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November 13, 2020

Q3 2020 Share Price Performance

Canadian Healthcare Stocks Outperform 

In this blog post, the Bloom Burton equity research team summarizes the performance of the Canadian healthcare sector during 3Q-2020 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; healthcare IT; medical devices; medical supplies; diagnostics; and consumer health. We do not include medical cannabis producers (unless they are developing cannabis-based products under the traditional drug development regulatory process) or companies that operate long-term care facilities. Based on these criteria we identified 103 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).

3Q-2020 Performance 

  • The 103 Canadian healthcare companies included in Bloom Burton’s 3Q-2020 blog were collectively up 15.3% in the quarter, outperforming the S&P/TSX Composite Index (+3.9%) and the S&P/TSX Venture Composite Index (+14.1%). While not as strong as last quarter (Canadian healthcare companies +63.3%; S&P/TSX Composite Index +16.0%; S&P/TSX Venture Composite Index +59.0%), the strong market performance continued this quarter and more than made up for the losses sustained during 1Q-2020 (Canadian healthcare companies -19.8%; S&P/TSX Composite Index -21.6%; S&P/TSX Venture Composite Index -32.5%). The broader market rally the last two quarters was driven by governmental fiscal stimulus programs in response to the pandemic, and progress on the development of Covid-19 treatments, vaccines and diagnostics. Collectively, Canadian healthcare stocks performed especially well this quarter due to several companies being perceived by investors as particularly well positioned in the new digital health environment (CloudMD Software & Services Inc. +223.1%; WELL Health Technologies Corp. +141.9%). 

  • Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, however, in 3Q-2020, the combined performance of Canadian healthcare stocks was stronger that of their U.S. counterparts, driven mainly by the digital health stocks. The NASDAQ Biotechnology Index (NBI) was down -0.9% and the NYSE Pharmaceutical Index (DRG) was up +3.2%, underperforming the broader U.S. markets (S&P 500 Index up +8.5%; NASDAQ Composite up +11.0%). After both U.S. indices mounted strong rebounds from March COVID-19 lows during 2Q-2020, drug pricing again hit election year radar screens for investors  with confusing signaling coming from the top: Great biotech innovation helping solve the COVID-19 problem, but drug prices too high – unfortunately, you can’t have one without the other.   

  • Among Canadian healthcare companies, larger Tier 1 companies performed better than smaller Tier 2 companies in 3Q-2020 (+21.0% vs +12.0% respectively). 

Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the best performing subsector was healthcare IT (5 companies: +83.9%), although the subsector contains only 5 companies and individual company outperformance can strongly skew the group’s return (CloudMD Software & Services Inc. up +223.1%). The worst performing subsector was therapeutics R&D (37 companies: +3.6%), although all subsectors had a positive return in the quarter (consumer health, 8 companies: +24.9%; medical devices, 17 companies: +20.4%; medical supplies, 4 companies: +20.3%; healthcare services, 16 companies: +17.3%; diagnostics, 4 companies: +13.9%; commercial therapeutics, 12 companies: +7.7%). 

* 2Q-2020 values were based on an analysis of 93 companies that fit the inclusion criteria (39 Tier 1 and 54 Tier 2)

3Q-2020 Healthcare stock Performance by Subsector

Tier 1 Company Performance

  • Overall, we included 38 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 3Q-2020 return of +21.0%.

  • The number of Tier 1 advancers (21) was higher than the number of decliners (17) this quarter. 

Notable Tier 1 advancers in the quarter were:

  • CloudMD Software & Services Inc. – The stock rose +223.1.0% during 3Q-2020 after the company announced a series of acquisitions and expanded its telehealth offering to include mental health, reported 2Q-2020 financial results and announced a $20.8 MM bought deal financing. 

  • WELL Health Technologies Corp. – The stock appreciated +141.9% in the quarter after the company announced two acquisitions, formed a new business unit focusing on digital health apps, reported 2Q-2020 financial results and closed a $23.0 MM private placement. 

  • ImmunoPrecise Antibodies Inc. – The stock was up +104.4% in 3Q-2020 after the company announced it had discovered functional, human antibodies against SARS-CoV-2 using its B cell Select and Single Step Cloning Hybridoma technologies and provided a series of updates on the program. 

  • Milestone Pharmaceuticals Inc. – The stock rose +88.2% during 3Q-2020 after the company announced regulatory guidance and updated the clinical development plan for etripamil in paroxysmal supraventricular tachycardia, announced a $25 MM private placement and 2Q-2020 financial results. 

  • Trillium Therapeutics Inc. – The stock was up +86.0% in 3Q-2020 after the company announced updated data from its ongoing TTI-622 and TTI-621 dose escalation studies, announced a US$25 MM equity investment from Pfizer and a US$130 MM public offering.

  • Akumin Inc. – The stock was up +79.2% in 3Q-2020 after the company announced 2Q-2020 financial results and commenced trading on NASDAQ. 

