Broader Markets Slide and Catch Up to Healthcare Stocks
In this blog post, Bloom Burton’s equity research team summarizes the performance of the Canadian healthcare sector during 2Q-2022 and provides commentary on select stock movements and overall market trends.
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 M or greater at June 30. 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 106 companies.
We classify companies as “Tier 1” and “Tier 2” based on their EV – Tier 1 companies are those with EV of >C$100 M and Tier 2 are those with EV of <C$100 M (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).
The 106 Canadian healthcare companies included in Bloom Burton’s 2Q-2022 blog universe were collectively down 16.3% in the quarter, modestly underperforming the S&P/TSX Composite Index (-13.8%) but outperforming the S&P/TSX Venture Composite Index (-30.8%). The rising interest rate environment is particularly challenging for riskier high growth companies with significant cash needs, which includes many of those in our Canadian healthcare universe, mirroring trends south of the border (discussed below).
Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, where biotech stocks have been particularly hard hit by the risk-off sentiment in the market, fueled by inflationary, geopolitical and drug pricing concerns, which resulted in the fourth consecutive quarter of declines for the sector (after peaking in mid-2021). While biotech was hit earlier than the broader markets, it has showed some resilience lately, with signs of a possible bottom – the NASDAQ Biotechnology Index (NBI) was down 10.0% in 2Q-2022, underperforming the NYSE Pharmaceutical Index (DRG), which was up 0.2%, but beating the broader U.S. market (S&P 500 Index down 16.5%; NASDAQ Composite down 22.4%).
Among Canadian healthcare companies, larger Tier 1 companies, which are typically less risky, performed moderately better than smaller Tier 2 companies in 2Q-2022 (-13.5% vs -17.6% respectively).
Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, all posted negative returns this quarter. The best performing subsector was medical supplies (3 companies: -4.9%) which was more resilient as medical procedures rebounded with pandemic restrictions easing. At the opposite end of the spectrum, the worst performing subsector was digital health (13 companies: -28.7%), which saw the greatest gains during the pandemic, but now suffers from a negative sentiment toward telehealth as the pandemic wanes. Other subsectors include consumer health (6 companies: -7.0%), therapeutics R&D (37 companies: -7.2%), medical devices (14 companies: -16.3%), diagnostics (7 companies: -17.3%), healthcare services (16 companies: -25.6%) and commercial therapeutics (10 companies: -27.5%).
2Q-2022 Healthcare Stock Performance By Subsector:
Tier 1 Company Performance
Overall, we included 34 companies in our Tier 1 analysis with EV of $100 M or greater, which collectively had a 2Q-2022 return of -13.5%.
The number of Tier 1 advancers (10) was lower than the number of decliners (24) this quarter.
Notable Tier 1 advancers in the quarter were:
Revive Therapeutics Ltd. – The stock gained 135.9% during 2Q-2022, after the company provided an update on its phase 3 clinical trial for bucillamine in the treatment of COVID-19.
BELLUS Health Inc. – The stock appreciated 42.1% in the quarter. After jumping nearly 50% on the reporting of positive SOOTHE results in mid-December, BELLUS stock gave up 20% of its gains in 1Q-2022 as it languished with the rest of the biotech sector. Possibly helped by the biotech sector showing signs of a bottom, BELLUS was able to post a 40% gain in 2Q-2022.
Notable Tier 1 decliners in the quarter were:
LifeSpeak Inc. – The stock declined 80.0% during 2Q-2022, after the company announced 1Q-2022 financial results, which missed consensus.
Venus Concept Inc. – The stock depreciated 67.3% in the quarter, after the company reported 4Q-2021 financial results, followed by 1Q-2022 results.
Bausch Health Companies Inc. – The stock declined 63.9% during 2Q-2022, after the IPO pricing for its subsidiary, Bausch + Lomb Corporation, was announced.
CloudMD Software & Services Inc. – The stock was down 51.9% in the quarter, after the company announced cost optimization and operational integration activities, CEO and director resignations and 1Q-2022 financial results.
Resverlogix Corp. – The stock declined 46.8% in 2Q-2022, after the company announced a one-year extension of debenture and an upcoming Type C meeting with the FDA.
Akumin Inc. – The stock depreciated 45.5%, after the company announced an executive departure and reported 1Q-2022 financial results.
Mind Medicine Inc. – The stock declined 44.3% in the quarter, after it reported topline data from the phase 1 trial of MM-110 in opioid withdrawal.
2Q-2022 Performance of Tier 1 Companies:
Tier 2 Company Performance
Overall, we included 72 companies in our Tier 2 analysis (with EV of less than $100 M), which as a group had a 2Q-2022 return of -17.6%.
The number of advancers (16) was lower than the number of decliners (53).
Notable advancers in the quarter include:
Avricore Health Inc. – The stock was up 44.0% in the quarter, after the company provided a corporate update on its growth strategy.
Ortho Regenerative Technologies Inc. – The stock appreciated 41.2% in 2Q-2022, after the company’s phase 1/2 rotator cuff tear repair trial was initiated.
Notable decliners in the quarter include:
Acerus Pharmaceuticals Corp. – The stock declined 67.2% in the quarter, following a 1 for 200 share consolidation, effective April 29, and reported 1Q-2022 financial results.
Nugen Medical Devices Inc. – The stock was down 63.0% in 2Q-2022, after the company announced its new InsuJet brand store for direct purchasing of its needle free drug delivery device in the EU, submitted for Emergency Use Authorization with the U.S. FDA and launched its PetJet product for companion animals.
Greenbrook TMS Inc. – The stock depreciated 60.9% in the quarter, following the release of 4Q-2021 and 1Q-2022 financial results.
Think Research Corp. – The stock was down 57.1% in 2Q-2022, after it announced a $25M convertible loan facility and 4Q-2021 financial results.
Newtopia Inc. – The stock was down 56.4% in 2Q-2022, following the release of 4Q-2021 and 1Q-2022 financial results.
Skylight Health Group Inc. – The stock declined 54.7% in the quarter, after the company announced the acquisition of NeighborMD, reported 1Q-2022 financial results and provided a corporate update.
NeuPath Health Inc. – The stock was down 54.5% in 2Q-2022, following the release of 4Q-2021 and 1Q-2022 financial results.
Dialogue Health Technologies Inc. – The stock was down 54.5% in 2Q-2022 after it reported 1Q-2022 financial results.
Xybion Digital Inc. – The stock depreciated 54.1% in the quarter, on no obvious news.
IMV Inc. – The stock was down 51.4% in the quarter, following the reporting of 1Q-2022 financial and operational results and announcing a US$10M drawdown from its long-term debt facility.
Miravo Healthcare – The stock was down 50.7% in the quarter, after the company announced the approval of a generic version of its product, Pennsaid 2%, in the United States.
Alpha Cognition Inc. – The stock traded down -49.0%, after the company announced 4Q-2021 and 1Q-2022 financial results, as well as topline results from its pivotal study of ALPHA-1062 in Alzheimer’s disease.
Field Trip Health Ltd – The stock depreciated 40.9% in 2Q-2022, after the company announced plans to separate the Field Trip Drug Discovery and Field Trip Health Division into two separate public companies.
BriaCell Therapeutics Corp. – The stock declined 40.3% in the quarter after announcing development details of Bria-OTS platform technology at the American Association of Cancer Research meeting.