Green Room Technologies

Turning Good Ideas into Good Business.

Green Room specializes in business, market and technology readiness. Our clients are health tech companies with medical device and software products and investors interested in health technology. Our services enhance innovation, interoperability, growth and investment potential.

The Health Tech Market: A US Equity Market Point of View

Health.Market

As entrepreneurs who aspire to either become a publicly traded company or be bought by one, understanding the dynamics of the public markets is fundamental to achieving your ultimate liquidity goal. It is one bookend of valuation.

Pass the Worry Beads

After the bulk of reporting in every quarterly earnings season we begin to worry. The great thing about any market is you can worry about either side of the trade. We can worry about things like what if it happens? Or alternatively, what if it doesn’t? “It” being the generic question.

Often it is better to worry and do nothing than to worry and do something. Please pass the beads. For example, what if growth is too much and there is inflation? Can there really be too much growth? What if growth is not good enough to cause inflation? You get the idea.

Besides weather-instigated human suffering in Texas last week wrought by inbred, insensitive politics and massive failures of leadership and judgment by elected officials, regulators, operators and voters, as market weeks go it was fairly quiet. We had time to worry.

Stocks largely stopped going up again and most indexes showed little losses on the week. The indexes and many sector and global ETF’s hit new 52-week highs and then rolled over. Should we worry? We are in a one-year bull run. What if it ends? What if it doesn’t?

Nothing much was trend changing last week. One thing that I always find worrisome is how often the consensus gets the qualitative direction of things correct but misses on timing and degree.

Until the market commits to a new behavior, which we don’t see so far technically, this is still a bull market. Lots of things could turn it the other way. Expectations and models not fulfilled mainly. The consensus expectations are so uniform, we should worry.

For an up-to-date analysis, see this week’s Healthcare Segment Scorecard below.

Healthcare Segment Scorecard - as of close of market 2/19/2021

Healthcare Scorecard Segment 02192021

Healthcare (XLV) continues to underperform and the hole gets deeper. Looking at relative performance all of the healthcare sectors underperformed SPY, though negative momentum is off the worst levels.

Why are healthcare stocks taking such a beating right now? XLV is one of three S&P sectors trading below its 50-day EMA (exponential moving average), a sign that the selloff has extended beyond a short-term time frame which usually implies a deeper, longer period of underperformance.

In looking in the usual news sources, nobody has a great explanation. Providers ($DJUSHP) have taken some significant losses especially in managed care groups. CNBC opines some combination of Covid related losses and imagined political regulatory stress might be contributing. Whatever. None of this is new news so why now?

Big pharma ($DJUSPR) underperforms at about the same rate as Providers. Given the current circumstances that one is also not easy to rationalize.

A recent trend in the market at large is the outperformance of small and microcap stocks. Healthcare is no exception. About the only companies’ stock prices doing well are much higher risk and higher volatility stocks but could be similar to any young company with growth opportunity that has made its way into the public space by IPO, direct listing or SPAC. SPAC’s seem to be particularly attractive to small health tech and life sciences companies who lack revenue or lack resources for growth. Assess accordingly.

Topping the charts this week was ENDP – Endo Pharmaceuticals at +16.21%. Not sure why.

As I See It:  I think the main thing to worry about is whether or not we should be worried. As previously noted either continuation of prior trends or even 5% pullbacks are reasonable ways for the stocks to recalibrate without changing the bullish trends. It’s worry season. And spring is coming soon.

February 15, 2021

Bob Teague, MD
Chief Medical Officer
Green Room Technologies

Send comments or questions to bob@greenroomtx.com

Chief Medical Officer

Leveraging technology to improve process and outcome, Bob’s career spans clinical practice and executive leadership in Fortune 50 enterprises and prominent healthcare institutions along with experience in the public markets and entrepreneurial startups.

Bob is board certified in Internal Medicine and Pulmonary Disease, practicing in the Texas Medical Center for 20 years, and has held leadership roles at Compaq, Dell, and Quorum Health Corporation.

His entrepreneurial experiences were financially successful enterprises that were transformative in their markets for respiratory home care, diabetes chronic care management, healthcare interoperability and Medicare Advantage risk management through transitional care and high risk patient management.

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Disclaimer: The information in Green Room Technologies’ public blogs and reports is obtained from third-party sources and believed to be reliable but accuracy and completeness are not guaranteed. Unintended errors or misprints may occur. All reports are for educational or informational purposes only and do not imply any investment, legal or other advice or recommendation. Each reader needs to review their own strategy and situation and perform their own research and analysis before using this information and opinion in any personal or corporate decision-making process or activity. All expressions of opinion are subject to change without notice. Green Room Technologies and its members are to registered investment advisors or broker/dealers and the opinions should not be construed as investment advice nor to replace advice from professional advisors.

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