May 8, 2023
In this blog post, Bloom Burton’s equity research team summarizes the performance of the Canadian healthcare sector during 1Q-2023 and provides commentary on select stock movements and overall market trends.
The analysis includes all Canadian publicly listed healthcare companies, defined as companies that are Canadian headquartered and/or listed on Canadian exchanges, with either a market cap (MC) or enterprise value (EV) of C$10M or greater at March 31. Our definition of healthcare includes companies operating in the following areas: therapeutic R&D; commercial therapeutics; healthcare services; digital health; medical devices; medical supplies; diagnostics; and consumer health. We do not include medical cannabis or psychedelic medicine companies (unless they are developing cannabis or psychedelic-based products under the traditional drug development regulatory process) or companies that operate long-term care facilities. Based on these criteria we identified 145 companies.
We classify companies as “Tier 1” and “Tier 2” based on their MC – Tier 1 companies are those with MC of >C$100M and Tier 2 are those with MC of <C$100M (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).
As a group, the 145 Canadian healthcare companies included in Bloom Burton’s 1Q-2023 blog universe were up an average 3.6% in the quarter, performing in line with the S&P/TSX Composite Index (+3.7%), but underperforming the S&P/TSX Venture Composite Index (+12.0%). This marks the second positive quarterly performance for the group since 3Q-2021, when the sector returned 0.4%.
Following a strong 4Q-2022, U.S. biotech stocks, which normally lead Canadian stocks, were back in negative territory in 1Q-2023 – the NASDAQ Biotechnology Index (NBI) lost 2.1% in 1Q-2023, underperforming the broader U.S. market (S&P 500 Index was up 7.0%; NASDAQ Composite was up 16.8%). We believe the modest underperformance of U.S. biotech stocks vs their Canadian peers was due to a pull back following their strong outperformance the previous two quarters, reflecting a reversion to the mean. Following the sector’s dismal performance since 3Q-2021, resulting from a general risk-off investment environment and concerns about drug pricing regulation, we appear to be reaching a bottom. However, with low valuations and the large balance sheets of big pharma, we are primed for an M&A-fueled sector rally.
The NYSE Pharmaceutical Index (DRG), which consists of large, well-capitalized, pharma companies, had a similarly weak performance this quarter (down 3.0% vs the NBI’s 2.1% loss), following a very strong performance in 4Q-2022 (was up +17.0%).
Among Canadian healthcare companies, larger Tier 1 companies, which are typically better capitalized and less risky, performed better than smaller Tier 2 companies in 1Q-2023 (+8.9% vs +1.6%, respectively).
Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the best performing subsectors were digital health (14 companies: +24.0%), diagnostics (11 companies: +21.5%) and medical devices (15 companies: +13.2%), which were each boosted by a few high performing names (NetraMark Holdings Inc.: +147.5%; Predictmedix Inc.: +187.5%; Neovasc Inc.: +96.0%; NuGen Medical Devices Inc.: +353.5%). Other sectors had more of a mixed bag of performances, including consumer health (11 companies: +3.3%), therapeutic R&D (60 companies: +0.3%), medical supplies (5 companies: -3.7%), healthcare services (19 companies: -8.8%) and commercial therapeutics (10 companies: -12.0%).
Overall, we included 39 companies in our Tier 1 analysis with MC of $100M or greater, which collectively had a 1Q-2023 return of 8.9%.
The number of Tier 1 advancers (18) was just below the number of decliners (21) this quarter.
Notable Tier 1 advancers in the quarter were:
There were no Tier 1 companies with share price declines ≥50% this quarter.
Overall, we included 106 companies in our Tier 2 analysis (with MC of less than $100M), which as a group had a 1Q-2023 return of 1.6%.
The number of advancers (36) was lower than the number of decliners (65).
Notable advancers in the quarter include:
Notable decliners in the quarter include:
Click Here to View the Appendix
Information included in this blog post has been sourced from publicly available sources. No representation or warranty, express or implied, is made with respect to the accuracy, correctness or completeness of the information contained herein. The commentary in this blog post represents the views and opinions of Bloom Burton only and should not be relied upon as investment advice. Bloom Burton accepts no liability whatsoever for any direct or consequential loss arising from any use or reliance on the information contained herein. The blog is published on a quarterly basis.