- Concordia reported first quarter revenue of $160.6 million, gross profit of $115.4 million and net loss from continuing
operations of $78.8 million
- The Company generated cash flow from operations of $86.2 million
- Adjusted EBITDA1 in the first quarter was
$84.2 million
- Company executing against its 2017 business stabilization
objectives
- Development of long-term business strategy remains on track
- Announced on April 26 that
David Price appointed as CFO
- Announced on May 4 that
Itzhak Krinsky and Frank Perier, Jr. appointed to Board of
Directors
OAKVILLE, ON, May 10, 2017 /CNW/ - Concordia International
Corp. ("Concordia" or the "Company") (NASDAQ: CXRX) (TSX: CXR), an
international specialty pharmaceutical company focused on generic
and legacy pharmaceutical products, today announced its financial
and operational results for the three months ended March 31, 2017. All financial references are in
U.S. dollars unless otherwise noted.
"Concordia's first quarter 2017 results demonstrate that the
Company's focus on near-term stabilization is beginning to have a
positive impact on the business," said Allan Oberman, Chief Executive Officer of
Concordia. "While the first quarter is only the beginning of an
ongoing process, I believe we are making important headway against
our business stabilization objectives. To that end, we are excited
about the recent announcements that David
Price will be joining Concordia as Chief Financial Officer,
and that Itzhak Krinsky and
Frank Perier, Jr. have joined our
Board of Directors. These individuals possess significant
experience that we believe will help Concordia make progress
against our stated goals over the remainder of the fiscal year, and
beyond, as we focus on Concordia's longer term growth."
Consolidated First Quarter 2017 Financial Results and Recent
Events
- Reported revenue of $160.6
million, compared to $228.5
million for the same period in 2016 and $170.4 million for the fourth quarter of
2016.
- Reported Adjusted EBITDA1 of $84.2 million, compared to $140.8 million for the same period in 2016 and
$80.5 million in the fourth quarter
of 2016.
- Generated cash flows from operating activities of $86.2 million, compared to $91.9 million for the same period in 2016 and
$95.2 million in the fourth quarter
of 2016.
- As of March 31, 2017, the
Company's liquidity was substantially comprised of $336.2 million of cash and cash equivalents and
$60 million under an undrawn
revolving credit facility. The Company believes it has sufficient
liquidity over the next 12 months to operate its business and meet
its cash requirements based on current market conditions.
- Subsequent to quarter end, on April 26,
2017, Concordia announced the appointment of David Price as CFO effective May 15, 2017.
- Subsequent to quarter end, on May 4,
2017, Concordia announced the appointments of Itzhak Krinsky and Francis (Frank) Perier, Jr. to the Company's
Board of Directors.
- Subsequent to quarter end, the Company completed an exclusive
authorized generic agreement with Actelion Pharmaceuticals, Ltd, a
biopharmaceutical company headquartered in Switzerland, to market bosentan in the
United Kingdom. Bosentan
(Tracleer®) is a specialty product for the treatment of pulmonary
arterial hypertension and digital ulcers. The agreement with
Actelion grants Concordia the rights to distribute and promote a
branded authorized generic version of bosentan (Stayveer®).
First Quarter 2017 Segmental Results
During the first quarter of 2017, the Company combined the
North America and Orphan Drug
segment to form a single Concordia North America segment. The
Company has conformed comparative information.
The Concordia North America segment reported revenue of
$41.8 million, a decline of
$46.8 million over the same period in
the prior year. The decline was primarily due to competitive
pressures on the following products: Plaquenil®; Lanoxin®;
Donnatal®; and Nilandron®. Revenue on a sequential basis did not
change significantly from the fourth quarter of 2016.
The Concordia International segment reported revenue of
$118.7 million, a decline of
$21.2 million over the same period in
the prior year. The decline was primarily due to the unfavourable
movement in foreign exchange rates of approximately $19.1 million, as well as increased competition
on the segment's generic product portfolio. Revenue on a sequential
basis decreased by $9.9 million over
the fourth quarter of 2016. The decline was primarily due to
additional competitive pressures on the segment's generic product
portfolio.
