A conspiracy theorist looking at today’s share movements might develop the impression that someone out there is shoving millions of dollars at microcap biomed, biopharm and biotech companies in a bid to dominate a fast-growing Canadian sector while there’s still value attached – en masse.
A less paranoid type might see it as evidence that the money has been chased out of resources and parked in a place where it can add value, and that value is now generating hard across the board.
Whatever the explanation is, something’s afoot at the old ranch and it’s time for us to have a chat about it.
The big bio movers that I’ve seen in the last few days – heaven knows there’s probably more:
Intellipharmaceutics International (
TSX:T.I,
Stock Forum): Up
166% on
product launch news today
Covalon Technologies (
TSX:V.COV,
Stock Forum): Up 10% today, up
580% since August
Cardiome Pharma Corp (
TSX:T.COM,
Stock Forum): Up 22.3% today, up
150% since September,
1700% on the year!
Titan Medical (
TSX:V.TMD,
Stock Forum): Up
33% today,
execs baffled as to why
Lorus Therapeutics (
TSX:T.LOR,
Stock Forum): Jumped
200% in November before ‘settling’ to just 100%
Spectral Diagnostics (
TSX:T.SDI,
Stock Forum): Up
230% since May, 32% in November
Aurora Spine Corporation (
TSX:V.ASG,
Stock Forum): Up 48% since early November, up
100% since September, company
knows not why.
ProMetic Life Sciences (
TSX:T.PLI,
Stock Forum): Up
200% since July
Paladin Labs (
TSX:T.PLB,
Stock Forum): Up
65% in November on
takeover offer
Vivione Biosciences (
TSX:V.VBI,
Stock Forum): Up
9.5% on
FDA research news today
Medifocus (
TSX:V.MFS,
Stock Forum): Up over
50% on the month
Theratechnologies (
TSX:T.TH,
Stock Forum): Up
20% in November
Miraculins (
TSX:V.MOM,
Stock Forum): Up
20% on
news today
I could go on but my hands are getting decidedly arthritic typing all of those crazy moves out. (Arthritis stocks boom!)
This isn’t the kind of activity that you’ll find replicated in any other industry right now. Resources have been coming back slowly but are still in ‘long time hammered’ territory and not leaving it soon. Oil and gas has stars but also faders. Tech is volatile but streaky.
But biotech – especially Canadian biotech – is getting gobbled up and gobbled up quickly.
Aurora Spine is a great example of what’s going down; they’ve had decent news releases and look like a fine little microcapper with good management. They’ve only got 12m shares outstanding, they’ve only been on the market since September, and their sudden 100% growth since listing has put them at a market cap of $33m. It’s an interesting play.
But if one was looking for dividends, Aurora’s not a target. Likewise, if you were looking for a product everyone will use (they have developed a spinal implant), again, not a target. Financials? You won’t find any on the TSX site. Brand value? Nobody knows who they are yet. Volatility? The 50-day average on volume is just 24k shares traded a day.
So why the mega interest in a solid but unspectacular company?
Because it’s biotech, man.
The kids love the biotech.
I’d love to tell you where to find value in this group, but the answer is pretty simple: It’s everywhere. Everything is jumping. And not just today, but this month, last month, April… If you’ve had your nose buried in drilling reports you might have missed it, but it appears that the money once bound for ore is now being parked in pills – in Canada even more so than in the US.
Why Biotech? Perhaps because it shares similarities to the mining industry.
With explorers, you’re always a few years from the kind of results that might get you a buy-out (or, occasionally, production), while biotech companies deal with similar long term pressures dealing with the FDA and Health Canada.
With explorers, you may strike gold, you might strike dirt. Biotech companies face the same hurdles as they move through clinical trials. MondoDrug may well grow your amputated hand back – or it might turn you into a monkey.. let’s find out which!
And with explorers, if you hit a good’un, the profits can be gigantic. Ditto anything that gets shoved into the US health care system and receives a little pick-up right now.
But the real reason biotech stocks jumping like they’re on hot coals while explorers are in the dumps comes down to one thing: Accountability.
You’ve seen why retail investors are increasingly done with miners. The pump and dumps. The big plans that peter out when financing gets hard. The companies run by people who have eight directorships, none of which they spend much time on. The commodity killers (Hi potash industry!). The company killers (What’s up, Donner Metals management!). The mover-shakers (Giddyup, Barkerville!).
Mining has a bad rep because, frankly, mining execs are frequently not at all interested in opening mines. They want the buy-out, or the friendly takeover or, at the least, a farm-out. The number of explorers to miners is nuts.
“Take my property, scrape some rocks up, just leave me alone while I work on my next float.”
Biotech has something going for it that, while not precluding the industry from sharks, makes those sharks a little less bitey. To develop a biotech product, you have to REALLY develop a product.
The FDA and Health Canada approval processes are not for preening players. If you don’t have any ‘there’ there, you’ll get flushed out at the first try. Quite often, even when you have a product of substance, the process will bury it. It forces companies to document, test, trial, and not engage the system unless there’s a point to it all.
Today, Primary Petroleum announced they would be selling their oil properties and
sinking their cash into the Keek social video platform.
Let’s take a step back and think about that – an oil company decided to GET OUT OF OIL and instead get into social media.
The parameters are changing. The era of the ‘stick a pipe in the ground and run out the clock for a few years while investors wait for a press release showing results’ is nearing an end. Investors want to know their dollars are working for them and, boy howdy, are their biotech dollars working hard to replicate right now.
Of course, there will be those that drop by the wayside (hey look, it’s Ventripoint!). And there will be resource plays that will actually deliver what Barkerville has been promising.
But if I was compelled to buy a random twenty companies in any given industry right now – if I was held at gunpoint and forced to choose… I’m betting on a continuation of the biotech spike.
In fact, I’m betting on it being this generation’s dotcom boom.
Ride it.