2020, after the company reported 4Q-2019 financial results.
Tier 2 Company Performance
- Overall, we included 54 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 1Q-2020 return of -19.8%.
- The number of decliners (45) was greater than the number of advancers (7).
Notable advancers in the quarter include:
- Trillium Therapeutics – TRIL stock was up +316.5% in 1Q-2020, continuing the gains from 4Q-2019 when the company provided updated safety and efficacy data for TTI-621 and TTI-622. The stock further appreciated in 1Q-2020, after competitor Forty Seven was acquired by Gilead for $4.9 B.
- MedMira – The stock was up +100.0% in 1Q-2020, but the stock generally exhibits large fluctuations in price due to low trading volume.
- SQI Diagnostics – The stock was up +57.5% in 1Q-2020 after the company announced that its one-hour COVID-19 triage test had received funding from the University Health Network.
- Stage Zero Life Sciences – The stock finished 1Q-2020 up +44.4% after the company announced that its CLIA-certified lab was preparing to offer COVID-19 serology and PCR tests in the U.S. and Canada.
Notable decliners in the quarter include:
- Intellipharmaceutics International – The stock finished 1Q-2020 down -84.3%, after the Anesthetic and Analgesic Drug Products Advisory Committee of the FDA voted to not support the approval of Aximris XR for severe pain.
- Neovasc – The stock was down -70.5% in 1Q-2020 after it spiked on December 31 and subsequently declined steadily. The company stated that it has initiated an independent inquiry into the trading of its shares due to unusual activity.
- IntelGenx Technologies – The stock declined -69.1% in the quarter, largely due to the company receiving a Complete Response Letter from the FDA for Rizaport for acute migraines.
- Kalytera Therapeutics – The stock finished 1Q-2020 down -66.7%, after the company announced a new payment agreement with Salzman Group of Israel for CBD development services, in exchange for common shares of Kalytera.
- Helius Medical Technologies – The stock finished the quarter down -66.0%, losing the gains it achieved in late December following the publication of positive results for translingual neurostimulation in the treatment of traumatic brain injury.
- Mondias Natural Products – The stock was down -61.3% in 1Q-2020, with the slide beginning after the company announced a binding LOI to acquire premium organic maple water beverage products.
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This Research Report is provided for informational purposes only and is not an offer to sell or the solicitation of an offer to buy any of the securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this Research Report may not be suitable for all types of investors. This Research Report does not take into account the investment objectives, financial situation or specific needs of any particular investor. Recipients of this Research Report should not rely solely on the investment recommendations contained herein and should contact their own professional advisors to determine if an investment is suitable for them.
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Company Specific Disclosures
1. Bloom Burton & Co. or its affiliates have provided investment banking services for HLS Therapeutics Inc. and Xenon Pharmaceuticals Inc. during the 12 months preceding the date of issuance of the research report or recommendation.
2. Bloom Burton has managed an offering of Antibe Therapeutics Inc., Bellus Health Inc., ESSA Pharma Inc., Greenbrook TMS Inc., HLS Therapeutics Inc., Medicenna Therapeutics Corp., Resverlogix Corp., Trillium Therapeutics Inc., Aurinia Pharmaceuticals Inc. and Titan Medical Inc. during the 12 preceding the date of issuance of the research report or recommendation.
3. Bloom Burton & Co. and its affiliates collectively beneficially own more than 1% of the outstanding common shares of Nuvo Pharmaceuticals Inc. and Mimi’s Rock Corp., respectively.
4. The research analyst responsible for the report or recommendation or any individuals directly involved in the preparation of the report hold or are short the securities of Aurinia Pharmaceuticals Inc., Xenon Pharmaceuticals Inc., Hamilton Thorne Ltd., Bellus Health Inc., Trillium Therapeutics Inc., ESSA Pharma Inc., Correvio Pharma Corp. and Greenbrook TMS Inc. directly or through derivatives.
5. The research analyst responsible for this report or recommendation may hold securities discussed in the report indirectly through Bloom Burton Canadian Healthcare Fund, LP which is indirectly affiliated with Bloom Burton & Co.
6. The research analyst responsible for the report or recommendation has visited facilities operated by Aurinia Pharmaceuticals Inc., Correvio Pharma Corp., CRH Medical Corp., ESSA Pharma Inc., Greenbrook TMS Inc., HLS Therapeutics Inc., Knight Therapeutics Inc. and Trillium Therapeutics Inc. preceding the date of issuance of the research report or recommendation. No remuneration was received from, nor expenses paid by the companies in respect of the visits.