Improved, positive performance in Q3

Overall, Q3 2016 share price performance in the sector was much better than in Q2 for the companies starting 2015 with share prices of $0.10 or higher. Two more companies have been deleted from the analysis in Q3 – Transition Therapeutics was acquired by OPKO Health and Prism Medical was acquired by Handicare Group.

  • Advancers (66) outnumbered decliners (45)
  • Twenty-six companies with share price increases of 40% or more
  • Nine companies had share price declines of 40% or more
  • The average and median share price changes were +14% and +2%

 

2016 to-date share price performance in the sector turned positive as the good Q3 results overtook the negative Q1 performance.

  • Decliners outnumbered advancers by 60 to 51
  • Twenty-one companies with share price increases of 40% or more
  • Twenty-five companies had share price declines of 40% or more
  • The average and median share price changes were +6% and -6%

 

An investor should ask ‘how do the average Q3 and 9-month share price changes compare with some benchmarks?’

 

The performance of the four benchmarks which I use are shown in this table. The two TSX indices continued their recovery from the January drop but the junior exchange’s performance was far superior, driven by the increased price of oil and continuing positive momentum in mining company share prices. The January-February drop for the NASDAQ Biotechnology Index was so large that excellent Q3 performance by technology stocks barely moved the NASDAQ Composite Index into positive territory. The NASDAQ Biotechnology Index had a positive Q3 but still has an overall negative performance for 2016.

The volatility in the sector is amazing – 35 companies (32%) in Q3 and 46 companies (41%) in the first 9-months of 2016 had share price changes of 40% or more. The volatility will attract retail stock traders and some hedge fund managers but will not necessarily attract the institutional investors which are needed for sustainable financing of the sector.

The sector needs successes to attract sustainable funding. Cynapsus Therapeutics’ share price was up 145% in Q3, triggered by the announcement that it will be acquired by Sunovion Pharmaceuticals. QHR Technologies’ shares were up 60% on news that Loblaw will acquire the company. Spectral Medical’s shares increased 69% in Q3 and 99% overall in the first 9-months of 2016 on expectation of positive Toraymyxin clinical data but were down 85% on October 3 after announcing the trial failed to meet its primary clinical endpoint.

Volatility, acquisitions, clinical failures – that’s life in the biotech industry!

In the next blog, I will asses the Q3 2016 share price performance of the Tier 1 Canadian healthcare 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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