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July 24, 2020

Q2 2020 Share Price Performance

Stocks Rebound and Canadian Healthcare Leads the Charge

In this blog post, the Bloom Burton equity research team summarizes the performance of the Canadian healthcare sector during 2Q-2020 and provides commentary on select stock movements and overall market trends. 

Inclusion Criteria 

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 94 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).

2Q-2020 Performance 

  • The 94 Canadian healthcare companies included in Bloom Burton’s 2Q-2020 blog were collectively up an impressive +63.3% in the quarter (+44.2% when MedMira is excluded, which was up +1800%, from $0.02, this quarter), outperforming the S&P/TSX Composite Index (+16.0%) and the S&P/TSX Venture Composite Index (+59.0%). The strong market performance this quarter is a reversal from last quarter, when Canadian healthcare stocks were down -19.8% due to the impact of Covid-19, but still outperformed the broader markets (S&P/TSX Composite Index was down -21.6% in 1Q-2020 and the S&P/TSX Venture Composite Index was down -32.5%). The broader market rally this quarter was driven by largescale monetary and fiscal stimuli that were pumped into global markets in response to the pandemic, and on the back of stronger than expected U.S. jobs numbers and progress on the development of Covid-19 treatments and vaccines. Collectively, Canadian healthcare stocks performed especially well this quarter after several companies announced Covid-19-related programs, resulting in their stock prices spiking (MedMira +1800.0%; ImmunoPrecise Antibodies +115.6%; Revive Therapeutics +163.6%; Edesa Biotech +125.2%, IMV +68.5%), lifting the performance of the group as a whole. 

  • Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, however, in 2Q-2020, the performance of Canadian healthcare stocks was stronger that of their U.S.  counterparts, which are generally larger and less volatile on the way up or down. The NASDAQ Biotechnology Index (NBI) was up +26.7% and the NYSE Pharmaceutical Index (DRG) was up +10.4%, somewhat underperforming the broader U.S. markets (S&P 500 Index up +20.0%; NASDAQ Composite up +30.6%). 

  • Among Canadian healthcare companies, larger Tier 1 companies performed better than smaller Tier 2 companies in 2Q-2020 (+81.6% vs +51.5% respectively), however, when MedMira was excluded from the Tier 1 list, Tier 2 companies outperformed (+51.5% vs +33.9%) due to their smaller size and more volatile nature. 

  • Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the best performing subsector was diagnostics (+417.7%; +72.2% when MedMira is excluded), although the subsector contains only 5 companies, and individual company outperformance can strongly skew the group’s return. The worst performing subsector was therapeutics R&D, although it also had a strong performance (36 companies: +36.4%). All other subsectors also had positive returns this quarter: medical devices (14 companies: +65.4%); healthcare IT (3 companies: +61.2%); consumer health (6 companies: +44.4%); medical supplies (4 companies: +41.5%); commercial therapeutics (12 companies: +41.0%); healthcare services (14 companies: +38.1%); and therapeutics R&D (36 companies: +36.4%). 

*1Q-2020 values were based on an analysis of 93 companies that fit the inclusion criteria (39 Tier 1 and 54 Tier 2).

2Q-2020 Healthcare Stock Performance By Subsector: 

Tier 1 Company Performance

  • Overall, we included 38 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 2Q-2020 return of +81.6% (+33.9% when MedMira was excluded). 

  • The number of Tier 1 advancers (30) was higher than the number of decliners (8) this quarter. 

Notable Tier 1 advancers in the quarter were:

  • MedMira Inc. – The stock rose +1800.0% during 2Q-2020 after the company announced it was developing a Covid-19 point-of-care diagnostic test and following a series of updates on the test’s progress, including announcing the submission of an application for emergency use authorization with the FDA, the receipt of CE mark and a distribution agreement with Webb Diagnostic Technologies that resulted in a $3.5 MM initial U.S. order.

  • ImmunoPrecise Antibodies Ltd. – The stock appreciated +115.6% in the quarter after the company announced an agreement with Janssen to study a panel of antibodies against an undisclosed target and that it was utilizing its platform to investigate therapeutic antibodies against Covid-19 and for antibody-based diagnostic tests. 

  • Viemed Healthcare Inc. – The stock was up +101.1% in 2Q-2020 after the company announced it was increasing its previously issued net revenue guidance for 1Q-2020 and that it was working with U.S. government agencies and health systems to assist in the Covid-19 response (help transition patients with chronic respiratory failure out of the hospital more quickly to make room for Covid-19 patients and in educating clinicians on respirator use).

  • Trillium Therapeutics Inc. – The stock rose +97.8% during 2Q-2020 after the company provided a business update in response to Covid-19 and also provided an update on its phase 1 dose escalation study for its CD47 blocker, TTI-622.

  • WELL Health Technologies Corp. – The stock was up +86.9% in 2Q-2020 after the company announced 1Q-2020 revenues (918% increase in digital services revenue that quarter), a series of partnerships/acquisitions and a $14.4 MM financing.

