Analysis: Stocks Get Hammered 

In this blog post, the Bloom Burton equity research team summarizes the performance of the Canadian healthcare sector during 4Q-2018, 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 a market capof 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; consumer health and veterinary. 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 85 companies.

We classify companies as “Tier 1” and “Tier 2” based on their enterprise value (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).

4Q-2018 Performance

  • The 85 Canadian healthcare companies included in Bloom Burton’s 4Q-2018 blog were collectively down -21.6% in 4Q-2018, underperforming the S&P/TSX Composite Index (-10.9%) but in line with the S&P/TSX Venture Composite Index (-21.6%). The poor performance of Canadian healthcare stocks during the quarter is largely a reaction to broader market weakness as a result of higher interest rates and heightened global trade tensions, creating an environment that is particularly unfavourable for high risk sectors like biotech, which is a large component of our healthcare blog universe.
  • Among Canadian healthcare companies, larger Tier 1 companies performed better than smaller Tier 2 companies (-17.2% vs -23.8% respectively) due to the perceived lower risk of commercial pharma stocks, which make up a greater proportion of the Tier 1 group compared to Tier 2. We see a similar trend in the U.S., where the NYSE Pharmaceutical Index (DRG) performed better than the NASDAQ Biotechnology Index (NBI) in 4Q-2018 (-4.2% vs -20.7% respectively).
  • Despite the punishing quarter for both Tier 1 and Tier 2 companies where the number of decliners (23 and 51 respectively) greatly outnumbered the number of advancers (5 and 6 respectively), due to the event driven nature of healthcare stocks, company-specific positive milestone events can lift stocks even in the toughest of market conditions (e.g. HLS Therapeutics increased +7.4% during 4Q-2018 on top of the +53.9% increase in 3Q-2018 after its partner Amarin, on September 24, reported positive clinical data for Vascepa, a pure EPA omega-3 prescription product that HLS has in-licensed for the Canadian market).
  • The performance of Canadian healthcare stocks largely follows that of healthcare stocks south of the border and as mentioned above, the NBI was down -20.7% and the DRG was down -4.2% during 4Q-2018, erasing gains earlier in the year. In addition to macroeconomic factors which impacted the broader U.S. markets (S&P 500 Index and NASDAQ composite down -14.0% and -17.5% respectively), large cap biopharmas continue to face headwinds around identifying new sources of growth to replace aging blockbuster drugs, while facing increased scrutiny around drug pricing. Nonetheless, demographic trends and innovation continue to push the healthcare industry forward.
  • While all healthcare subsectors in Bloom Burton’s Canadian tracking universe were down in 4Q-2018, the best performing subsectors were diagnostics (2 companies – see Appendix 1: -9.2%), commercial therapeutics (15 companies: -14.2%), healthcare services (7 companies: -14.9%) and consumer health (6 companies: -17.3%), possibly due to the perceived lower risk of these subsectors. The worst performing subsectors were healthcare IT (1 company: -30%), medical supplies (5 companies: -28.0%), therapeutic R&D (33 companies: -25.9% – the therapeutic R&D subsector had been the highest flyer in 3Q-2018, up 7.3% (2Q-2018 up 16.6%), providing additional fuel for underperformance in a risk-off market), veterinary (2 companies: -25.3%) and medical devices (14 companies: -23.0%). However, several of the subsectors contain only a few companies so we are hesitant to draw any definitive conclusions from these trends.
Company Grouping/Share Price Changes4Q-20183Q-20182Q - 2018Q1 - 2018*FY 2017*
S&P/TSX Composite Index-10.9%-1.3%+5.9%-5.8%+5.2%
S&P/TSX Venture Composite Index-21.4%-4.2%+7.1%-8.5%+9.9%
S&P 500 Index-14.0%+7.2%+2.9%-2.0%+18.4%
NASDAQ Composite-17.5%+7.1%+6.3%+0.8%+27.2%
NASDAQ Biotechnology Index (NBI)-20.7%+11.1%+3.0%-2.5%+18.7%
NYSE Pharmaceutical Index (DRG)-4.2%+12.5%-0.3%-3.8%+11.7%
Canadian Healthcare Overall - Average (93 companies)-21.6%+1.0%+8.8%+3.9%+16.2%
Tier 1 - Average (32 companies)-17.2%+9.3%+7.0%+1.8%+32.0%
Tier 2 - Average (61 companies)-23.8%-2.9%+9.8%+4.8%+9.8%
Tier 1 and 2 - Number of Advancers1135453436
Tier 1 and 2 - Number of Decliners7446454843
Share price increase 40% or greater - Overall16181019
Tier 103727
Tier 21311812
Share price decrease 40% or greater - Overall1637611
Tier 131406
Tier 2132365
*3Q-2018 values were based on an analysis of 85 companies (27 Tier 1 and 58 Tier 2) that fit the inclusion criteria, while 2Q-2018 values were based on 93 companies (32 Tier 1 and 61 Tier 2) and 1Q-2018 and FY-2017 values were based on 86 companies (27 Tier 1 and 59 Tier 2).


