Brookline Brief
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THE BROOKLINE BRIEF Healthcare Equity Capital Markets Update February 2, 2021 Healthcare Equity Capital Markets Update February 2, 2021 Equity Market / New Issue Market Tailwinds Equity Market / New Issue Market Headwinds › Fueled by a broad-based improvement to investor sentiment across the healthcare › Although the new issue market for companies within the life sciences, med. tech, and equities landscape, new issue activity from life sciences, med. tech, and diagnostics issuers diagnostics subsectors recently witnessed the strongest-ever start to a new year on continued to remain robust over the last 4 weeks, with 4 IPOs and 72 follow-on offerings record, the benefits of Jan. 2021’s robust offering conditions accrued disproportionately raising over $8.4bn in combined aggregate gross proceeds during the first calendar to larger issuers pursuing larger deals, with sub-$100mm market cap issuers accounting month 2021. On a relative basis, Jan. 2021 was the 2nd most active month since the for just $336mm of last month’s $8.4bn in aggregate gross proceeds raised (prior to beginning of 2017 (based on the total monthly number of IPOs and follow-on offerings, in overallotment), the lowest such “micro-cap share” of overall monthly new issue absolute terms), surpassing the prior #2 record (75), set by both May 2020 and Dec. 2020. proceeds since Oct. 2020 and nearly 50% below the typical monthly “micro-cap share” of In addition, the $8,478mm in aggregate gross proceeds raised during the past month the overall new issue market dating back to the start of 2018 ($0.07 of each $1 raised per represents the 4th greatest single-month of overall deal volume (in terms of aggregate gross month). proceeds raised, prior to overallotment) of any of the preceding 48 months dating back to Jan. 2017. › While many remain confident that the “contagion effects” stemming from painful short › In the wake of one of the most closely followed short-squeezes in recent memory – selling losses over the past 2 weeks will not threaten the prevailing fundamental US manifesting most visibly in the +1,625% surge in the price of video game retailing chain, equity outlook, others have warned that certain key market indicators – including, most rd GameStop (GME) – selling pressures previously weighing down dozens of biotechnology notably, the VIX, which recorded its 3 highest-ever single-day spike of +62% on Jan. 27, equities dramatically abated during the middle part of the past month, with 61% of the 2021 and the largest such 1-day move (in absolute terms) since Feb. 27, 2007 – may IBB’s 198 individual constituents witnessing a decrease in short interest as a percentage portend a more widespread correction to US equity prices and could lead to a of float as of Jan. 15, 2021 (compared to their respective Dec. 15, 2020 short interest readings, potentially less constructive equity financing backdrop over the near- to medium-term. according to FactSet). Consequently, some market observers remain optimistic that biotech’s strong opening performance to 2021 – easily outpacing the broader NASDAQ › Logistical challenges bedeviling the roll-outs of several FDA- and EMA-approved SARS- by a margin of +5.1% over the past month – may continue apace over the coming weeks nCoV-2 vaccines appeared to intensify during the last 4 weeks, with political leaders in as traders frantically unwind short positions and bid up shares of previously out-of-favor the US, EU, and UK (among others) struggling to balance competing priorities of efficiency companies en masse. and equity vis-à-vis the designs and implementation strategies of their respective vaccine distribution protocols. Furthermore, some geopolitical observers have warned that › On Jan. 25, Janet Yellen was confirmed to the position of Secretary of the US Treasury growing disparities of vaccine availability between nation-states could further delay (or by an 84-15 Senate vote, becoming the first former Fed Chair to serve as Treasury chief even derail) critical global cooperation among even wealthy, developed nations – th since G. William Miller in 1980 and only the 4 to do so since the creation of the challenging the already weakened geopolitical outlook and potentially widening the position in 1789. Some have speculated that Ms. Yellen’s 2014-2018 Fed tenure window of opportunity for new nCoV variants to emerge, further weighing on the US – combined with her enduring connections with members of the