NOVEMBER RECAP & BEYOND

Broad-based healthcare strength in November.
The healthcare sector was up 6.8% in November, again outperforming the S&P which was up 1.8% in the month. Broad-based performance was driven by macro inflows, but with particular strength in the biotech sector (up 9.7% in November). Small and mid-caps continue to outperform their large cap counterparts. As we look to next year, relative valuations remain at a multi-year high, reflecting high expectations for strong performance, growth acceleration, and earnings upside.

MARKET COMMENTARY

After October’s falls, global equity markets climb back.
U.S. equities closed higher in November, with shares climbing early in the month then giving up much of the gains in the second half. Economic data remained encouraging and midterm elections were largely in line with expectations. Looking ahead, many strategists have speculated that investors are beginning to anticipate the potential for positive newsflow into the traditionally supportive holiday season. All things considered, November was a roller coaster ride for equities.

Medical device group continues its relative outperformance.
Whilst the medical device group underperformed biotech and the broader healthcare sector, the group’s relative valuation vs. the S&P exceeded 20% in November, marking a 10-year high. Given the higher relative valuations, analysts are shifting focus to company-specific outperformance driven by higher results, accelerating growth and improving fundamentals.

IPO Pricings.
The IPO market was quiet in November with three healthcare deals raising a total of $100 million (in total only six deals priced across all sectors). The one medtech deal, Vapotherm, priced at the low end of the filing range but is up 31% in the aftermarket. There were also two specialty pharmaceuticals pricings, with both deals posting modest gains in the aftermarket. With the Biotech Index down around 20% since the end of August, the appetite for Biotech offerings will be tested in early December with the expected pricing of Moderna’s IPO. At the midpoint of the filing range, the company is expected to raise $500 million (the largest biotech IPO on record) giving it a valuation of over $7.5 billion.

Source: Thompson Reuters and FactSet