Biotech has been one of the most promising engines of innovation in the field of healthcare and medicine.
Consequently, it’s also an avenue where a lot of big money is moving in (institutional investors, government funding, etc.).
The global biotech market size is expected to reach a trillion dollars by 2024, and it’s full of exciting investment opportunities.
Some of these best Canadian biotech stocks can be your ticket to a breakthrough investment.
Pros and Cons of Investing in Biotech in Canada
- Powerful short-term growth potential.
- The potential of making money in a weak market (contrarian performance).
- Intra-industry diversification.
- Potential to invest in breakthrough technologies.
- No dividend stocks.
- Inconsistent growth patterns.
- Difficult to research.
- No large-cap or mid-cap biotech stock in Canada
Best Canadian Biotech Stocks You Can Invest in 2023
Biotech companies are often lumped together with pharmaceutical companies, but they are not the same thing.
Even though biotech companies also develop medicine and medicinal therapies, and they have a significant overlap with pharmaceutical companies, they use living organisms (biologics) to develop healthcare products.
In contrast, pharmaceutical companies mostly work with synthetics. Vaccines, antibiotics/probiotics, antibodies, etc., all fall under the purview of biotechnology.
1. BELLUS Health
In addition to being the largest biotech company in Canada by market cap, Bellus stands out from the rest of the stocks on this list for two reasons. It’s developing a treatment for a problem that affects about 13% of the general population (Chronic cough).
That’s 48 million people in the US and Canada alone. Secondly, treatment for this problem hasn’t been approved in the US for sixty years.
The treatment is already in Phase III clinical trials stage, and since Bellus holds the patents for the biological agent behind this treatment worldwide, it may experience a powerful surge in revenue once the treatment hits the market.
Even though it may still take years, this biotech company is quite close to the end of the production pipeline.
The stock has already shown enormous return potential in the right market conditions (optimism).
It went through two growth and slump cycles between Mar 2018 and Mar 2023, going up (from its lowest point to the peak) over 900% and over 400%, respectively.
Fennec Pharmaceuticals caters to cancer patients, particularly children that have lost their hearing due to chemotherapy. Platinum-based chemotherapy drugs (like Cisplatin) can cause permanent hearing loss, especially in children.
These drugs are given to roughly 10% to 20% of cancer patients and cause permanent hearing loss in about 75% of the children who receive them.
Fennec Pharma deals with a very specific market, but it has an edge, i.e., the primary FDA-approved treatment for this product.
The FDA approved the drug in September 2022, and the stock took off after that, though the momentum was short-lived. However, the edge still exists, and it may help the stock offer good long-term returns.
Sernova is a biotech company working on regenerative medicine, which aims to replace animal cells for the purpose of restoring one or more of the body’s functions.
The company already has the approval to conduct clinical studies for its highly innovative (and patented) Cell Pouch™. The Cell Pouch is an implant (made from FDA-approved materials) that will provide an organ-like environment where therapeutic cells will live and spread from.
Combined with its other two patented technologies/research avenues, Sernova has the potential to offer alternative treatments for multiple medically managed conditions, including diabetes and Thyroid diseases.
Millions of people suffer from these diseases, and if Sernova’s cell pouch and therapeutic cells prove a viable alternative to insulin, it will be a monumental leap in healthcare.
So far, the most significant spike in the stock’s recent history lasted for a few months (between Nov 2020 and Feb 2021) and pushed the value up over 500%.
Arch Biopartners is a clinical-stage biotech that is developing novel therapies for a widespread problem – organ injury and inflammation. One of its treatments, i.e., LSALT Peptide (Metablok), has already gone through Phase I and II clinical trials.
It’s the company’s candidate for dealing with inflammation in the lungs, liver, and kidneys, and it was investigated for COVID-19 as well.
In the last two decades, the stock has spiked/risen multiple times. The most recent bullish phase lasted from June 2021 and December 2021 and pushed the stock up over 300%.
Positives like awards of significant grants or approval of phase III clinical trials can push the stock upward.
Similarly, negative news like research associated with trials leaving for another company may trigger a downward momentum.
BriaCell is developing treatments for a wide range of cancer and has eight separate treatments in the preclinical stage and one treatment that has been approved by the FDA for phase II clinical trials for advanced metastatic breast cancer patients.
Breast cancer is the most prevalent form of cancer in the world, and about 78 women are diagnosed with it just in Canada every day. Comprehensive treatment can see powerful demand in the international market.
The overall family of treatments the company is developing is even more impressive and compelling, targeting prostate and lung cancers (covering a significant segment of the total cancer patients).
The company used to be massive (in terms of market capitalization) before the great recession and is currently a fraction of its former self.
