April 7, 2017

Q1 Share Price Performance in 2017 - Part 3

Tier 2 Canadian Healthcare Companies – nicely positive with moderate volatility

In this blog, I am going to comment on the Q1 2017 share price performance of the group of 69 companies with share prices of between $0.10 and $0.99 to start 2017 (revised from 72 companies mentioned in Part 1).

  • Advancers outnumbered decliners by 40 to 29
  • Average and median share price changes were +13% and +5%, respectively
  • Twelve companies in this group had share price increases of 40% or more
    • VentriPoint Diagnostics (+317%) – announced that it received a Health Canada license for its VMS-PLUS™ machine and 4-chamber heart analysis system; after this news triggered a share price increase, the company completed a private placement for $3.4 M; now comes the big hurdle for Canadian diagnostics companies – turning a product approval into sales
    • Oncolytics Biotech (+126%) – slow rise from a bottom culminating with positive Phase 2 data for REOLYSIN in treating metastatic breast cancer; next hurdles are regulatory blessing of the Phase 3 trial design and finding the funding and/or partner for the trial
    • InMed Pharmaceuticals (+107%) – no significant product news (cannabinoid therapeutics); raised almost $3 M from a financing and warrant exercise
    • IBEX Technologies (+100%) – reported slightly improved financial results
    • Revive Therapeutics (+91%) – announced a product pipeline expansion through the development of cannabinoid-based therapeutics targeting liver diseases
    • ImmunoVaccine (+68%) – no major news but did announce some early clinical data and new clinical plans
    • CVR Medical (+67%) – no major news; sporadic and low volume trading
    • Spectral Medical (+53%) – completed another step towards completion of its PMA submission for Toraymyxin with the U.S. FDA, despite previously missing the primary clinical endpoint in its pivotal clinical trial
    • Luminor Medical Technologies (+53%) – no significant product or sales news; completed a $1.1 M financing
    • DiaMedica Therapeutics (+47%) – completed dose optimization study of DM 199 in human volunteers; intend to start Phase 2 trial in stroke patients
    • Patient Home Monitoring (+46%) – announced improved financial results
    • Imperial Ginseng Products (+44%) – no major news; slow but steady share price increase during Q1 on sporadic and low trading volumes
  • Four companies had a share price decline of more than 40%
    • KDA Group (-45%) – no major news; slow but steady share price decline during Q1 on sporadic and low trading volumes
    • Pascal Biosciences (-45%) – declined from a share price spike near the end of Q4 2016; reverted to a trading plateau of $0.40 to $0.50 on sporadic and low trading volumes
    • Eternity HealthCare (-66%) – no major news; slow share price decline during Q1 on low trading volumes
    • Hemostemix (-80%) – the reason for the share price decline was probably concern about financial viability

There is nearly always more volatility in the share prices of Tier 2 companies than for the Tier 1 companies. There were share price changes of 40% or more (positive and negative) for 8 out of 50 (16%) Tier 1 companies and 16 out of 69 (23%) Tier 2 companies. The major difference in Q1 between these two groups is that specific announcements triggered most of those changes in Tier 1 and the changes in Tier 2 often occurred in the absence of major news and with low volume, sporadic trading.

There are more than 30 companies in the sector which closed 2016 with share prices below our $0.10 limit for inclusion in Tier 2, including LED Medical Diagnostics which ended 2016 with a share price of 6 cents. The share price increase of 64% in Q1 2017 deserves mention because LED announced completion of the acquisition of Apteryx (dental imaging software) for an aggregate purchase price of US$10.25 million and the related financings for gross proceeds totaling approximately C$14.4 million.

Medical/Retail Marijuana Group

Nineteen public Canadian marijuana companies are being monitored for share price performance in 2017. Most companies in this sector are in the early stages of commercialization, either still seeking Health Canada licenses or not yet profitable.

  • There were 9 advancers and 10 decliners in Q1
  • Average and median share price changes were +24% and -2%, respectively; if Canadian Bioceutical (+395%) is removed from this analysis, the average share price change is +4%
  • Three companies (tickers BCC, MJN, VRT) had share price increase of 40% or more while only one company (ticker EAT) had a share price decrease of 40% or more

The announcement by the Canadian government on the decriminalization/legalization of marijuana use in Canada was announced after the end of Q1. The stock market anticipated that the legislation would create a highly-controlled market with large potential revenues but with many unknowns. One of the biggest unknowns is how each province will manage marijuana sales. As a reminder, marijuana is still illegal under U.S. federal law (unlikely to change soon) and, in the states where it is legal, all marijuana products must be made in the state where they are sold. The lack of information and clarity on the marijuana market led to stock market uncertainty which flattened out the sector share prices.

Looking Ahead

Last quarter, the expectation of certain legislative actions in the U.S. started the ‘Trump rally’, which continued into Q1. While no legislation has yet been passed, the expectations are still high. The Q1 earnings season is ongoing, with most companies meeting their lowered expectations. The pharma and biotech companies are hoping for tax reductions and trusting that there will not be any agreement on drug price controls. Adding in BREXIT and elections in U.K., France, Germany and Iran, there are so many factors which can impact the movement of the general markets.

You are probably going to have to pick individual winners in Canadian healthcare – whether you choose to bottom-fish, look for near-term events or expect improved financial performance.


 [The author and his immediate family members may have long or short positions in the shares of some companies mentioned in or assessed during the preparation of this blog. Past share price performance may not be an indicator of future share price performance. This blog does not consider the investment objectives, financial situation or particular needs of any particular person. Investors should obtain professional advice based on their own individual circumstances before making an investment decision.]

As with all our posts, please see our full legal disclaimer