  • Resverlogix Corp. – The stock was up +69.7% in 3Q-2020 after the company announced a scientific publication of BET inhibition in human diseases and provided an update regarding extension of its filing calendar. 

Notable Tier 1 decliners in the quarter were:

  • MedMira Inc. – The stock was down -38.5% during 3Q-2020 after the company reported 3Q-2020 financial results. 

3Q-2020 Performance of Tier 1 Companies

Tier 2 Company Performance

  • Overall, we included 65 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 3Q-2020 return of +12.0%. 

  • The number of advancers (31) equaled the number of decliners (31).

Notable advancers in the quarter include:

  • Therma Bright Inc.  – The stock rose +271.4% in the quarter after the company provided an update on its Orpheus Medica Rapid Test for Covid-19 in saliva.  

  • Aequus Pharmaceuticals Inc. – The stock was up +100.0% in 3Q-2020 after the company announced a $2.5 MM public offering. 

  • DIAGNOS Inc. – The stock was up +86.7% in 3Q-2020 after the company held its annual general meeting, announced a multi-year contract with Chaparral Medical in California and announced new board members. 

  • Rapid Dose Therapeutics Corp. – The stock was up +73.7% in 3Q-2020 after the company announced a $6 MM credit facility financing.  

  • Ortho Regenerative Technologies Inc. – The stock was up +71.4% in 3Q-2020 after the company announced a $2.6 MM private placement. 

Notable decliners in the quarter include:

  • NervGen Pharma Corp. – The stock was down -42.5% in 3Q-2020 after the company reported 1Q-2020 financial results and announced a $6.5 MM public offering.  

  • Helix BioPharma Corp.  – The stock finished 3Q-2020 down -40.0% after it announced the divestment of its Polish subsidiary and announced 3Q-2020 financial results. 

3Q-2020 Performance of Tier 2 Companies

Appendix 1

Disclosures:
This Research Report is issued and approved for distribution by Bloom Burton Securities Inc. (“Bloom Burton”), a member of the Investment Industry Regulatory Organization of Canada.

This Research Report is provided for informational purposes only and is not an offer to sell or the solicitation of an offer to buy any of the securities discussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this Research Report may not be suitable for all types of investors. This Research Report does not take into account the investment objectives, financial situation or specific needs of any particular investor. Recipients of this Research Report should not rely solely on the investment recommendations contained herein and should contact their own professional advisors to determine if an investment is suitable for them.

The information contained in this Research Report is prepared from sources believed to be reliable but Bloom Burton makes no representations or warranties, express or implied, with respect to the accuracy, correctness or completeness of such information. All opinions and estimates contained in this Research Report constitute Bloom Burton’s judgment as of the date of this Research Report and are subject to change without notice.  Past performance is not necessarily indicative of future results and no representation or warranty is made regarding future performance of the securities mentioned in this Research Report. Bloom Burton accepts no liability whatsoever for any direct or consequential loss arising from any use or reliance on this Research Report or the information contained herein. This Research Report may not be reproduced, distributed or published, in whole or in part, without the express permission of Bloom Burton.

Company Specific Disclosures

1. Bloom Burton & Co. or its affiliates have provided investment banking services for Xenon Pharmaceuticals Inc. during the 12 months preceding the date of issuance of the research report or recommendation. 

2. Bloom Burton has managed an offering of Antibe Therapeutics Inc., ESSA Pharma Inc., Greenbrook TMS Inc., Medicenna Therapeutics Corp., Trillium Therapeutics Inc., Aurinia Pharmaceuticals Inc. and Titan Medical Inc. during the 12 preceding the date of issuance of the research report or recommendation.

3. Bloom Burton & Co. and its affiliates collectively beneficially own more than 1% of the outstanding common shares of Nuvo Pharmaceuticals Inc., Mimi’s Rock Corp., Newtopia Inc., Appili Therapeutics Inc., Avivagen Inc. and NeuPath Health Inc.

4. The research analyst responsible for the report or recommendation or any individuals directly involved in the preparation of the report hold or are short the securities of Aurinia Pharmaceuticals Inc., Xenon Pharmaceuticals Inc., Hamilton Thorne Ltd., Bellus Health Inc., Trillium Therapeutics Inc., ESSA Pharma Inc., Correvio Pharma Corp. and Greenbrook TMS Inc. directly or through derivatives.

5. The research analyst responsible for this report or recommendation may hold securities discussed in the report indirectly through Bloom Burton Canadian Healthcare Fund, LP which is indirectly affiliated with Bloom Burton & Co.

6. The research analyst responsible for the report or recommendation has visited facilities operated by Aurinia Pharmaceuticals Inc., Correvio Pharma Corp., CRH Medical Corp., ESSA Pharma Inc., Greenbrook TMS Inc., HLS Therapeutics Inc., Knight Therapeutics Inc. and Trillium Therapeutics Inc. preceding the date of issuance of the research report or recommendation. No remuneration was received from, nor expenses paid by the companies in respect of the visits.