In isolation, March was a modest month for the small cap health and biotech sector.

Overall the sector gained 2.4 percent and there was a near balance of winners and losers with 53 stocks gaining, 60 declining and 19 remaining unchanged.

A similar gain in January of 2.6 percent and a loss in February 2.3 percent has left small cap health and biotech stocks up 0.25 percent this quarter.

However, last quarter this sector lost nearly 14 percent, which was in line with the ASX more broadly.

While some of this can be put down to the broader share market, one horror story that hit the sector last year was the wipeout of Factor Therapeutics (ASX:FTT).

Upon announcing a clinical trial showed almost no benefit, the stock fell from 7 cents to 0.002 cents the moment the market opened on November 14. This sent a stern warning to investors of the risks of this sector.  

Even though the industry has failed to catch the momentum of the bull market seen since Christmas, the shareholders of some companies will be pleased.

Of the top 15 performers in March, ten of them lost ground in Q4 2018 by an average of 13 percent. But in gaining an average 41 percent in Q1 2019 they have shown compelling investment cases can still be made in the sector.   

The winners

The biggest gainer was knee-osteoarthritis focused Paradigm Biopharmaceuticals (ASX: PAR). Their success has taken even the ASX by surprise – leading to an ASX price query last week.

After positive results in a 2b clinical trial of its injectable pentosan polysulfate sodium (iPPS) concentrate, it would seem investors are both satisfied with positive results and optimistic of more good news when the secondary endpoints are reported later this quarter.

‘Due to the comprehensive nature of this secondary endpoint data it is expected to be of significant interest to both the investment community and the pharmaceutical industry, hence the increasing attention, the company is receiving in the lead up to the release of these results’, said managing director Paul Rennie in response the the ASX query.

The second biggest gainer is 1st Group (ASX: 1ST) who operate online platforms for the health sector, particularly appointment booking services.

This quarter they announced they had exceeded $1 million in quarterly revenues and a half yearly Annualised Contract Value at $4.8 million. They also announced a number of new strategic partnerships with Medibank and Vetcentric.

While clinical trial results and sales are important, so are regulatory approvals and Admedus (ASX: AHZ) proved this, spiking 50 percent after announcing its CardioCel product portfolio and collagen bioscaffold product received regulatory approval in Europe.

Among the other winners were nasal technology platform Rhinomed (ASX: RNO) and dental company Smiles Inclusive (ASX: SIL) in spite of a profit downgrade and board upheaval.

The company’s CFO, Paul Innes, departed and the CEO, Mike Timoney, stood down but has stayed on as a director. But substantial holders Lev Mizikovsky and Jonathan Hamilton have managed to call an EGM on May 22 to remove Timoney and director David Herlihy.

Perhaps investors are optimistic that the coup will be successful and the company will edge closer to profitability.

Top 15 performing health and biotech small cap ASX stocks

Ticker Name Market Cap Price (1-Apr) Total Return March (%) Total Return

Q1 2019 (%)

PAR   PARADIGM BIOPHARMACEUTICALS $    290,419,840.00 2.07 78 97
1ST   1ST GROUP LTD $       13,334,135.00 0.051 70 76
AHZ   ADMEDUS LTD $       30,087,082.00 0.051 50 -18
ALC   ALCIDION GROUP LTD $       46,728,928.00 0.058 45 29
ANR   ANATARA LIFESCIENCES LTD $       24,212,486.00 0.49 38 7
SIL   SMILES INCLUSIVE LTD $       10,717,586.00 0.185 37 -38
UCM   USCOM LTD $       23,398,948.00 0.17 36 17
RCE   RECCE PHARMACEUTICALS LTD $       22,497,282.00 0.21 35 20
OSP   OSPREY MEDICAL INC-CDI $       58,292,644.00 0.135 35 17
MX1   MICRO-X LTD $       53,115,336.00 0.35 35 19
RNO   RHINOMED LTD $       27,676,990.00 0.195 34 3
VHT   VOLPARA HEALTH TECHNOLOGIES $    262,508,224.00 1.46 32 33
BD1   BARD1 LIFE SCIENCES LTD $       21,876,694.00 0.022 29 0
IVX   INVION LTD $       99,010,912.00 0.018 29 0
VBS   VECTUS BIOSYSTEMS LTD $       10,520,998.00 0.45 29 -24

 

This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.