January 26, 2017
Q4 and Annual Share Price Performance in 2016 - Part 3
Tier 2 Canadian Healthcare Companies – same as Tier 1, not a good year
In this blog, I am going to comment on the Q4 and annual 2016 share price performances of the group of 52 companies which ended 2016 in Tier 2 (there were 58 companies with share prices of $1.00 or more to start 2016).
- Decliners outnumbered advancers by 32 to 20
- Average and median share price changes were -5% and -8%
- Five companies in this group had share price increases of 40% or more
- ChroMedX (+100%) – completed two small financings and made progress in development of its Handheld Blood Analyzer System prototype
- InMed Pharmaceuticals (+92%) – probably got a boost from being in cannabinoid-based drug development and there was also some heavier trading in the last few days of 2016
- Centric Health (+64%) – announced improved financial results (cash-flow positive and profitable)
- NexgenRx (+47%) – announced improved financial results; trading is sporadic and volumes are low
- Hamilton Thorne (+41%) – announced increased sales and there was continued share price momentum after a mid-September acquisition
- Six companies had a share price decline of more than 40%
- LED Medical Diagnostics (-42%) – a year-long share price decline continued, with sporadic trading and low volumes; small financing was completed at year end
- Revive Therapeutics (-50%) – no major news; the Q4 share price decline followed a Q3 increase
- Aurora Spine (-58%) – share price decline started in late September (no major news trigger); there may have been concerns about the low cash position
- Vanc Pharmaceuticals (-66%) – a year-long share price decline continued (I missed a 1 for 4 consolidation in my preliminary analysis; the original +42% performance became -66%)
- Intrinsic4D (-69%) – no major news; sporadic trading
- Spectral Medical (-83%) – announced that its Phase 3 trial of Toraymyxin did not achieve its primary clinical endpoint
- Six companies were dropped from assessment during 2016
- Telesta Therapeutics – acquired
- Response Biomedical – taken private
- Network Life Sciences – now ePlay Digital
- Simavita – voluntary delisting
- Avapecia Life Sciences – merging
- DiagnoCure – voluntary liquidation
2016 Annual Summary
- Decliners outnumbered advancers by 31 to 21
- Average and median share price changes were +5% and -12%, respectively; if the positive outliers Ceapro (+349%) and Vigil (+317%) are removed from the analysis, the average annual share price change moves from +4% to -9%.
- Eleven companies in this group had share price increases of 40% or more
- Ceapro (+349%)
- Vigil Health Solutions (+317%)
- Centric Health (+127%)
- Hamilton Thorne (+125%)
- BioMmune Technologies (+108%)
- Opsens (+88%)
- Symbility Health (+82%)
- Critical Outcome Technologies (+64%)
- IntelGenx Technologies (+50%)
- NexgenRx (+42%)
- Profound Medical (+40%)
- Sixteen companies in this group had share price declines of 40% or more
- Theralase Technologies (-41%)
- Smart Employee Benefits (-49%)
- SQI Diagnostics (-53%)
- VentriPoint Diagnostics (-57%)
- Aequus Pharmaceuticals (-61%)
- Convalo Health International (-63%)
- Hemostemix (-64%)
- Eastwood Bio-Medical Canada (-64%)
- Spectral Medical (-66%)
- Panacea Global (-69%)
- LED Medical Diagnostics (-69%)
- Patient Home Monitoring (-73%)
- Intrinsic4D (-80%)
- Revive Therapeutics (-81%)
- QuickFlo Health (-84%)
- Vanc Pharmaceuticals (-88%)
Fourteen public Canadian medical marijuana companies were monitored for share price performance in 2016. Most companies in this sector are in the early stages of commercialization, either still seeking Health Canada licenses or not yet profitable.
- Q4 2016 Performance
- There were 13 advancers and only 1 decliner
- Average and median share price changes were +58% and +61%
- Ten companies had a share price increase of 40% or more in Q4 and no company had a share price decrease of 40% or more
- Annual 2016 performance
- There were 12 advancers and only 2 decliners in 2016
- Average and median share price changes were +233% and +217%
- Ten companies had a share price increase of 40% or more and only one company had a share price decrease of 40% or more
- I wrote in the Q3 blog about the ‘herd mentality’ movement of the medical marijuana group. Share price movement like this reminds me of the tech and biotech sectors from 1999 to 2001, and another word which describes that period is ‘bubble’. I think there is a valuation bubble because I don’t believe the sales will develop as quickly as most investors believe. However, there is a real product – medical and recreational marijuana – which was missing in many tech bubble companies.
- The valuation of these companies will eventually be based on sales, profitability and growth. What are some of the questions which investors need to ask?
- What are the markets?
- Canada – medical
- Canada – recreational
- U.S. – medical
- U.S. – recreational
- What are the markets?
- What is the size of each of these markets in kg and $?
- What are the factors governing the growth of each market?
- What is the regulatory situation in each market?
- Will there be a 2-step regulatory change in Canada – with decriminalization followed by regulations on marketing and sales?
- Will the provinces move quickly on establishing the sales channels?
- Can Canadian manufacturers sell into the U.S. market, given that it is still illegal from a U.S. federal perspective?
- Manufacturing questions
- What is the manufacturing capacity for each company in kg and $?
- Will there be excess manufacturing capacity?
- Will any company have a manufacturing cost advantage?
- Marketing questions
- Will there be product differentiation between similar products (i.e. bud) and between different products (i.e. bud and oil)?
- Will there be price competition?
- Will there be restrictions on where the products can be sold?
- Will manufacturers vertically integrate into the retail space?
- What types of advertising will be allowed?
- Will the medical profession still be hesitant to write prescriptions?
Looking Ahead
There was no obvious pattern for success among the companies with share price increases of 40% or more in 2016. If I had to pick a group which performed better, it would be companies with products or services, revenues and profitability.
I have no idea where stock markets are going. Although the U.S. election is over, I don’t think anybody knows what the election of Donald Trump will mean. The U.S. Federal Reserve has firmly indicated rate increase for 2017 but that may already be built into the market.
I will repeat my comment from my last blog – “with this background, you are probably going to have to pick winners – whether you choose to bottom-fish, look for near-term events or expect improved financial performance”.
[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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