MARCH RECAP & BEYOND

The macro back-drop overshadowed sector driven effects in March with monetary policy, looming trade wars and tax reform contributing to the equity market’s continued volatility. March swings of +/- 1% were notable, but still far from the heights of the financial crisis where intra-month movement peaked at +/- 5%. Within the sector, Chinese tariffs are unexpected to restrict access to the second largest device market OUS as most of what is sold in China is manufactured in China, or vice versa. Notably in March, there were also meaningful developments in diabetes: a positive panel recommendation on Eversense (SENS) and approval of the G6 device (DXCM). More broadly, Tandem (TNDM) completed a recap round, JNJ received an offer for its LifeScan blood glucose monitoring business and Bigfoot raised $55m.

MARKET COMMENTARY

Divergent Performance Within Healthcare Sector
Healthcare performance for the month of March of (-3.2%) was in-line with the broader market. However, within the sector, results diverged. Biotech continues to disappoint (-7.6%), but the underperformance does not seem to be dampening capital markets activity. Medtech escaped the month flat (+0.5%), ending the quarter up (+6.5%) YTD. Outperformance was a function of investor enthusiasm on individual stocks with performance varying widely within the space.

Tax Reform’s Effect Reflected in Q1 EPS Estimate’s Upward Revisions for the S&P 500
Prior to Q1 earnings, analyst revised EPS estimates upwards 5.4%, despite a historical trend of downward changes over the past 40 quarters (-5.5%). If results follow expectations, quarterly earnings growth for the index (+17.3%) will be the largest since 2011.

Capital Markets Active Despite Market Volatility
Equity market new issues and follow-ons were strong with four IPOs, raising ~$430mn, and 22 follow-ons, raising ~$2.3bn for issuers pricing in March – again with activity dominated by biotech. The overall financial market backdrop remains strong as does the calendar with three healthcare issuers currently in the 6mo IPO backlog.

Source: Thompson Reuters and FactSet