Q3 2015 Share Price Performance (Part 1)

From herd movement up in Q1 to selective movement in Q2 to herd movement down in Q3

Ninety nine Canadian healthcare companies started 2015 with share prices of $0.10 or higher. Three of these companies are no longer part of this sector, including Catamaran which was acquired by UnitedHealth Group and IMRIS which was taken private by Deerfield. Of the remaining 96 companies, decliners only slightly outnumbered advancers by 50 to 46 but the average share price decline was 12.4% in Q3 2015. There were only 3 companies with share price increases of 40% or more, whereas 17 companies had share price declines of 40% or more.

The sector is impacted by many factors beyond the performance of individual healthcare companies. The TSX Composite Index and most major global indices were weak, with reasons including slower growth of the Chinese and other economies, weak commodity prices and concerns about the timing of a U.S. fed rate hike – or the absence of one. The TSX Venture Composite Index bounced along a bottom during the first 6 months of 2015 but slid downhill throughout Q3. In the U.S., strong performances by technology and social media stocks on the NASDAQ in the first six months of 2015 were wiped out in Q3 and the declines were compounded by the collapse of biotech valuations after the Turing Pharmaceuticals drug price debacle and government musings about price controls. As a reminder, Hillary Clinton made similar comments as her husband became the U.S. president over 20 years ago and nothing really happened except brief pharma share price declines.

In this blog, I am going to comment on the Q3 and 9-month performance of the group of 46 companies with share prices of $1.00 or more to start 2015 (excludes Catamaran).

Q3 2015 Performance

• Decliners outnumbered advancers by 33 to 13
• Average and median share price changes were -9% and -10%, respectively
• No group had a positive share price performance, with the best performance from the Services group

Seven companies had share price changes of 40% or more in Q3 versus four companies in Q2 and nine companies in Q1

• Two companies had a share price increase of 40% or more
  • Aquinox Pharmaceuticals (+103%) – the perfect example of share price volatility in biotech; the share price was crushed in early July on a failed Phase 2 COPD trial BUT became a 10-bagger from those lows on additional data from a Phase 2 pain trial (notorious for placebo effects) in early August; the company then completed a US$98 million financing in September
  • Medicure (+43%) – continuation of a trend from early 2015 on increased Aggrastat sales and a September filing with the U.S. FDA for a an expanded indication
  • Five companies had a share price decline of more than 40%
  • Trillium Therapeutics (-40%) – declined throughout the quarter on no news; announced Phase 1 plans for its lead product on the last day of the quarter
  • Merus Labs (-41%) – slow decline which was probably triggered by the financial results released on August 10th
  • Arbutus Biopharma (formerly Tekmira; -49%) – continuation of a decline which started in early February
  • Cipher Pharmaceuticals (-54%) – continuation of a decline which started in early February
  • Aurora Spine (-58%) – continuation of a year-long decline, perhaps now impacted by financial concerns

9-Month 2015 Performance

I believe that the Canadian healthcare investor focus has remained the same throughout 2015 – companies with revenues, profits and dividends/distributions. The three groups which investors focused on were Services, Therapeutics – Commercial and Medical Devices. Most of the share price gains in these groups occurred in Q1.

• Decliners substantially outnumbered advancers by 29 to 17
• Average and median share price changes were -4% and -6%, respectively
• Six companies had share price increases of 40% or more and eight ­­­ Q2

 [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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