During the first quarter, the Company launched one
new product in an IMS measured market that has a current
estimated value of $30 million. The
Company has an additional nine products that have already been
approved or are awaiting regulatory approval in various countries.
These products, if launched, are expected to compete in product
areas that have an estimated current IMS measured market value
anticipated to be in excess of $100
million. The Company expects these products will be launched
in the next three years.
In addition, the Company has eight products under active
development that it anticipates will launch in the next three to
five years. These products, if launched, are expected to compete in
product areas that have an estimated current IMS-measured market
value expected to be in excess of $1
billion. Concordia anticipates that these eight
products will include several potential first-to-market or
early-to-market opportunities for difficult to make products
Finally, Concordia has identified up to 21 additional products
for future development with its network of external partners. If
launched, these products are anticipated to compete in estimated
current IMS measured markets that are expected to be worth hundreds
of millions more.
Financial Results
(in $000s, from
continuing operations)
|
Quarter
Ended
March 31,
2017
|
Quarter
Ended March 31,
2016
|
Revenue
|
$160,557
|
$228,535
|
Gross
profit
|
$115,415
|
$159,852
|
Adjusted gross
profit1
|
$115,726
|
$178,495
|
Operating income from
continuing operations
|
$18,366
|
$54,950
|
Net loss from
continuing operations
|
($78,824)
|
($4,801)
|
Loss per share,
continuing operations – basic
|
($1.540)
|
($0.090)
|
Loss per share,
continuing operations – diluted
|
($1.540)
|
($0.090)
|
Adjusted
EBITDA1
|
$84,242
|
$140,848
|
Cash and cash
equivalents
|
$336,156
|
$178,516
|
Consolidated Operating Results
Total revenues during the first quarter of 2017 were
$160.6 million, a decrease of
$68.0 million over the same period in
2016. This decrease is primarily due to the impact of increased
generic competition and foreign exchange. On a sequential basis,
revenue decreased by $10.0 million.
This decrease was primarily a result of increased competition on
the generic product portfolio within the Concordia International
segment.
Gross profit for the three months ended March 31, 2017 decreased by $44.4 million or 28%, compared to the
corresponding period in 2016 primarily due to the impact of the
factors described above. The gross profit percentage increased by
2% primarily due to the first quarter of 2016 including
$18.6 million related to a non-cash
inventory fair value adjustment included in cost of sales as a
result of the Concordia International segment acquisition.
Excluding the impact of these non-cash inventory adjustments, the
gross profit percentage decreased by 6% primarily due to a change
in the mix of product sales within both the Concordia North America
segment and Concordia International segment.
General and administrative expenses reflect costs related to
salaries and benefits, professional and consulting fees, ongoing
public company costs, travel, facility leases and other
administrative expenditures. General and administrative expenses
for the three months ended March 31,
2017 decreased by 11% compared to the corresponding period
in 2016 as a result of cost saving initiatives being undertaken by
the Company, the timing of certain costs which are likely to be
incurred in future periods, as well as favourable movements in
foreign exchange rates.
Selling and marketing expenses reflect costs incurred by the
Company for the marketing, promotion and sale of the Company's
broad portfolio of products across the Company's segments. Selling
and marketing costs for the three months ended March 31, 2017 decreased by $3.6 million or 27% compared to 2016. These costs
have decreased primarily due to the termination of the previous
higher cost Donnatal® contract sales force, which has been replaced
by a co-promotion agreement with RedHill Biopharma Ltd., as well as
the favourable foreign exchange impact of selling and marketing
costs incurred within the Concordia International segment.
Research and development expenses reflect costs for clinical
trial activities, product development, professional and consulting
fees and services associated with the activities of the medical,
clinical and scientific affairs, quality assurance costs,
regulatory compliance and drug safety costs (pharmacovigilence) of
the Company. Research and development costs for the three months
ended March 31, 2017 decreased by
$883 thousand, or 10%, compared to
the corresponding period in 2016. This decrease is due to cost
saving initiatives undertaken by the Company to move certain
external costs previously incurred within the Concordia North
America segment to the Company's centre of excellence in
Mumbai, India.
