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November 1, 2021

Q2 2021 Share Price Performance

Canadian Healthcare Stocks Take a Breather

In this blog post, Bloom Burton’s equity research team summarizes the performance of the Canadian healthcare sector during 2Q-2021 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; 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 129 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-2021 Performance

  • The 129 Canadian healthcare companies included in Bloom Burton’s 2Q-2021 blog were collectively down 5.6% in the quarter, underperforming the S&P/TSX Composite Index (+7.8%) and the S&P/TSX Venture Composite Index (+0.9%). The downturn follows 4 consecutive quarters of strong performance for Canadian healthcare stocks, driven by low interest rates, governmental fiscal stimulus programs, a rebound from 1Q-2020 pandemic lows, and new areas of growth (including COVID-19 treatments and vaccines, digital health and psychedelics drugs for treatment of depression). However, in 2Q-2020, Canadian healthcare investors took profits as markets got choppy, with investors pondering future possible interest rate increases. This hurt riskier sectors like biotechnology, particularly smaller, less liquid stocks. 

  • Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, although their performance can sometimes lag behind, which was the case in 2Q-2021. In 1Q-2021, U.S. growth stocks (including many in biotech) dipped and underperformed relative to value stocks. In 2Q-2021, growth stocks, and the market more broadly, rebounded after The Fed’s rate-setting meeting did not result in a change in policy – in 2Q-2021, the NASDAQ Biotechnology Index (NBI) was up 9.0% vs the NYSE Pharmaceutical Index (DRG; up +7.2%) and the broader U.S. markets (S&P 500 Index up +8.2%; NASDAQ Composite up +9.5%). However, this reversal has not yet been reflected in the performance of Canadian healthcare stocks.

  • Among Canadian healthcare companies, larger Tier 1 companies performed better than smaller Tier 2 companies in 2Q-2021 (-2.2% vs -8.2% respectively), reflecting the risk-off sentiment. The large caps were helped by successful debuts of Dentalcorp Holdings Ltd. and Neighbourly Pharmacy Inc., both of which IPO’d in May, and ended 2Q up 17% and 25% respectively from issue prices.

  • Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the only subsector reporting a gain in 2Q-2021 was consumer health (8 companies: +14.8%), driven by the particularly strong performance of Rapid Dose Therapeutics Corp. (+163.6%). All other subsectors were negative in the quarter, including healthcare services (18 companies: -0.1%), medical devices (17 companies: -1.8%), therapeutics R&D (46 companies: -4.9%), commercial therapeutics (18 companies: -7.2%), medical supplies (4 companies: -9.1%), digital health (11 companies: -22.3%) and diagnostics (7 companies: -24.6%).

1Q-2021 values were based on an analysis of 128 companies that fit the inclusion criteria (59 Tier 1 and 69 Tier 2)

2Q-2021 Healthcare Stock Performance By Subsector

Tier 1 Company Performance

  • Overall, we included 56 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 2Q-2021 return of -2.2%.

  • The number of Tier 1 advancers (22) was lower than the number of decliners (34) this quarter.

Notable Tier 1 advancers in the quarter were:

  • Cybin Inc. – The stock rose 129.8% during 2Q-2021 after the company announced some proof-of-concept data in depression and addiction, selected alcohol use disorder as an indication for its psychedelic molecule, CYB003, and selected anxiety disorder as an indication for another psychedelic molecule, CYB004.

  • Assure Holdings Corp. – The stock appreciated 63.0% in the quarter after the company entered into an in-network agreement with a Louisiana commercial health insurer, announced a record number of monthly procedures and announced that its products/services supported a rare auditory brainstem implant surgery.

  • Venus Concept Inc. – The stock was up 46.0% in 2Q-2021 after the company announced a global brand partnership with tennis champion, Venus Williams.

Notable Tier 1 decliners in the quarter were:

  • ImmunoPrecise Antibodies Ltd. – The stock declined 51.1% during 2Q-2021 after the company announced a series of updates for its antibody drug candidates, including a program for the treatment of Covid-19.

  • Aptose Biosciences Inc. – The stock depreciated 42.2% in the quarter after the company provided a clinical update for its cancer drug candidate, luxeptinib. 

2Q-2021 Performance of Tier 1 Companies:

Tier 2 Company Performance

  • Overall, we included 73 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 2Q-2021 return of -8.2%.

  • The number of advancers (20) was lower than the number of decliners (49).

Notable advancers in the quarter include:

  • Rapid Dose Therapeutics Corp.  – The stock rose 163.6% in the quarter after the company provided an update on its Covid-19 vaccine research collaboration with McMaster University.

  • Nanalysis Scientific Corp. – The stock was up 158.3% in 2Q-2021 after the company released 1Q-2021 financial results, showing a 115% Y/Y increase in revenues.

  • Tetra Bio-Pharma Inc. – The stock was up 68.4% in 2Q-2021 after the company provided a status update on its U.S. clinical trial testing cannabis drug, QIXLEEF, as an alternative to morphine.

  • Devonian Health Group Inc. – The stock was up 60.7% in 2Q-2021 after the company presented at a series of investor conferences.

Notable decliners in the quarter include:

  • Relay Medical Corp. – The stock was down 63.3% in 2Q-2021, following the +80% rise in 1Q-2021, after the company addressed the continued need for rapid Covid-19 testing.  

  • BioMark Diagnostics Ltd. – The stock depreciated 48.3% in the quarter after a series of announcements, including the opening of a new diagnostics lab in Quebec and a change of auditors. The dip comes after the stock gained 180% in 1Q-2021.

  • Think Research Corp. – The stock was down 48.0% in the quarter after a series of announcements, including reporting 4Q-2020 and 1Q-2021 financial results.

  • SQI Diagnostics Inc. – The stock was down 45.9% in 2Q-2021, continuing the slide from 1Q-2021, following updates on its business, which includes the sale of rapid Covid-19 antibody tests.

  • Aequus Pharmaceuticals Inc. – The stock was down 44.2% in 2Q-2021 after the company announced a warrant acceleration and reported 4Q-2020 and 1Q-2021 financial results.

  • MindBeacon Holdings Inc. – The stock depreciated 42.1% in the quarter after the company reported 4Q-2020 and 1Q-2021 financial results.

  • Ortho Regenerative Technologies Inc. – The stock depreciated 42.0% in the quarter after a series of announcements, including reporting 4Q-2020 financial results.

2Q-2021 Performance of Tier 2 Companies:

Appendix 1:

Disclaimer:

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.