It has gone through multiple growth cycles in the last decade, and the most significant growth phase in the last five years (between May 2021 and April 2022) pushed its value up by 300%.
Oncolytics Biotech is developing a treatment that aims to trigger and augment the human body’s own response to cancer cells.
The treatment is expected to be safe and well-tolerated by humans, and the company is already midway through its clinical trials for multiple treatments. The company’s main edge is the broad-spectrum application of the biological agent it’s developing.
The stock has exhibited multiple highs and lows in the past, and if you can buy the low and hold the stock till the next high, you may have a decent chance of doubling your money.
Theratechnologies has three areas of focus – HIV, for which it has both treatments in the research pipeline and prescription products it markets; liver diseases; and cancer.
It’s still in the process of securing permission for clinical trials from the FDA for some treatments, while others (its HIV trials) are already in phase II.
One of the treatments it is developing also received a Fast-Track Designation from the FDA due to its promising prospects.
The stock has gone through two major and two minor long-term growth cycles. The last major growth phase that was spread out between Jan 2014 and May 2018 saw the stock go up over 2,700%.
As a clinical-stage biotech company, NervGen focuses on problems/illnesses associated with the nervous system, primarily spinal cord injuries, Alzheimer’s, and Multiple Sclerosis (MS).
About a million people in the US are living with MS, and roughly 6.5 million with Alzheimer’s.
Its leading drug candidate, NVG-291, which is the first of its kind for these issues (injection under the skin), is already going through Phase-1 clinical trials.
The stock is relatively new and started trading on the junior exchange in 2019. It has surged up over 100% three times in the two years between Nov 2019 and Nov 2020.
Ceapro is different from all the other best Canadian biotech stocks on this list because of its diversified focus, which includes applications (for the biological agents it’s developing) other than healthcare.
The two main areas of focus are cosmeceuticals (cosmetic products with medicinal properties) and Nutraceuticals (food-derived products with additional health benefits).
It also has a patented Pressurized Gas Expanded (PGX) technology which allows companies to overcome the challenge of dying biopolymers.
The focus of the company may be unique compared to other biotech firms in Canada, but the stock’s performance has followed a similar pattern.
IntelGenx is a biotech company that focuses on drug delivery technologies. This includes Oral Films that make it easy to take drugs without water, Transmucosal Films that improve the absorption of a drug, Oral Topical Films, and Transdermal Patches.
The primary strength of the company is the size of the B2B market it can cater to. The delivery system can be applied to a wide array of drugs, so the company can potentially partner up with almost all pharmaceutical companies to improve their drug delivery with its technologies.
In the last ten years, the stock has spiked at least once every year. So if you buy low and wait, you may have a strong chance of catching a spike upward and accumulating decent capital appreciation.
You may also consider looking into the following honourable mentions:
- Medicenna Therapeutics
- Covalon Technologies
- Promis Neurosciences
- Devonian Health Group
- Microbix Biosystems
- IBEX Technologies
When you are choosing a biotech company based on its products and research avenue rather than its financials or past performance, there are a few factors you should consider looking into.
How big/commonplace is the problem the biotech company is planning on solving?
If the company is working on a revolutionary product that aims to solve a problem millions of people around the world suffer from, its breakthrough might be quite significant.
Whether it develops and sells the product directly or simply holds the patents, a larger target audience equals a larger financial opportunity, and the company may attract a lot of investment, pushing its value up.
Biotech companies focused on rare conditions may not hold the same appeal for institutional investors unless they have no competition and stand to dominate a specific market segment for years.
How far along a biotech company is in its research or clinical trials can also give insights about the right time to buy the company.
It may be difficult to decipher and challenging to track, but if you can buy a company just before a major milestone like moving to human trials or regulatory approval (HPFB, FDA, etc.), it can help you capture a strong upward trend.
Almost all of the best Canadian biotech stocks have inconsistent growth patterns. They can spike up when the conditions are favourable but can slump down just as quickly and hard enough to neutralize any gains achieved from the spike. So they may not be ideal long-term holdings.
The fundamental financial analysis approach may not be the best to evaluate the profitability potential of biotech stocks. Instead, you may consider analyzing them from the perspective of its technology pipeline.
One good way to check its spikes/growth spurts against milestones it has achieved, like getting approved for clinical trials or moving from Phase I to II or from II to III. If they coincide, you may consider keeping an eye on the timeline for the next milestone.
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Biotech stocks in Canada might require a more active investment style to capitalize on their potential fully, so if you are looking for buy-and-forget investments, this may not be your cup of tea.
But if you are looking for short-term gains (from a few months to a couple of years) and are adequately risk-tolerant, then you may consider buying heavily discounted biotech stocks and holding them till they go up.
If you are looking for other options, these diversified healthcare stocks are worth looking into.