The current income tax expense recorded for the three months
ended March 31, 2017 decreased by
$2.7 million, compared to the
corresponding period in 2016. Income taxes were lower primarily
related to the Concordia International segment due to lower taxable
income and favourable movements in foreign exchange rates.
The net loss from continuing operations for the three months
ended March 31, 2017 was $78.8 million, and earnings per share loss was
$1.54 per share. Significant
components comprising the net loss are fair value gains and losses
on derivative contracts of $27.3
million, and the deduction of other significant cash and
non-cash expenses which include, but are not limited to, interest
and accretion expense of $92.3
million offset by operating income of $18.4 million.
Adjusted EBITDA1 for the three months ended
March 31, 2017 decreased by
$56.6 million or 40% compared to the
corresponding period in 2016. This decline was primarily due to a
decline in operating results from the Concordia North America
segment combined with the impact of unfavourable movements in
foreign exchange rates impacting the Concordia International
segment. Adjusted EBITDA by segment was $26.6 million from Concordia North America and
$63.2 million from Concordia
International. In addition, the Company incurred $5.6 million corporate costs related to the
Corporate Head Office.
As of March 31, 2017, the Company
had cash of $336.2 million and,
subject to compliance with certain incurrence covenants under the
Company's debt agreements, currently has up to $60 million available to it under a revolving
credit facility before it is subject to financial maintenance
covenants under its credit agreement.
As at March 31, 2017 and
May 9, 2017 the Company had
51,089,782 common shares issued and outstanding.
Conference Call Notification
The Company will hold a conference call on Wednesday, May 10, 2017, at 8:30 a.m. ET, hosted by senior management. A
question-and-answer session will follow the corporate update.
CONFERENCE CALL
DETAILS
|
DATE:
|
Wednesday, May 10,
2017
|
TIME:
|
8:30 a.m.
ET
|
DIAL-IN
NUMBER:
|
(647) 427-7450 or
(888) 231-8191
|
TAPED
REPLAY:
|
(416) 849-0833 or
(855) 859-2056
|
REFERENCE
NUMBER:
|
8302391
|
This call is being webcast and can be accessed by going to:
http://event.on24.com/r.htm?e=1408461&s=1&k=4EB3012BD9D2C45F3C29CBBB53714775
An archived replay of the webcast will be available by clicking
the link above.
About Concordia
Concordia is a diverse, international specialty pharmaceutical
company focused on generic and legacy pharmaceutical products. The
Company has an international footprint with sales in more than 90
countries, and has a diversified portfolio of more than 200
established, off-patent products. Concordia also markets Photofrin®
for the treatment of certain rare forms of cancer.
Concordia operates out of facilities in Oakville, Ontario and, through its
subsidiaries, operates out of facilities in Bridgetown, Barbados; London, England and Mumbai, India.
Non-IFRS Measures
This press release makes reference to certain measures that are
not recognized measures under International Financial Reporting
Standards ("IFRS"). These non-IFRS measures do not have a
standardized meaning prescribed by IFRS, and are therefore unlikely
to be comparable to similar measures presented by other companies.
When used, these measures are defined in such terms as to allow the
reconciliation to the closest IFRS measure. These measures are
provided as additional information to complement those IFRS
measures by providing further understanding of the Company's
results of operations from management's perspective. Accordingly,
they should not be considered in isolation nor as a substitute for
analyses of the Company's financial information reported under
IFRS. Management uses non-IFRS measures such as EBITDA, adjusted
EBITDA, adjusted gross profit, adjusted net income and adjusted
earnings per share ("Adjusted EPS") to provide a supplemental
measure of operating performance and thus highlight trends in the
core business that may not otherwise be apparent when relying
solely on IFRS financial measures. Management also believes that
securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of issuers.
Management also uses non-IFRS measures in order to facilitate
operating performance comparisons from period to period, prepare
annual operating budgets, to assess its ability to meet future debt
service requirements, in making capital expenditures, and to
consider the business's working capital requirements. Readers are
cautioned that the non-IFRS measures contained herein may not be
appropriate for any other purpose.
EBITDA is defined as net income / (loss) adjusted for net
interest and accretion expense, interest income, income tax
expense, depreciation and amortization. Management uses
EBITDA to assess the Company's operating performance.