4Q-2018 Healthcare Stock Performance (%) By Sector


Tier 1 Company Performance

  • Overall, we included 28 companies in our Tier 1 analysis with EV of $100 M or greater, which collectively had a 4Q-2018 return of -17.2%.
  • The number of Tier 1 decliners (23) was higher than the number of advancers (5) this quarter.

Notable advancers in the quarter include:

  • Aurinia Pharmaceuticals – The stock finished 4Q-2018 up +8.8% after the company announced that it had completed enrolment of its phase 3 trial (AURORA) of voclosporin in lupus nephritis in September, and in anticipation of a phase 2 data readout for voclosporin ophthalmic solution in dry eye disease expected in January 2019.
  • HLS Therapeutics – The stock increased +7.4% during 4Q-2018, continuing its run from late 3Q-2018, which saw the stock price increase +53.9% following partner Amarin’s September 24 reporting of strong efficacy results for cardiovascular drug Vascepa, a pure EPA omega-3 prescription product that HLS has in-licensed for the Canadian market.
  • Cardiol Therapeutics – The stock finished 4Q-2018 up +7.2% after its IPO on December 20 raised C$15.1 MM to advance the development of pharmaceutical cannabidiol products and targeted therapies for heart failure and cancer.
  • Clementia Pharmaceuticals – The stock finished 4Q-2018 up +5.5% after the company announced on October 23 that it was planning to submit an NDA in 2H-2019 for episodic dosing of palovarotone, its drug candidate for the treatment of fibrodysplasia ossificans progressiva, based on existing phase 2 data, prior to ongoing phase 3 trial completion.

Notable decliners in the quarter include:

  • Novelion Therapeutics – The stock was down -71.6% in 4Q-2018, as the company faces a short timeline to develop a long term capital strategy to address its looming US$412 MM of debt which matures between February and August 2019.
  • Arbutus Biopharma – The stock decreased -59.5% in 4Q-2018 after the company provided a corporate update on October 9, which announced the decision to delay the initiation of a phase 1 trial for AB-452, its novel HBV RNA destabilizer, that was planned in 4Q-2018, following nonclinical safety findings.
  • Prometic Life Sciences – The stock finished 4Q-2018 down -46.9%, continuing its slide from 3Q-2018 which saw the stock lose -38.5% due to continued balance sheet risk, uncertainty regarding timelines for NDA resubmission for lead drug candidate, Ryplazim, and leadership changes.

Tier 2 Company Performance

  • Overall, we included 57 companies in our Tier 2 analysis (with EV of less than $100 M), which as a group had a 4Q-2018 return of -23.8%.
  • The number of decliners (51) outnumbered the number of advancers (6) this quarter.

Notable advancers in the quarter include:

  • Aeterna Zentaris – The stock increased +80.4% in 4Q-2018 after the company announced on November 1 that Novo Nordisk was acquiring rights to Macrilen for adult growth hormone deficiency in the U.S. and Canada from Strongbridge Biopharma (Aeterna Zentaris out-licensed U.S. and Canadian rights to Macrilen to Strongbridge).
  • biOasis Technologies – The stock increased +31.5% in 4Q-2018 after the company announced positive results on November 20 from a peripheral whole-body PET/CT scan study in non-human primates for xB3-001, its preclinical drug candidate for brain metastases.
  • Ceapro – The stock finished 4Q-2018 up +11.6% after the company announced on October 9 that it had received Health Canada approval to commence a human clinical study assessing the natural health product beta glucagon as a cholesterol-lowering agent in hyperlipidemia patients on statins.

