Why Is Pharmaceutical Industry Offering Canada C$1 Billion?

Summary

• Canada’s drug regulations would curtail drugmakers’ revenue by at least C$ 19.8 billion over the next two decades, according to an estimate by the pharmaceutical industry.
• Stocks of CloudMD have rocketed over 214 per cent in the last three months.
• Stocks of Bausch have rebounded by nearly 41.74 per cent since the pandemic-led meltdown on March 19.

Drugmakers have offered a C$1 billion deal to the Canadian government in an attempt to remove parts of drug pricing curb that is set to come into effect on January 1, 2020, as per Reuters’ report.

The remaining drug regulations would still impact drugmakers’ revenue by at least C$ 19.8 billion over the next two decades, according to an estimate by the pharmaceutical industry. The government claims that Canada’s patented drugs among the most expensive in the world, just behind the United States and Switzerland.

Innovative Medicines Canada (IMC), drug makers’ lobby group in Canada, interacted with Minister of Health Patty Hajdu a month ago and submitted a written proposal but is yet to receive any response, IMC President Pamela Fralick said.

IMC has come forward with some reasonable alternatives for the government to consider, added the IMC President.

Healthcare industry has been faced multiple challenges in the face of the pandemic and supply chain disruptions. Most funding and support are oriented towards COVID-19 vaccination or related initiatives. The S&P/TSX health index is down over 21 per cent this year. However, the index has advanced by 29.35 per cent quarter-to-date and over 20 per cent month-to-date (MTD).

The MTD gains were fueled by the optimism around COVID-19 vaccination following pharma giant Pfizer and biotech company Moderna’s claims of over 90 per cent efficacy in preventing the virus.

In the wake of these developments, let us take a closer look at the following top healthcare stocks: CloudMD Software & Services Inc. (TSVX: DOC) and Bausch Health Companies Inc. (TSX:BHC).

CloudMD Software & Services Inc. (TSVX: DOC)

Current Stock Price: C$ 2.64

CloudMD Software & Services Inc offers virtual medical care, digital medical records, and online consultation with doctors from digital devices. It provides Software-as-a-Service (SaaS)-based solutions with in-house developed technology for clinics across Canada by combining telemedicine and artificial intelligence.

The company recently announced that it started an Enterprise Health Solutions Division designed to establish engagement and enable patients via personalized health and wellbeing products.

CloudMD began trading on the Toronto Stock Exchange Venture in June this year. Since then, the stock has surged nearly 257 per cent. In the last three months, stocks of CloudMD have rocketed over 214 per cent. 

The company has a current market capitalization of C$ 414.74 million and its price-to-book (P/B) ratio of 15.529. The stock offers negative return on equity and assets. Its debt to equity ratio is 0.21.

CloudMD stock six-month price chart/Source: Refinitiv, Thompson Reuters

CloudMD has been placed among TMX’s top healthcare stocks across the TSX and TSXV with the largest price gains in the last 30 days. The company has also been ranked on TMX’s Rising Stars stocks that have outperformed the markets (TSXV and TSX) in the last 30 days.

The stock is among the most actively traded stocks with the 10-day average trading volume of 2.4 million units.

The company reported total revenue of C$ 2.78 million for the second quarter ended 30 June 2020, as compared to C$ 1.06 million in Q2 2019, a surge of 163 per cent. The revenue generated from SaaS model services soared 35 per cent to C$4.59 million in the latest quarter while the revenue earned from digital clinics and pharmacies rocketed by 223 per cent to C$ 2.3 million.

Bausch Health Companies Inc. (TSX: BHC, NYSE: BHC)

Current Stock Price: C$ 25.74

Bausch Health is one of the leading drug makers in Canada. The company manufactures drugs and supplies pharmaceuticals products. Its current market cap stands at C$ 9.13 billion.

The stock has rebounded by nearly 41.74 per cent since the pandemic-led meltdown on March 19. In the last three months, stocks of drug maker have surged over 12.79 per cent. Bausch’s scrips indicate about 33 per cent decline year-to-date.

The drug manufacturer made it to TMX’s top healthcare stocks across the TSX and TSXV with the largest price gains in the last 30 days.

Bausch Health’s revenue grew 28 per cent quarter-over-quarter in the third quarter of 2020. However, the company posted revenues of C$ 2.138 billion for Q3 2020, a fall of three per cent year over year.

As per the company’s outlook for the financial of 2020, it is anticipating an annual revenue range of C$ 7.8 billion to C$ 8.00 billion and its adjusted EBITDA (non-GAAP) to be in the C$3.15 billion to C$3.30 billion range.

Bausch and Lomb, a leading global eye health segment of Bausch Health Companies, has recycled almost 27 million cast-off contact lenses, top foils, and blister packs under its ONE by ONE Recycling program since launching in November 2016.