Q3 2016 - Share Price Performance - Part 3

Tier 2 Canadian Healthcare Companies – better performance than the Tier 1 companies

In this blog, I am going to comment on the Q3 and 9-month 2016 share price performance of the group of 57 companies with share prices of between $0.10 and $0.99 to start 2016 (DiagnoCure is not included).

• Advancers outnumbered decliners by 34 to 23
• Average and median share price changes were +16% and +2%
• Fifteen companies in this group had share price increases of 40% or more
  • Network Life Sciences (+180%) – announced letters of intent to acquire two private companies that will see it become a sports entertainment company (will be deleted from future analyses)
  • Aurora Spine (+143%) – share price increase on higher trading volumes and improved financial performance (almost profitable)
  • Revive Therapeutics (+142%) – share price increase started with completion of a financing
  • Vigil Health Solutions (+105%) – announced improved financial results
  • Telesta Therapeutics (+80%) – announced a binding Agreement, subject to shareholder approval, to be acquired by ProMetic Life Sciences Inc. for $0.14/Telesta share, payable in shares of ProMetic
  • Centric Health (+76%) – announced improved financial results, new contracts and an acquisition
  • Hamilton Thorne (+73%) – announced the acquisition of Massachusetts-based Embryotech Laboratories for approximately US$7.25 million; Embryotech provides quality control services and testing assays to the Assisted Reproductive Technologies sector
  • PediaPharm (+70%) – the share price increase appears to correlate with increased trading volumes, followed by a product approval and licensing of an additional product
  • Spectral Medical (+69%) – the share price increased 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
  • Acerus Pharmaceuticals (was Trimel; +68%) – the share price increase preceded the announcement of the availability of NATESTO, a testosterone nasal gel, in Canada
  • Antibe Therapeutics (+68%) – the share price increased prior to the announcement of positive results for its phase 2 clinical trial of ATB-346 in osteoarthritis
  • Ceapro (+68%) – continued its 2016 share price climb, completed a financing and announced good financial results
  • AlliancePharma (+52%) – completed two acquisitions but also had very sporadic and low trading volumes
  • BioMmune Technologies (+49%) – no material news
  • IntelGenx Technologies (+41%) – several product announcements but also correlates with increased trading volume
  • Five companies had a share price decline of more than 40%
    • Panacea Global (-45%) – low and sporadic trading volumes
    • Vanc Pharmaceuticals (-48%) – continuation of Q2 share price decline but did bounce in early Q4
    • Convalo Health International (-49%) – continuation of Q2 share price decline
    • Eastwood Bio-Medical Canada (-56%) – low and sporadic trading volumes
    • Agility Health (-57%) – might be related to concerns about stagnant revenues and declining cash balance

2016 9-Month Summary

• Decliners slightly outnumbered advancers by 31 to 26
• Average and median share price changes were +13% and -6%, respectively
• Fifteen companies in this group had share price increases of 40% or more
  • Ceapro (+403%)
  • Vigil Health Solutions (+275%)
  • Response Biomedical (+175%)
  • Aurora Spine (+114%)
  • Spectral Medical (+99%)
  • Critical Outcome Technologies (+90%)
  • BioMmune Technologies (+90%)
  • Opsens (+74%)
  • Profound Medical (+64%)
  • Hamilton Thorne (+60%)
  • Symbility Health (+50%)
  • Arch Biopartners (+45%)
  • Immunotec (+43%)
  • Diamedica (+43%)
  • AlliancePharma (+40%)
• Twelve companies in this group had share price declines of 40% or more
  • LED Medical Diagnostics (-47%)
  • Eastwood Bio-Medical Canada (-50%)
  • VentriPoint Diagnostics (-50%)
  • Smart Employee Benefits (-51%)
  • Revive Therapeutics (-63%)
  • Vanc Pharmaceuticals (-67%)
  • Convalo Health International (-67%)
  • Hemostemix (-67%)
  • Telesta Therapeutics (-68%)
  • Patient Home Monitoring (-71%)
  • Panacea Global (-76%)
  • QuickFlo Health (-83%)

Fourteen public Canadian medical marijuana companies are being monitored for share price performance in 2016. Most companies in this sector are in the early stages of commercialization, either still seeking Health Canada licenses or not yet profitable.

• There were 12 advancers and only 2 decliners in Q3 (9 and 5, respectively, in the first 9-months of 2016)
• Average and median share price changes were +164% and +77% (+118% and +97%, respectively, in the first 9-months of 2016)
• Eleven companies had a share price increase of 40% or more in Q3 and only one company had a share price decrease of 40% or more in Q2
• The share price changes in the medical marijuana group in Q3 are one of the best examples I have seen of herd mentality movement. Legislation on legalization is presumably closer but nothing has been announced. One of the most commercially-advanced companies is Aphria, whose most recent quarterly financial results showed annualized sales approaching $18 million and profitable operations as measured by both EBITDA and net income. However, a market cap approaching $350 million and a price to sales ratio approaching 20 shows that the market is expecting major revenue expansion in the future.

Looking Ahead

Overall, Q3 2016 share price performance in the sector was nicely positive. There was no pattern for success among the companies with share price increases of 40% or more in either Q3 or the first 9 months of 2016 and herd mentality movement was only seen in the medical marijuana group.

Many stock market indices have flattened out over the last two months. The initial Q3 financial reports by major companies have met expectations on average. The U.S. election will be over soon and there is no consensus on any interest rate action by the U.S. Federal Reserve.

With this background, you are probably going to have to pick winners – whether you choose to bottom-fish, look for near-term events or expect improved financial performance.

 [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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