Adjusted EBITDA is defined as EBITDA adjusted for certain
charges including costs associated with acquisitions, restructuring
initiatives, and other costs (which includes onerous contract costs
and direct costs associated with contractual terminations), initial
exchange listing expenses on the NASDAQ, non-operating
gains/losses, integration costs, legal settlements (net of
insurance recoveries) and related legal costs, non-cash items such
as unrealized gains / losses on derivative instruments, share based
compensation, fair value changes including purchase consideration
and derivative financial instruments, asset impairments, fair value
increases to inventory arising from purchased inventory from a
business combination, gains / losses from the sale of assets and
unrealized gains / losses related to foreign exchange. Management
uses Adjusted EBITDA, among other non-IFRS financial measures, as
the key metric in assessing business performance when comparing
actual results to budgets and forecasts. Management believes
Adjusted EBITDA is an important measure of operating performance
and cash flow, and provides useful information to investors because
it highlights trends in the underlying business that may not
otherwise be apparent when relying solely on IFRS measures.
The table below sets forth the reconciliation of net loss from
continuing operations to EBITDA and to Adjusted EBITDA for the
three months ended March 31, 2017 and
March 31, 2016:
|
|
|
|
|
For the three
months ended (in $000's)
|
|
Mar 31,
2017
|
|
Mar 31,
2016
|
Net loss from
continuing operations
|
|
(78,824)
|
|
(4,801)
|
|
|
|
|
|
Interest and
accretion expense
|
|
92,291
|
|
68,341
|
Interest
income
|
|
(18,479)
|
|
—
|
Income
taxes
|
|
4,739
|
|
(1,613)
|
Depreciation
|
|
488
|
|
430
|
Amortization of
intangible assets
|
|
56,717
|
|
46,595
|
EBITDA
|
|
56,932
|
|
108,952
|
Fair value
adjustment to acquired inventory
|
|
311
|
|
18,643
|
Acquisition
related, restructuring and other
|
|
5,216
|
|
3,548
|
Share-based
compensation
|
|
2,952
|
|
8,357
|
Fair value changes
of purchase consideration and derivatives
|
|
27,506
|
|
8,325
|
Foreign exchange
loss (gain)
|
|
990
|
|
(1,391)
|
Unrealized foreign
exchange gain
|
|
(9,665)
|
|
(5,586)
|
Adjusted
EBITDA
|
|
84,242
|
|
140,848
|
As used herein, adjusted gross profit is defined as gross profit
adjusted for non-cash fair value increases to cost of acquired
inventory from a business combination. Under IFRS, acquired
inventory is required to be written-up to fair value at the date of
acquisition. As this inventory is sold the fair value adjustment
represents a non-cash cost of sale amount that has been excluded in
adjusted gross profit in order to normalize gross profit for this
non-cash component. The table below sets forth the reconciliation
of gross profit to adjusted gross profit for the three months ended
March 31, 2017 and March 31, 2016:
|
|
|
|
|
For the three
months ended (in $000's)
|
|
Mar 31,
2017
|
|
Mar 31,
2016
|
Gross profit per
financial statements
|
|
115,415
|
|
159,852
|
Add back: Fair
value adjustment to acquired inventory
|
|
311
|
|
18,643
|
Adjusted Gross
Profit
|
|
115,726
|
|
178,495
|
Notice regarding future-oriented financial
information:
To the extent any forward-looking statements or forward-looking
information in this press release constitutes future-oriented
financial information or financial outlooks within the meaning of
securities laws, such information is being provided to demonstrate
the potential financial performance of Concordia and its business
and readers are cautioned that this information may not be
appropriate for any other purpose and that they should not place
undue reliance on such future-oriented financial information and
financial outlooks. Future-oriented financial information and
financial outlooks, as with forward-looking statements and
forward-looking information generally, are, without limitation,
based on the assumptions and subject to the risks set out below
under "Notice regarding forward-looking statements".