  • Protech Home Medical Corp. – The stock was up +71.2% in 2Q-2020 after the company provided a business update in response to Covid-19 (which resulted in an uptick in demand for its at-home services) and announced 2Q-2020 results (ended March 31; saw 16% revenue growth and 30% adjusted EBITDA growth). 
    • IMV Inc. – The stock increased +68.5% in the quarter after the company announced development of DPX-COVID-19, a vaccine candidate for Covid-19, and announced 1Q-2020 results and provided an operational update.

Notable Tier 1 decliners in the quarter were:

  • Antibe Therapeutics Inc. – The stock was down -32.0% during 2Q-2020, after the company announced topline results from its phase 2b efficacy study for ATB-346 and a $25 MM financing. 

2Q-2020 Performance of Tier 1 Companies: 

Tier 2 Company Performance

  • Overall, we included 56 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 2Q-2020 return of +51.5%. 

  • The number of advancers (45) was greater than the number of decliners (11). 

Notable advancers in the quarter include:

  • Imaging Dynamics Company Ltd.  – The stock rose +225.0% in the quarter on speculation that the company was entering into a supply agreement for masks and ventilators for use during the Covid-19 pandemic, however, the company commented on May 28 that the company was not aware of any explanation for the recent trading activity. 

  • Ceapro Inc. – The stock was up +200.0% in 2Q-2020 after the company announced it was expanding its collaborative research program with McMaster University to develop an inhalable therapeutic for Covid-19, announced 1Q-2020 financial results and announced the publication of positive results for its PGX drug delivery system for accelerated burn wound healing. 

  • TearLab Corp. – The stock was up +178.2% in 2Q-2020 due to rumours of a merger, which the company confirmed it was in advanced discussions for through a press release on May 7. 

  • PreveCeutical Medical Inc. – The stock was up +175.0% in 2Q-2020 due to promotional activity, which the company responded to in a press release on June 15, where it stated that it did not have prior knowledge of the unauthorized promotional activity. 

  • Titan Medical Inc. – The stock was up +164.7% in 2Q-2020, in response to the company announcing a development and license agreement with Medtronic to further develop its robotic-assisted surgical technologies. 

  • Revive Therapeutics Inc. – The stock was up +163.6% in 2Q-2020 after the company provided an update on its pharmaceutical initiatives in the Covid-19 and psychedelics spaces. 

  • Apteryx Imaging Inc. – The stock finished 2Q-2020 up +133.3% after it was announced that the company was being acquired by Planet DSS (a portfolio company of Level Equity Management) for $39 MM. 

  • Edesa Biotech Inc. – The stock appreciated +125.2% in the quarter after the company announced that it had received Health Canada approval to initiate a phase 2/3 clinical trial examining its investigational anti-inflammatory drug, EB05, as a potential treatment for Covid-19. 

  • Sernova Corp. – The stock rose +119.2% in 2Q-2020 after the company presented preclinical data for its HemAcure hemophilia cell therapy program, announced a collaboration with AgeX Therapeutics to develop cell therapies for type 1 diabetes and hemophilia, and presented clinical validation data for its Cell Pouch technology in diabetes. 

  • Valeo Pharma Inc. – The stock was up +92.6% in 2Q-2020 after the company announced it was licensing Canadian rights to Ametop Gel (local anesthetic) from Alliance Pharma, received Health Canada approval to transfer commercial rights of Yondelis (novel marine-derived antitumour agent) from PharmaMar, and received FDA approval for ethacrynate sodium (loop diuretic).   

  • NervGen Pharma Corp. – The stock rose +91.4% in 2Q-2020 after the company announced 1Q-2020 results, stating that its phase 1 study of NVG-291 in spinal cord injury remains on track to commence in 4Q-2020, and closed a $2.3 MM private placement.

Notable decliners in the quarter include:

  • Helix BioPharma Corp.  – The stock finished 2Q-2020 down -50.3%, after the company released topline phase 1 data of immuno-oncology drug, L-DOS47, in lung cancer, and announced it was divesting remaining ownership (51%) in its Polish subsidiary. 

AppendixDownload

Disclosures:
This Research Report is issued and approved for distribution by Bloom Burton Securities Inc. (“Bloom Burton”), a member of the Investment Industry Regulatory Organization of Canada.

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.

The information contained in this Research Report is prepared from sources believed to be reliable but Bloom Burton makes no representations or warranties, express or implied, with respect to the accuracy, correctness or completeness of such information. All opinions and estimates contained in this Research Report constitute Bloom Burton’s judgment as of the date of this Research Report and are subject to change without notice.  Past performance is not necessarily indicative of future results and no representation or warranty is made regarding future performance of the securities mentioned in this Research Report. Bloom Burton accepts no liability whatsoever for any direct or consequential loss arising from any use or reliance on this Research Report or the information contained herein. This Research Report may not be reproduced, distributed or published, in whole or in part, without the express permission of Bloom Burton.

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., Medicenna Therapeutics 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.