Canadian Healthcare Stocks Flat, but Beat the Market
In this blog post, Bloom Burton’s equity research team summarizes the performance of the Canadian healthcare sector during 3Q-2021 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 MM or greater. 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 126 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).
The 126 Canadian healthcare companies included in Bloom Burton’s 3Q-2021 blog universe were collectively up 0.4% in the quarter, outperforming the S&P/TSX Composite Index (-0.5%) and the S&P/TSX Venture Composite Index (-10.5%). Canadian healthcare stocks held their own in the face of the broad market downturn in 3Q-2021, due to rising inflation and the fear of higher interest rates, hitting riskier and less liquid stocks more harshly.
Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, however, in 3Q-2021, Canadian healthcare stocks performed slightly better than their U.S. counterparts – the NASDAQ Biotechnology Index (NBI) was down 1.2% and the NYSE Pharmaceutical Index (DRG) was down 0.9%, just below the broader U.S. markets (S&P 500 Index up +0.2%; NASDAQ Composite down +0.4%). Following the COVID-19 bounce, the U.S. biotech sector has generally been weighed down by several negative clinical readouts, an attenuated M&A environment and continued drug pricing concerns.
Among Canadian healthcare companies, larger Tier 1 companies performed better than smaller Tier 2 companies in 3Q-2021 (+2.2% vs -1.1% respectively). The Tier 1s were helped by the strong performance of Trillium Therapeutics Inc. (+146.5%), on buyout news, and BELLUS Health Inc. (+120.9%), after it reported an interim clinical readout.
Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the best performing subsectors were medical supplies (4 companies: +9.0%; included Covalon Technologies Inc., which was up 69.8%), therapeutics R&D (43 companies: +7.1%; included the strong performance of Trillium and BELLUS), commercial therapeutics (16 companies: +3.8%) and diagnostics (6 companies: 0.5%). The worst performing subsectors were digital health (13 companies: -9.7%; many of which were the strongest performers at the onset of the pandemic), consumer health (9 companies: -6.8%), healthcare services (19 companies: -5.0%) and medical devices (16 companies: -4.2%).
3Q-2021 Healthcare Stock Performance By Subsector:
Tier 1 Company Performance
Overall, we included 59 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 3Q-2021 return of +2.2%.
The number of Tier 1 advancers (26) was lower than the number of decliners (32) this quarter.
Notable Tier 1 advancers in the quarter were:
Trillium Therapeutics Inc. – The stock rose 146.5% during 3Q-2021, after the company announced that it was being acquired by Pfizer for $2.3 B.
BELLUS Health Inc. – The stock appreciated 120.9% in the quarter, after the company reported positive interim data from its phase 2b SOOTHE trial of BLU-5937 in refractory chronic cough.
Cardiol Therapeutics Inc. – The stock was up 91.9% in 3Q-2021, after it began trading on NASDAQ and received FDA approval to start a phase 2 trial of CardiolRx for acute myocarditis.
Aurinia Pharmaceuticals Inc. – The stock was up 70.8% in the quarter, after the company acquired novel pipeline assets targeting autoimmune and kidney diseases, and on takeout rumours.
Kneat Inc. – The stock rose 45.9% in 3Q-2021, after the company reported 2Q-2021 financial results
Fennec Pharmaceuticals Inc. – The stock appreciated 45.5% in 3Q-2021, after the company reported 2Q-2021 financial results
Edesa Biotech Inc. – The stock was up 42.5% in the quarter, after the company announced positive data for a patient subgroup in its phase 2 trial of monoclonal antibody, EB05, in hospitalized COVID-19 patients.
Notable Tier 1 decliners in the quarter were:
ESSA Pharma Inc. – The stock declined 72.0% during 3Q-2021, after the company announced 2Q-2021 financial results and provided a corporate update, indicating that it was planning to enroll additional higher doses of its prostate cancer drug, EPI-7386, in its ongoing phase 1 study.
Medexus Pharmaceuticals Inc. – The stock depreciated 60.1% in the quarter, after the company announced that it had received a Complete Response Letter from the FDA, rejecting its approval application for Treosulfan for allogeneic hematopoietic stem cell transplantation.
Acasti Pharma Inc. – The stock declined 47.9% during 3Q-2021, following the closing of its merger with Grace Therapeutics.
3Q-2021 Performance of Tier 1 Companies:
Tier 2 Company Performance
Overall, we included 67 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 3Q-2021 return of -1.1%.
The number of advancers (22) was lower than the number of decliners (44).
Notable advancers in the quarter include:
BriaCell Therapeutics Corp. – The stock rose 84.8% in the quarter, after the company announced a clinical update for its anti-cancer treatment, Bria-IMT, in breast cancer, and closed a US$27.2 MM private placement.
Covalon Technologies Ltd. – The stock was up 69.8% in 3Q-2021, after the company announced the sale of its AquaGuard product line for US$30 MM and announced 3Q-2021 financial results.
Vaxil Bio Ltd. – The stock was up 64.7% in 3Q-2021, after the company announced a corporate update on its R&D activities.
Newtopia Inc. – The stock was up 56.2% in 3Q-2021, after the company reported 2Q-2021 financial results and closed a $2.5 MM private placement.
Appili Therapeutics Inc. – The stock appreciated 52.1% in the quarter, after the company announced 1Q-2021 financial results, closed a $3.5 MM funding agreement and announced completion of enrolment for Avigan/Reeqonus in a phase 3 study in mild to moderate COVID-19.
Ortho Regenerative Technologies Inc. – The stock rose 50.0% in 3Q-2021, following the company submitting a formal response to the FDA clinical hold for ORTHO-R, a drug/biologic combination product for rotator cuff tear repair surgery.
Ventripoint Diagnostics Ltd. – The stock rose 44.8% in the quarter, after the company reported 2Q-2021 financial results and provided an update on its clinical studies.
There were no notable decliners in the quarter.
3Q-2021 Performance of Tier 2 Companies:
Information included in this blog post has been sourced from publicly available sources. No representation or warranty, express or implied, is made with respect to the accuracy, correctness or completeness of the information contained herein. The commentary in this blog post represents the views and opinions of Bloom Burton only and should not be relied upon as investment advice. Bloom Burton accepts no liability whatsoever for any direct or consequential loss arising from any use or reliance on the information contained herein. The blog is published on a quarterly basis.