Notice regarding forward-looking statements:
This press release includes forward-looking statements within
the meaning of the United States Private Securities Litigation
Reform Act of 1995 and forward-looking information within the
meaning of Canadian securities laws, regarding Concordia and its
business, which may include, but are not limited to, statements
with respect to Concordia's 2017 objectives and priorities, the
development of a long term growth strategy (and the timing
thereof), the stabilization of Concordia's business, the execution,
timing and impact of Concordia's business stabilization objectives,
the experience of Messrs. Price, Krinsky and Perier, the ability of
Messrs. Price, Krinsky and/or Perier to help Concordia make
progress against the Company's goals over the remainder of the
fiscal year and beyond, leveraging Concordia's International
segment, diversifying Concordia's business, Concordia's liquidity,
the improvement of working capital and liquidity based on near term
initiatives and efficiencies launched by the Company, the
assessment of providing guidance and the timing thereof,
Concordia's financial performance (including the performance of its
operating segments), the ability of Concordia to execute and
deliver on business plans and growth strategies, the ability to
drive long-term shareholder value, the implementation of actions to
manage competitive challenges, the Company taking actions to
rebuild value for stakeholders (and the ability of Concordia to
rebuild value for its stakeholders), Concordia's ability to service
its debt obligations and meet its other obligations in 2017 and
beyond, optimism about Concordia's future, the growth of Concordia
and the rate of revenue growth, the sources of revenue growth, the
stability of Concordia's business (including, without limitation,
with respect to its business in certain jurisdictions), the
diversification of the Company's geographic and therapeutic
platform, product lines and/or sales channels, Concordia's ability
to expand globally, the intention to launch products, the timing of
product launches, success of product launches, the size of the
markets in which Concordia has launched or intends to launch
products, Concordia's ability to launch first to market, early to
market or difficult to make products, Concordia's network of
partners, Concordia's international pipeline of products,
Concordia's revenue by geography, expected debt levels and
leverage, free cash flows, Concordia's debt structure (including
its flexibility) and the ability to pay down debt, expected sources
of funds (including expected levels of cash on hand and the ability
to draw on the Company's revolving facility), future growth of the
Company (including, without limitation, the Company's expansion
globally), the ability to pay certain debt and other obligations of
Concordia, the ability to use the Company's expected cash flow and
cash on hand to pay certain future obligations (including, without
limitation, debt obligations), the Company's cash on hand and cash
flows being sufficient to meet the Company's liquidity needs,
success of product launches, concentration of Concordia's business,
cash on hand after satisfying obligations during 2017, the
performance of Concordia's products and segments, the
revenue-generating capabilities and/or potential of Concordia's
assets, Concordia's financial strength, the continued and/or
expected profitability of Concordia's products and/or services, the
sales and/or demand for Concordia's products, the deployment of
cash towards value creating initiatives or debt repayment
(including to fund future acquisitions and the launch of pipeline
products, and settle debt and other obligations as they become
due), the expansion into new indications and new markets for
Concordia's existing and/or future products, Concordia's ability to
evaluate growth opportunities on a global scale (and the
availability of such opportunities), the ability to expand existing
sales of Concordia's products in certain markets, market
opportunities for Concordia's products, Concordia's ability to
provide patients with safe and efficacious medicines, the safety
and efficacy of Concordia's products, the ability to obtain
necessary approvals, the approval and development of Photofrin® as
a new treatment for certain forms of cancer, the ability of
Photofrin® to combat certain forms of cancer, enrollment of
patients into clinical trials, the outcomes and success of clinical
trials, the adoption of Photofrin® in certain geographic regions
and other factors. Often, but not always, forward-looking
statements and forward-looking information can be identified by the
use of words such as "plans", "is expected", "expects",
"scheduled", "intends", "contemplates", "anticipates", "believes",
"proposes" or variations (including negative and grammatical
variations) of such words and phrases, or state that certain
actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved. Such statements are based on
the current expectations of Concordia's management, and are based
on assumptions and subject to risks and uncertainties. Although
Concordia's management believes that the assumptions underlying
these statements are reasonable, they may prove to be incorrect.
