January 8, 2015

Q4 2014 Share Price Performance (Part 1)




Quietly positive Q4 over-shadowed by broader Canadian market volatility

Individual company and sector share price performance in Q3 and Q4 was impacted by volatility in the broader Canadian market.

  • Broad market decline straddling the end of Q3 / beginning of Q4
  • Broad market decline in early December triggered by collapsing oil prices and probably including some tax-loss selling
  • Broad market bounce in late December despite the continuing drop in oil pricesQ4_Jan5_Image_Rev_Clear

Despite this background, the Canadian healthcare sector had a quietly positive Q4, led by the two profitable commercial sectors, Therapeutics – Commercial and Services. Investors have been focused on revenues, profits and safety.

I believe that the most important news in Q4 was from Express Scripts, the largest U.S. pharmacy benefit manager,  which negotiated a lower price for AbbVie’s new hepatitis C treatment and, in most cases, will no longer cover Gilead Sciences’ drugs. Gilead has now countered with an exclusive rights deal with CVS, the largest U.S. drug-store chain. All of the new hepatitis C drugs are breakthroughs which will actually cure the disease in many patients. From the longer term pharmaco-economic perspective, the drug costs are easily justifiable. However, from a shorter term budget perspective, some payers including state and local governments cannot absorb the increased drug costs. While drug price negotiations and restrictive formularies are common in many E.U. countries, this is the first time it has attracted such public attention in the U.S., which is still about 35% of the global pharmaceutical market.

In this blog, I am going to comment on the Q4 and yearly performance of the group of 39 Canadian healthcare companies with share prices of $1.00 or more to start 2014.

Q4 2014 performance

  • Advancers doubled decliners by 25 to 12 (excludes Nordion and Vansen Pharma)
  • Average and median share price changes were 6% and 4%, respectively
  • Four companies had share price increases of 40% or more in Q4.
    •  Nobilis Health (formerly Northstar Healthcare; +154%) – reported positive Q3 financial results and announced the acquisition of a company which offers specialized health services in 7 U.S. states
    •  Nuvo Research (+46%) – received US$45 million for its sale of PENNSAID 2% U.S. rights to Horizon Pharma; results from Phase 2 WF10 trial are expected in February
    •  Cipher Pharmaceuticals (+43%) – positive Q3 financial results, continued share price momentum and a NASDAQ listing
    •  IMRIS (+43%) – completed a small financing which included support from a long-term major shareholder, Centara Corp.
  • Two companies had share price decreases of 40% or more in Q4
    •  Response Biomedical (-43%) – continued the share price decline from Q3 despite a small financing and a Chinese partnership
    •  Aeterna Zentaris (-54%) – declined when the U.S. FDA determined that a new clinical trial would be needed for approval of its Macrelin diagnostic test



2014 Annual Performance

  •  Advancers outnumbered decliners by 21 to 16
  •  Average and median share price increases were 31% and 12%, respectively
  •  Nine companies had share price increases of 40% or more and eight companies had share price decreases of 40% or more in Q2.

Therapeutics – Commercial has been driving the sector throughout 2014.

  •  All 8 remaining companies in the Therapeutics – Commercial subsector were advancers
  •  The average increase was 143%, ranging from 14% for Covalon Technologies to 484% for Concordia Healthcare
  •  The list does not include the performance of Knight Therapeutics, headed by former Paladin Labs CEO Jonathan Goodman, which went public during 2014 and will be added to this group for the 2015 analyses



 [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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