Fed’s current and ex-US equity outlook into 2021 or possibly beyond. leadership – could foster a uniquely synergistic relationship between the two bodies principally responsible for crafting and implementing US fiscal and monetary policies, adding further support to the US equities outlook over the near- to medium-term. Sources: FactSet, Bloomberg, The Wall Street Journal, Financial Times. Market data as of 4:30 PM on Jan. 29, 2021. Healthcare Equity Capital Markets Update February 2, 2021 Major US Indices ETF Performance – Monthly Performance Montage (2020 to 2021) Yr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Full Yr / YTD 2021 -2.0% -- -- -- -- -- -- -- -- -- -- -- -2.0% Dow Jones iShares Dow Jones ETF (DIA) 2020 -0.9% -9.9% -13.9% 10.9% 4.6% 1.4% 2.5% 7.5% -2.4% -4.5% 11.9% 3.1% 43.5% 2021 -1.0% -- -- -- -- -- -- -- -- -- -- -- -1.0% S&P 500 SPDR S&P 500 ETF (SPY) 2020 0.0% -7.9% -13.0% 12.7% 4.8% 1.3% 5.9% 7.0% -4.1% -2.5% 10.9% 3.3% 16.2% 2021 0.9% -- -- -- -- -- -- -- -- -- -- -- 0.9% NASDAQ Fidelity NASDAQ Comp (ONEQ) 2020 1.8% -6.1% -10.6% 15.9% 6.8% 5.9% 6.6% 10.2% -5.6% -2.3% 11.8% 5.8% 43.5% 2021 4.8% -- -- -- -- -- -- -- -- -- -- -- 4.8% Russell 2000 iShares Russell 2000 ETF (IWM) 2020 -3.1% -8.8% -21.8% 13.8% 6.6% 3.1% 2.9% 5.5% -3.6% 2.2% 18.2% 8.3% 43.5% Major US Index ETFs – Performance Since January 1, 2021 (1) DOW S&P 500 NASDAQ RUSSELL (1.96%) (1.02%) +0.87% +4.85% Major US Index ETF Constituents – Largest Movers Since January 1, 2021 (1) D Company Ticker % Chg. S Company Ticker % Chg. O Walgreens WBA-US 26.0% & Discovery DISCA-US 37.7% Intel INTC-US 11.4% ViacomCBS VIAC-US 30.2% W P Amgen AMGN-US 5.0% Lumen Technologies, Inc. LUMN-US 27.0% Microsoft MSFT-US 4.3% Walgreens WBA-US 26.0% Johnson & Johnson JNJ-US 3.7% CarMax KMX-US 24.7% Coca-Cola KO-US (12.2%) Las Vegas Sands LVS-US (19.3%) Visa V-US (11.6%) Global Payments GPN-US (18.1%) Boeing BA-US (9.3%) Paycom Software PAYC-US (16.0%) Honeywell International HON-US (8.1%) Howmet Aerospace HWM-US (13.9%) Procter & Gamble PG-US (7.9%) Carnival CCL-US (13.8%) N Company Ticker % Chg. R Company Ticker % Chg. A Koss KOSS-US 1,760.5% U GameStop GME-US 1,625.1% Naked Brand Group NAKD-US 759.4% Express EXPR-US 559.3% S S Gritstone Oncology GRTS-US 359.4% AMC Entertainment Holdings AMC-US 525.5% D The9 Ltd. NCTY-US 334.5% S Gritstone Oncology GRTS-US 359.4% A Polar Power POLA-US 309.6% E 3D Systems DDD-US 239.1% Q Lumos Pharma LUMO-US (51.8%) L Calithera Biosciences CALA-US (41.5%) Sarepta Therapeutics SRPT-US (47.6%) L IMARA IMRA-US (41.0%) Ucommune International Ltd. UK-US (47.0%) Nkarta, Inc. NKTX-US (35.5%) PMV Pharmaceuticals, Inc. PMVP-US (44.5%) Repro Med Systems KRMD-US (32.9%) Calithera Biosciences CALA-US (41.5%) eHealth EHTH-US (32.2%) Source: FactSet, Bloomberg. Market data as of 4:00 PM on Jan. 29, 2021. (1): Note: Index and individual stock performance (% chg.) indexed to each security’s respective closing price on Dec. 31, 2020. Healthcare Equity Capital Markets Update February 2, 2021 Healthcare ETF Performance – Monthly Performance Montage (2020 to 2021) Yr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Full Yr / YTD Health Care Select Sector 2021 1.4% -- -- -- -- -- -- -- -- -- -- -- 1.4% SPDR Fund (XLV) 2020 -2.7% -6.6% -4.4% 12.6% 3.3% -2.9% 5.5% 2.6% -2.6% -3.6% 7.9% 3.4% 11.4% iShares NASDAQ 2021 6.0% -- -- -- -- -- -- -- -- -- -- -- 6.0% Biotechnology ETF (IBB) 2020 -5.6% 0.1% -5.4% 15.1% 8.7% 1.4% -1.7% 0.9% -0.1% -3.5% 11.0% 4.5% 25.7% Invesco S&P SmallCap 2021 6.2% -- -- -- -- -- -- -- -- -- -- -- 6.2% Health Care ETF (PSCH) 2020 0.1% -7.0% -14.0% 12.4% 3.6% 0.6% 5.2% 4.6% -0.9% 1.2% 15.3% 10.2% 31.5% iShares U.S. Medical 2021 1.9% -- -- -- -- -- -- -- -- -- -- -- 1.9% Devices ETF (IHI) 2020 0.1% -8.7% -6.7% 14.2% 4.3% -1.4% 10.7% 3.7% -1.4% -0.5% 5.0% 4.5% 23.8% Major US Healthcare Index ETFs – Performance Since January 1, 2021 (1) XLV IBB PSCH IHI +1.40% +6.04% +6.22% +1.87% Major US Healthcare Index ETF Constituents – Largest Movers Since January 1, 2021 (1) X Company Ticker % Chg. I Company Ticker % Chg. L Eli Lilly & Co LLY-US 23.2% B Gritstone Oncology GRTS-US 359.4% Biogen BIIB-US 15.4% Lexicon Pharmaceuticals LXRX-US 131.3% V B Illumina ILMN-US 15.3% Evolus EOLS-US 101.2% Abbott Laboratories ABT-US 12.9% Ligand Pharmaceuticals LGND-US 86.4% Gilead Sciences GILD-US 12.6% EyePoint Pharmaceuticals EYPT-US 70.2% Stryker Corp SYK-US (9.8%) Sarepta Therapeutics SRPT-US (47.6%) Edwards Lifesciences EW-US (9.5%) Apellis Pharmaceuticals APLS-US (22.6%) Viatris, Inc.