The forward-looking events and circumstances discussed in this
press release may not occur by certain specified dates or at all
and could differ materially as a result of known and unknown risk
factors and uncertainties affecting Concordia, including risks
relating to Concordia's inability to stabilize its business,
Concordia's inability to develop a long term strategic plan or
being delayed in developing such plan, cash on hand and cash flows
from operations being insufficient to meet Concordia's liquidity
needs, which could result in Concordia having to refinance or
restructure its debt, sell assets or seek to raise additional
capital, which may be at less favourable terms, the inability to
implement Concordia's objectives and priorities for 2017, which
could result in financial strain on the Company and continued
pressure on the Company's business, the inability of Messrs. Price,
Krinsky and/or Perier to help Concordia make progress against its
goals over the remainder of the fiscal year and beyond, Concordia's
securities, risks associated with developing new product
indications, increased indebtedness and leverage, the inability to
generate cash flows, revenues and/or stable margins, the inability
to grow organically, the inability to repay debt and/or satisfy
future obligations (including, without limitation, earn out
obligations), risks associated with Concordia's outstanding debt,
risks associated with the geographic markets in which Concordia
operates and/or distributes its products, risks associated with
fluctuations in exchange rates (including, without limitation,
fluctuations in currencies), risks associated with the use of
Concordia's products to treat certain diseases, the pharmaceutical
industry and the regulation thereof, the failure to comply with
applicable laws, risks relating to distribution arrangements,
possible failure to realize the anticipated benefits of
acquisitions and/or product launches (including the product
launches described herein), risks associated with the integration
of assets and businesses into Concordia's business, product
launches (including, without limitation, unsuccessful product
launches), the inability to launch products or the delay in
launching products, regulatory delays in product approvals, the
inability to launch first to market, early to market or difficult
to make products, the inability to capture a share of any market in
which Concordia has launched or intends to launch its products, the
fact that historical and projected financial information may not be
representative of Concordia's future results, the failure to obtain
regulatory approvals (including, without limitation, with respect
to Photofrin® as a new treatment for certain forms of cancer or
with respect to the product launches described herein), the FDA
permitting unapproved products to remain on the market and compete
with Concordia's products (including, without limitation,
Donnatal®), economic factors, market conditions, acquisition
opportunities, risks associated with the acquisition and/or launch
of pharmaceutical products (including the product launches
described herein), risks regarding clinical trials and/or patient
enrollment into clinical trials, the equity and debt markets
generally, risks associated with growth and competition (including,
without limitation, with respect to Concordia's niche, hard-to-make
products and Concordia's key products in its International and
North America segments (including
the competitive pressures on some of the products described
herein)), general economic and stock market conditions, risks
associated with the United
Kingdom's exit from the European Union (including, without
limitation, risks associated with regulatory changes in the
pharmaceutical industry, changes in cross-border tariff and cost
structures and the loss of access to the European Union global
trade markets), risks associated with regulatory investigations
(including investigations by competition authorities with respect
to the Company's operations), risks related to the introduction of
new legislation, or amendments to existing legislation, in the
jurisdictions in which Concordia carries on business, risks related
to patent infringement actions, the loss of intellectual property
rights, risks associated with class action litigation, risks
associated with Concordia's inability to defend itself in certain
legal actions or being found to have violated certain laws
(including, without limitation, the regulatory investigations and
class actions which Concordia is currently subject to), which may
require Concordia to make certain payments in respect of such legal
matters or which may result in certain fines being levied against
Concordia, risks and uncertainties detailed from time to time in
Concordia's filings with the Securities and Exchange Commission and
the Canadian Securities Administrators and many other factors
beyond the control of Concordia. Although Concordia has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements and forward-looking
information, there may be other factors that cause actions, events
or results to differ from those anticipated, estimated or intended.
No forward-looking statement or forward-looking information can be
guaranteed. Except as required by applicable securities laws,
forward-looking statements and forward-looking information speak
only as of the date on which they are made and Concordia undertakes
no obligation to publicly update or revise any forward-looking
statement or forward-looking information, whether as a result of
new information, future events, or otherwise.
1 Management uses non-IFRS measures such as EBITDA,
Adjusted EBITDA, adjusted net income, adjusted gross profit, net
debt/EBITDA and Adjusted EPS to provide a supplemental measure of
operating performance. Please refer to the "Non-IFRS Measures"
section of this press release for further information.
SOURCE Concordia International Corp.