Q4 and Annual Share Price Performance in 2016 - Part 1

For the analysis of the 2016 share price performance for the Canadian healthcare sector, there were 115 companies starting 2016 with share prices of $0.10 or higher. Twelve of these companies were no longer in the sector by the end of 2016, with six lost through acquisition/merger transactions. For the remaining 103 companies, the sector performance in 2016 can be described by the following statistics.

• Average share price change: -5.5%
• Median share price change: -18.4%
• Advancers: 39 companies (38%)
• Decliners: 64 companies (62%)
• Share price increase +40% or more: 17 companies (17%)
• Share price decrease -40% or more: 35 companies (34%)

 

 

Based on these numbers, the 2016 sector performance could be described as ‘volatile and negative’, the same terms I used to describe the sector performance in 2015. The small cap healthcare sector has always been volatile and 52 companies or half of the sector had share price changes greater than 40% in 2016. The negative sector performance should be looked at in the proper context. The sector substantially underperformed the TSX and TSX Venture Composite Indices, both of which benefited from increased prices for oil and other commodities. Positive performance by technology stocks moved the NASDAQ Composite Index in the second half, but the NASDAQ Biotechnology Index could not recover from its disastrous Q1 performance.

Broad sector numbers will not necessarily tell the complete story in a sector where there are major differences in market cap (Tier 1 vs. Tier 2) and in the variety of products and services being developed and delivered.

Unlike 2015 when the Tier 1 and Tier 2 companies had the same average share price change of -3%, the Tier 2 companies had a positive and substantially better performance in 2016 than the Tier 1 companies. In the Tier 1 group, only the Services subsector had a positive performance.

I have always had a personal bias to looking at Therapeutics – Development companies, the highest risk – highest reward subsector. There were 38 companies in this subsector at the end of 2016, just over one-third of the total sector. Unlike their balanced performance in 2015, the performance in 2016 was decidedly negative.

• Average share price change: -16%
• Advancers: 11 companies (29%)
• Decliners: 27 companies (71%)
• Share price increase +40% or more: 4 companies (11%)
• Share price decrease -40% or more: 13 companies (34%)

 

Two groups of Canadian healthcare companies consistently made headlines in 2016. The specialty pharma group was put in the spotlight by the continuing share price declines for Valeant Pharmaceuticals and Concordia International. The proposed legalization of marijuana in Canada created upward momentum, and probably a bubble, for the share prices of medical marijuana companies, which we monitor but are not included in our index.

In the following blogs, I will give a more detailed review of the Q4 and 2016 share price performance of the Tier 1 and Tier 2 Canadian healthcare companies.

 

 [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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