Two Healthcare Stocks Offer Value Opportunities Despite TSX Rally

The Toronto stock market has climbed steadily out of the pandemic's wreckage, but not every sector has risen equally. Healthcare, which stumbled badly in 2020, has clawed back to become the second-best performer on the TSX year-to-date. Yet within that recovery, two companies still trade at prices that suggest the market hasn't fully priced in their potential: Trillium Therapeutics and Bausch Health, both offering what value investors call a margin of safety.

Trillium Therapeutics, a Mississauga-based biotech firm with a market value of $1.22 billion, is developing immunotherapy treatments for cancer. The company's approach targets CD47, a protein that cancer cells exploit to hide from the immune system. Two lead candidates—TTI-621 and TTI-622—are moving through clinical trials, and the company recently launched an ambitious Phase 1b/2 program across nine different patient populations, spanning blood cancers and solid tumors. At $11.81 per share, the stock trades 37 percent below where it closed in 2020, despite having delivered a 1,308 percent return last year. Analysts covering the company see room for the stock to climb to $21, implying a 78 percent gain from current levels. The company's losses are narrowing—it posted a $10.8 million net loss in the first quarter of 2021, down from $16.6 million in the same quarter a year earlier. The rising research and development costs reflect the reality of scaling up: more patients enrolling in trials, higher manufacturing expenses, and the machinery of clinical operations grinding forward. Jan Skvarka, the company's president and chief executive, framed the moment as one of execution, saying the firm is well positioned to generate a steady stream of new trial data over the coming years.

Bausch Health tells a different story, though it points toward a similar conclusion. The Laval-based company, valued at $11.47 billion, manufactures pharmaceuticals, medical devices, and over-the-counter products, with particular strength in eye care, gastroenterology, and dermatology. Last year was brutal—the stock fell 32 percent. But this year it has recovered 47 percent, and the company's operational fundamentals are strengthening. In the first quarter of 2021, despite reporting a $610 million net loss on paper, Bausch generated $443 million in cash from operations, nearly 70 percent more than it produced in the same quarter the year before. That gap between accounting losses and cash generation matters: it suggests the company is moving through a transition, shedding unprofitable operations while its core business generates real cash.

The catalyst investors should watch is eyeTELLIGENCE, a next-generation surgical software platform being developed in collaboration with Lochan LLC. The technology will connect operating rooms to the cloud, allowing surgeons to access real-time data and analytics during procedures. Bausch plans to launch the first version by 2022, positioning itself as the first major eye health company to offer this kind of digital integration in the operating room. According to Mark Lobanoff, Lochan's founder, the software will help surgeons make faster, more informed decisions about treatment and procedural choices.

Both stocks carry real risk. Biotech companies live or die by clinical trial results, and Trillium's future depends on whether TTI-621 and TTI-622 prove safe and effective in human patients. Bausch's turnaround is still incomplete, and the company must execute on its product roadmap while managing a complex portfolio. But for investors willing to hold through uncertainty, the current prices offer entry points before the market fully recognizes what these companies are building. The next two years will tell whether that bet pays off.