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January 14, 2022

Q4 2021 Share Price Performance

Canadian Healthcare Stocks Underperform

In this blog post, Bloom Burton’s equity research team summarizes the performance of the Canadian healthcare sector during 4Q-2021 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 at December 31. 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 115 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).

4Q-2021 Performance

  • The 115 Canadian healthcare companies included in Bloom Burton’s 4Q-2021 blog universe were collectively down 9.8% in the quarter, underperforming the S&P/TSX Composite Index (+5.7%) and the S&P/TSX Venture Composite Index (+9.3%). Mirroring trends seen south of the border (discussed below), 4Q-2021 was particularly challenging for biotech companies operating in therapeutics R&D, which is a large component of our Canadian healthcare universe (43/115 companies; therapeutics R&D companies collectively down 9.8% in 4Q-2021).

  • Canadian healthcare stocks typically perform in line with healthcare stocks south of the border, where biotech stocks have won none of the COVID-inspired generalist fervor of 2020 – the NASDAQ Biotechnology Index (NBI) was down 7.0% in 4Q-2021, underperforming the NYSE Pharmaceutical Index (DRG) and the broader U.S. markets (S&P 500 Index up +10.7%; NASDAQ Composite up +8.3%). The poor performance of biotech stocks has continued for much of the year and is due to a combination of factors, including the fear of higher interest rates (particularly bad for high-risk sectors like biotech), a tidal wave of biotech IPOs in both 2020 and 2021, drug pricing concerns, a dearth of M&A and an overweighting of clinical setbacks in the gene therapy and CAR-T spaces).

  • Among Canadian healthcare companies, larger Tier 1 companies, which are typically less volatile, performed better than smaller Tier 2 companies in 4Q-2021 (-0.2% vs -16.4% respectively) due to the risk-off environment hitting riskier and less liquid stocks more harshly.

  • Among the healthcare subsectors in Bloom Burton’s Canadian tracking universe, the best performing subsector was medical supplies (3 companies: +18.2%; included Hamilton Thorne Ltd. and Microbix Biosystems Inc. which were up 20.5% and 31.7% respectively). All other subsectors had negative returns in 4Q-2021, including medical devices (13 companies: -0.9%), diagnostics (8 companies: -5.9%), commercial therapeutics (11 companies: -8.7%), therapeutics R&D (43 companies: -9.8%), digital health (12 companies: -10.4%), healthcare services (18 companies: -18.8%), and consumer health (7 companies: -20.1%).

* 3Q-2021 values were based on an analysis of 126 companies that fit the inclusion criteria (59 Tier 1 and 67 Tier 2)

4Q-2021 Healthcare Stock Performance By Subsector:

Tier 1 Company Performance

  • Overall, we included 47 companies in our Tier 1 analysis with EV of $100 MM or greater, which collectively had a 4Q-2021 return of -0.2%.

  • The number of Tier 1 advancers (19) was lower than the number of decliners (28) this quarter.

Notable Tier 1 advancers in the quarter were:

  • Arch Biopartners Inc. – The stock rose 97.1% during 4Q-2021, rising steadily since the company provided an update on the analysis of phase 2 results for its lead drug, Metablok, in August. Metablok is in phase 2 development for acute respiratory distress syndrome (ARDS) and acute kidney injury (AKI) in patients infected with COVID-19.

  • Perimeter Medical Imaging AI Inc. – The stock appreciated 73.0% in the quarter, after the company announced that it received a $43.4 MM strategic investment by Social Capital Holdings on December 15.

  • ESSA Pharma Inc. – The stock was up 70.1% in 4Q-2021, rebounding from a steep decline in 3Q-2021, in anticipation of final dose escalation data in 1H-2022.

  • MedMira Inc. – The stock was up 42.9% in the quarter, after the company announced an expansion of its VYRA product line with CoV2Flu Rapid Antigen Test on December 21.

  • Sernova Corp. – The stock rose 41.1% in 4Q-2021, after the company provided a clinical update on its diabetes trial its Cell Pouch on December 16.

Notable Tier 1 decliners in the quarter were:

  • Fennec Pharmaceuticals Inc. – The stock declined 51.3% during 4Q-2021, after the company announced on November 29 that it was expecting to receive a Complete Response Letter from the FDA for its New Drug Application for Pedmark, to prevent ototoxicity associated with cisplatin in pediatric patients with solid tumours.

  • Field Trip Health Ltd. – The stock depreciated 43.9% in the quarter, after competitor Compass Pathways (NASDAQ:CMPS; unrated) reported mixed phase 2b results for COMP360 psilocybin in treatment resistant depression in November.  

  • Zymeworks Inc. – The stock declined 43.0% during 4Q-2021, following the reporting of clinical results for zanidatamab and competing HER-targeted ADC, Enhertu, at ESMO in September.

  • Cybin Inc. – The stock was down 42.9% in the quarter, after COMPASS Pathways’ reporting of mixed phase 2b results for COMP360 psilocybin in treatment resistant depression in November.

  • Greenbrook TMS Inc. – The stock was down 40.4% in the quarter after it announced the acquisition of Achieve TMS East and Central, and a US$11.5 MM bought deal financing in September.

4Q-2021 Performance of Tier 1 Companies:

Tier 2 Company Performance

  • Overall, we included 68 companies in our Tier 2 analysis (with EV of less than $100 MM), which as a group had a 4Q-2021 return of -16.4%.

  • The number of advancers (14) was lower than the number of decliners (52).

Notable advancers in the quarter include:

  • Theralase Technologies Inc.  – The stock rose 82.9% in the quarter, after the company reported 3Q-2021 financial results on November 29.

  • BioMark Diagnostics Inc. – The stock was up 50.0% in 4Q-2021, after the company provided an operational update and announced a collaboration with AstraZeneca, Pfizer Canada and the IUCPQ Foundation for a project to detect early lung cancer.

  • Quest PharmaTech Inc. – The stock was up 46.2% in 4Q-2021, after the company announced the first patient was enrolled in each of two investigator led clinical trials for oregovomab in recurrent ovarian cancer.  

  • Devonian Health Group Inc. – The stock was up 45.0% in 4Q-2021, after the company announced the publication of a scientific article on the potential use of thykamine for the treatment of COVID-19.  

Notable decliners in the quarter include:

  • Bionik Laboratories Corp.  – The stock declined 66.9% in the quarter, on low volume, after the company reported 2Q-2021 financial results on November 10.

  • Titan Medical Inc.  – The stock declined 56.6% in the quarter, after the company reported 3Q-2021 financial results and delayed its filing of an IDE application for Enos by approximately 1 year.

  • Sunshine Biopharma Inc. – The stock was down 50.9% in 4Q-2021 on limited news.

  • Jack Nathan Medical Corp. – The stock depreciated 50.0% in the quarter, with the decline starting after the company reported 2Q-2021 financial results on September 28.

  • Cardiol Therapeutics Inc. – The stock was down 47.6% in 4Q-2021, after the company filed a preliminary prospectus supplement for a US$50 MM public offering.  

4Q-2021 Performance of Tier 2 Companies:

Appendix 1:

Disclaimer:

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.