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January 25, 2018

Q4 & Annual 2017 Share Price Performance - Part 3

Tier 2 Canadian Healthcare Companies: A Few Outperformers, Balanced with Usual High Volatility

In this blog, I am going to comment on the Q4 and annual 2017 share price performance of the group of 64 companies with share prices of between $0.10 and $0.99 to start 2017 (excludes companies which were acquired or taken private during 2017).

Q4 2017 review

  • There were an equal number of advancers and decliners (32)
  • Average and median share price changes were +25.5% and -2.0%, respectively
    • The big difference between the average and median changes indicates there were some strong outperformers on the positive side
    • Four of the top five performers have a cannabis link – see the details below. If these four companies are removed from the analysis, the average share price change drops from +25.5% to +9.2%
  • Fifteen companies in this group had share price increases of 40% or more:
    • BlueOcean NutraSciences (+580%) – low volume trading at 2017’s lowest prices changed when the company made its cannabis-related announcement that four growers were testing their proprietary growth technology. They later did a financing at 8 cents per unit, well below the current 25 cent price.

There are two things investors should consider: The first is when the cannabis growers might have sufficient data to make a decision on long-term licensing deals and the second is  when the 4-month hold on the shares from the recent financing expires, could the sale of those shares have a short-term impact on the share price?

    • NeutriSci International Inc. (+194%) – another company which benefited from a cannabis-related announcement, in this case a joint venture that was formed to produce and commercialize a line of healthy, sugar-free, edible cannabinoid, quick dissolving tablets, and expected Japanese marketing approval. One question investors need to consider is, when will a cannabis-related announcement not be enough to move a share price unless short-term sales are predictable?
    • Acerus Pharmaceuticals (+176%) – the key announcement to move the share price from its 2017 bottom was a NATESTO licensing deal in Brazil, supplemented by some in-licensing and sales data. For long term benefits, investors need to see these deals lead to increased revenues in the quarterly financials through 2018 and beyond.
    • InMed Pharmaceuticals (+166%) – this is another company which benefited from the Q4 share price rise for almost any company with a cannabis link. InMed, a biopharmaceutical company developing cannabinoid-based pharmaceuticals, caught the cannabis wave and smartly completed a financing for $9.4 M (gross proceeds) in January. Since completing that financing, the share price has dropped from a $2.40 high to about $1.25. InMed is now a pre-clinical stage cannabis biopharmaceutical company with a market cap of about $165 M. Investors should look for products being moved into the clinic and clinical data
    • Revive Therapeutics (+137%) – another company which benefited from the Q4 share price rise for almost any company with a cannabis link. Revive is also attempting to apply blockchain technology to its development program. I did not see a specific announcement which led to the share price rise. In 2018 to January 12, the share price has declined from a $0.48 peak to $0.34. At some point, investors should expect to see some detailed information on partnerships and products
    • GeneNews Limited (+137%) – the share price declined steeply for about 6 months due to financial concerns spanning both operating losses and a very low cash position however, a substantial financing in November triggered the share price bounce.

Investors should look to see if improved financial and operating performance result from its new business strategy.

    • Sernova Corp. (+121%) – the share price had declined for about 18 months but started to bounce back in late October however, the biggest move came with the announcement of U.S. FDA approval of an IND for a new Phase 1/2 trial of its cell pouch system in Type 1 diabetics. It is a single site, single arm study. This new clinical trial is not yet listed at clinicaltrials.gov however investors might want to check this site periodically (search using Cell Pouch or Sernova).

An investor should want to know more about the structure of the trial in order to assess the timing of any potential investment with respect to when data might be available.

    • Immunovaccine Inc. (+114%) – after trading around a $1.25 plateau for about 7 months, the share price rose steadily in Q4 on the expectation and release of positive Phase 1 clinical data for its lead anticancer drug candidate in a combination therapy. The company has sufficient cash to get to the end of 2018. As with all early stage clinical programs, investors are always waiting for the next piece of clinical data. Sometimes data is presented at conferences like ASCO which is the largest global cancer conference, and other times when a dosing cohort is completed. The company says more data will be available in H1 2018.
    • ChroMedX (+111%) – the share price bounced along a bottom in 2017 until the company announced hiring a firm ‘to conduct a high value transaction,’ which I would interpret as finding a partner or, preferably, a buyer. The company subsequently announced a new CEO. The maximum price from the sale of a company is secured if the company can also continue as a stand-alone business; the market cap is now about $55M.

Investors need to consider what a potential acquisition price could be, what the market reaction would be for a partnership and not a sale, and when such a transaction might occur.

    • Breathtec BioMedical (+109%) – the share price declined in 2017 until it bounced back up starting on November 8th and is currently trading where it was 12 months ago. The company has put out press releases saying there are no material changes. The current market cap is about $18 M. There is a corporate presentation on the company website which explains the technology and market potential but there is no technical data for the diagnosis of a specific disease or medical condition.
    • Luminor Medical Tech. (formerly Miraculins; +105%) – the share price bounced along a 2017 bottom until it listed on the CSE after its acquisition of the exclusive Canadian licence for all current and future cannabis commercial products developed by Rise Research. The most recent financials show a low cash position and, as with all non-medical cannabis products, provincial regulation of the retail market in Canada has not yet been fully established.
    • Vanc Pharmaceuticals (+64%) – the company’s share price was at 2017 lows until just before it announced the intention to launch the INSTI HIV rapid point-of-care test in Ontario with United Pharma Group. The biggest jump happened a few days later when it closed a small financing.