Notable decliners in the quarter include:

  • Neovasc – The stock was down -76.5% in 4Q-2018, continuing the slide that began on September 11 when the company announced that it was the subject of a lawsuit brought about by Endovalve and Micro Interventional Devices alleging trade secret misappropriation, breach of contract and unfair competition.
  • Trillium Therapeutics – The stock decreased -68.2% in 4Q-2018 due to investor concerns that the company has slipped behind and has a weaker balance sheet than its competitor, Forty Seven.
  • DiaMedica Therapeutics – The stock was down -62.7% in 4Q-2018, concurrent with the company announcing on November 12 its intention to list on NASDAQ and announcing on December 7 the pricing of its NASDAQ IPO (issuing 4.1 MM common shares at US$4.00 per share).
  • Kalytera Therapeutics – The stock finished 4Q-2018 down -60.0%, with the slide occurring alongside the company providing a progress update on September 27 for its cannabinoid-based products for the treatment of pain.


CompanyEV (C$ MM)Market Cap (C$ MM)Subsector
Tier 1
Bausch Health Companies Inc. 39,685.2 8,823.9 Commercial Therapeutics
Advanz Pharma Corp. 1,791.9 1,258.5 Commercial Therapeutics
Jamieson Wellness Inc. 1,017.5 810.9Consumer Health
Medical Facilities Corp.778.7466.6Healthcare Services
Resverlogix Corp.744.4635.1Therapeutic R&D
Theratechnologies Inc.654.5639.6Commercial Therapeutics
Aurinia Pharmaceuticals Inc.612.3791.8Therapeutic R&D
HLS Therapeutics Inc.521.6369.8Commercial Therapeutics
CRH Medical Corp.470.5302.1Healthcare Services
Zymeworks Inc.447.0641.0Therapeutic R&D
Clementia Pharmaceuticals Inc.403.4607.3Therapeutic R&D
Akumin Inc.395.2278.6Healthcare Services
Eastwood Bio-Medical Canada Inc.378.1114.9Consumer Health
Novelion Therapeutics Inc.377.121.7Commercial Therapeutics
Knight Therapeutics Inc.357.8 1,098.2 Commercial Therapeutics
Prometic Life Sciences Inc.346.0183.1Therapeutic R&D
IMV Inc.297.3309.1Therapeutic R&D
Helius Medical Technologies Inc.282.3319.0Medical Devices
Arbutus Biopharma Corp.266.0290.3Therapeutic R&D
Neptune Wellness Solutions Inc.258.3276.4Consumer Health
Viemed Healthcare Inc.202.7198.3Healthcare Services
Zomedica Pharmaceuticals Corp.188.3194.7Veterinary
Correvio Pharma Corp.145.4121.2Commercial Therapeutics
Centric Health Corp.140.661.6Healthcare Services
Fennec Pharmaceuticals Inc.130.5168.7Therapeutic R&D
VBI Vaccines Inc.124.8212.7Therapeutic R&D
Cardiol Therapeutics Inc.104.0101.1Therapeutic R&D
BELLUS Health Inc.103.9160.2Therapeutic R&D
Tier 2
Hamilton Thorne Ltd.97.2107.9Medical Supplies
BioSyent Inc.94.6116.8Commercial Therapeutics
Covalon Technologies Ltd.93.191.0Medical Supplies
Greenbrook Tms Inc.89.6133.1Healthcare Services
Arch Biopartners Inc.75.776.4Therapeutic R&D
Aptose Biosciences Inc.69.898.2Therapeutic R&D
Antibe Therapeutics Inc.64.568.2Therapeutic R&D
ProMIS Neurosciences Inc.61.866.6Therapeutic R&D
Opsens Inc.61.372.0Medical Devices
Intelgenx Technologies Corp.60.568.9Therapeutic R&D
Spectral Medical Inc59.764.3Therapeutic R&D
