July 10, 2014

Q2 2014 Share Price Performance (Part 1)



Share price performance in Q2 and H1 2014 for the Canadian Healthcare Sector (Part 1):

General loss of momentum but our Therapeutics – Commercial subsector of companies still surging

In Q1, we asked whether there had been a fundamental strengthening of the sector’s performance and outlook or was there substantial, and perhaps unsustainable, momentum in this performance. For the 99 companies starting 2014 with share prices of $0.10 or higher, decliners significantly outnumbered advancers by 63 to 36 in Q2. There were only 8 companies with share price increases of 40% or more, versus the 25 companies in Q1, and 11 companies had share price declines of 40% or more, versus only 2 companies in Q1. Overall, Q2 2014 share price performance reflects a loss of momentum in the sector except for those companies benefiting from investors looking for the next Paladin Labs – an acquisition target with ‘tax inversion’ potential.

In this blog, I am going to comment on the Q2 and H1 performance of 39 companies with share prices of $1.00 or more to start 2014.

Q2 2014 performance

  • Average and median share price changes were -1% and -3%, respectively
  • Five companies had share price increases of 40% or more in Q2. Four of these companies are in the Therapeutics – Commercial sector, the only sector with a positive average change in Q2.Fix3
    • Concordia Healthcare (107%) – building a profitable business but ‘tax inversion’ potential is probably the major factor in the share price increase
    • Covalon Technologies (+103%) – announced increased revenues and profits
    • Aurinia Pharma (+61%) – advanced its Phase 2B clinical program for voclosporin in the treatment of lupus nephritis
    • BioSyent (+41%) – announced increased revenues and profits
    • Merus Labs (+41%) – announced increased revenues, smaller loss and completed a financing
  • Four companies had share price decreases of 40% or more in Q2
    • Tekmira (-42%) – no negative news but could not sustain the momentum of Q1
    • Stellar Biotechnologies (-51%) – no substantial news
    • OncoGenex (-68%) – lead product custirsen failed to meet the primary clinical endpoint in its Phase 3 prostate cancer study
    • Vansen Pharma (-97%) – an anomaly; the share price declined on one trade of 500 shares after not trading for 1 ½ months


H1 2014 Performance

  • Decliners outnumbered advancers by 24 to 15
  • Average and median share price increases were +18% and +7%, respectively
  • Nine companies had share price increases of 40% or more and four companies had share price decreases of 40% or more in Q2.

The highlighted line in the following table shows what is driving the sector.

  • All 9 companies in the Therapeutics – Commercial subsector were advancers
  • The average increase was 82%, ranging from 8% for Valeant Pharmaceuticals to 326% for Concordia Healthcare
  • The list does not include the performance of Knight Therapeutics, headed by former Paladin Labs CEO Jonathan Goodman, which went public during 2014

Will this renewed interest in the Canadian healthcare industry and the profits made by investors in these companies trickle down to the development stage biotechnology companies? Unfortunately, I do not think this will happen with the Canadian institutional investors, who are generalists and not willing to take the risk with development stage companies. With retail investors, some will probably be willing to reinvest some profits in biotechnology companies.

[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.]

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