What moves the share price of companies with approved products? Sales.

    • Antibe Therapeutics (+61%) – the share price bounced along a 2017 bottom for about 6 months, not moving when the company announced the start of a Phase 2 trial for its lead drug candidate. The price did bounce when, in its financial press release, it stated that clinical data would be available in Q1 2018.

Investors need to assess what type of data the market is expecting and decide whether they think the company will fail, meet or beat market expectations.

    • Aequus Pharmaceuticals (+47%) – a specialty pharma company whose share price dropped during 2017 (no bad news) and popped in late Q4 when the market noticed its cannabinoid programs. At some point, investors should expect to see some detailed information on partnerships and products.
    • Delivra (+46%) – sales of OTC products increased while the operating loss decreased. Borrowing an acronym used by an Ottawa weather announcer 40 years ago, investors should be assessing whether the company can deliver MOTS – more of the same.

Five companies had a share price decline of more than 40%

    • Lattice Biologics (-40%) – there is sporadic low volume trading within a range. The loss is the result simply of starting Q4 at the top of the range and ending the quarter near the bottom of that range.
    • Imaging Dynamics (-44%) – the share price declined throughout 2017 on financial concerns. Trading is very sporadic and low volume.
    • Theralase Technologies (-48%) – preliminary data from a Phase 1 trial of its bladder cancer therapy, while not negative, did not meet market expectations
    • Patient Home Monitoring (-50%) – the separation of the business into two companies, PHM and Viemed (VMD), was completed in late December. The spin out of Viemed with a market cap of just under $100 M resulted in the share price decline for PHM.
    • Panacea Global (-100%) – not really 100% but the only trade in the last month was at 0.005 cents (US), which rounds to zero

Is there any pattern in the cause of the share price movements for the 20 companies assessed above?

  • Cannabis link – 6 companies
  • Clinical & regulatory data – 3 companies
  • Financial improvements (operational, financing) – 3 companies
  • Commercial activity (i.e. partnering, M&A) – 4 companies
  • Other or no obvious reason – 4 companies

2017 Review

  • Decliners slightly outnumbered advancers by 34 to 30
  • Average and median share price changes were +21.0% and -3.4%, respectively
    • The big difference between the average and median changes indicates there were some strong outperformers on the positive side
  • Twenty-nine out of sixty-four companies (45%) had share price changes, positive or negative, greater than 40%
  • Sixteen companies in this group had share price increases of 40% or more
    • InMed Pharmaceuticals (+478%) – cannabis bounce
    • Revive Therapeutics (+261%) – cannabis bounce
    • Immunovaccine (+246%) – positive Phase 1 data
    • Imperial Ginseng Products (+196%) – improved financial results
    • Oncolytics Biotech (+168%) – bounce from lows on Phase 3 clinical plan
    • VentriPoint Diagnostics (+158%) – Health Canada device approval
    • ChroMedX (+146%) – ‘for sale’ announcement
    • BlueOcean NutraSciences (+143%) – cannabis bounce
    • Acerus Pharmaceuticals (+115%) – Brazilian licensing deal
    • IBEX Technologies (+100%) – improved financial results
    • NeutriSci International (+77%) – cannabis bounce
    • Hamilton Thorne (+67%) – EU acquisition
    • Diamedica (+61%) – start of Phase 2 trial
    • Vanc Pharmaceuticals (+45%) – product launch, small financing
    • Sernova (+40%) – FDA approval to start new Ph 1 trial
    • Vigil Health Solutions (+40%) – improved sales bookings

Thirteen companies had a share price decline of more than 40%

    • Eastwood Bio-Medical Canada (-40%) – low volume, sporadic trading
    • MedX Health (-45%) – Q1 decline stabilized, started 2018 with a bounce
    • Aurora Spine (-53%) – stagnant sales, continuing losses
    • RepliCel Life Sciences (-58%) – no negative news
    • Pascal Biosciences (-62%) – no negative news; low volume, sporadic trading
    • Hemostemix (-65%) – financial concerns during restructuring
    • Agility Health (-68%) – increased operating losses
    • Bionik Laboratories (-74%) – continuing losses, financial concerns
    • Lattice Biologics (-75%) – sporadic low volume trading
    • KDA Group (-80%) – sporadic low volume trading
    • Eternity Healthcare (-86%) – sporadic low volume trading
    • Imaging Dynamics (-86%) – financial concerns, low trading volumes
    • Panacea Global (-100%) – only one trade in last month, which was at 0.005 cents (US)

In the next part of this blog series, I will look back at the performance of the sector over the last few years and make some comments about the path forward for the sector.

 [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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