Cipher Pharmaceuticals Inc.58.045.6Commercial Therapeutics
Helix BioPharma Corp.53.555.5Therapeutic R&D
Xenon Pharmaceuticals Inc.45.3217.5Therapeutic R&D
Aeterna Zentaris Inc.45.066.8Commercial Therapeutics
Theralase Technologies Inc.40.042.5Medical Devices
Acasti Pharma Inc.37.589.0Therapeutic R&D
TSO3 Inc.37.135.5Medical Devices
ImmunoPrecise Antibodies Ltd.36.839.0Medical Supplies
Profound Medical Corp.36.059.4Medical Devices
LexaGene Holdings Inc.33.845.7Diagnostic
Neovasc Inc.33.820.7Medical Devices
InMed Pharmaceuticals Inc.33.358.1Therapeutic R&D
Acerus Pharmaceuticals Corp.31.927.1Commercial Therapeutics
Medexus Pharmaceuticals Inc.29.870.8Commercial Therapeutics
Trillium Therapeutics Inc.29.333.9Therapeutic R&D
Microbix Biosystems Inc.28.822.7Medical Supplies
Sernova Corp.28.233.5Medical Devices
DiaMedica Therapeutics Inc.27.148.9Therapeutic R&D
biOasis Technologies Inc.26.228.1Therapeutic R&D
Ceapro Inc.26.129.7Consumer Health
Oncolytics Biotech Inc.25.342.8Therapeutic R&D
Medicure Inc.24.895.8Commercial Therapeutics
Protech Home Medical Corp.23.750.1Healthcare Services
Novoheart Holdings Inc.22.910.9Medical Supplies
Nuvo Pharmaceuticals Inc.21.723.9Commercial Therapeutics
Hemostemix Inc.21.322.7Therapeutic R&D
LED Medical Diagnostics Inc.21.213.8Medical Devices
Medx Health Corp.18.918.9Medical Devices
Aurora Spine Corp.18.815.0Medical Devices
CVR Medical Corp.18.625.7Diagnostic
Bionik Laboratories Corp.18.117.6Medical Devices
Quest PharmaTech Inc.16.716.7Therapeutic R&D
Sirona Biochem Corp.16.213.8Therapeutic R&D
Medicenna Therapeutics Corp.15.820.0Medical Devices
Kalytera Therapeutics Inc.15.016.7Therapeutic R&D
Eyecarrot Innovations Corp.12.815.4Healthcare IT
BriaCell Therapeutics Corp.12.810.1Therapeutic R&D
Delivra Corp.12.711.6Consumer Health
Avivagen Inc.12.513.4Veterinary
Waverly Pharma Inc.11.915.1Commercial Therapeutics
SQI Diagnostics Inc.9.811.1Medical Devices
Eastgate Biotech Corp.7.114.6Consumer Health
ESSA Pharma Inc.1.415.7Therapeutic R&D
Titan Medical Inc.(6.9)36.6Medical Devices
Sierra Oncology Inc.(9.8)134.0Therapeutic R&D
Aquinox Pharmaceuticals Inc.(42.7)69.2Therapeutic R&D

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Company Specific Disclosures

  • Bloom Burton & Co. or its affiliates have provided investment banking services for Cipher Pharmaceuticals, Knight Therapeutics, Nuvo Pharmaceuticals, CRH Medical, BELLUS Health and Titan medical during the 12 months preceding the date of issuance of the research report or recommendation.
  • Bloom Burton has managed an offering of securities by Knight Therapeutics and Titan Medical in the past 12 months.
  • The research analyst responsible for this report and recommendations may hold securities discussed in the report indirectly through Bloom Burton Canadian Healthcare Fund, LP which is indirectly affiliated with Bloom Burton & Co.
  • 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 Trillium Therapeutics Inc., Xenon Pharmaceuticals Inc., Hamilton Thorne Ltd., Bellus Health Inc., and ESSA Pharma Inc. directly or through derivatives.