Healthcare Trending Stock: Concordia International Corp (NASDAQ:CXRX)

On Wednesday, Shares of Concordia International Corp (NASDAQ:CXRX) lost -10.28% to $1.96. Trading volume recorded for this company was about 1.56M shares as contrast to its average volume of 1.55M shares. The stock’s intraday range was $1.81 to $2.03. The company has the total of 1.00 outstanding shares, while its market capitalization is about $111.73M.

Concordia International Corp. (CXRX) (CXR.TO), an international specialty pharmaceutical company focused on generic and legacy pharmaceutical products, today declared its financial and operational results for the three and twelve months ended December 31, 2016. All financial references are in U.S. dollars unless otherwise noted.

Fourth Quarter 2016 Financial Results and Recent Events:

  • Merged revenue of $170.40M, a decrease of 8.10% contrast with the third quarter of 2016.
  • GAAP net loss includes fourth quarter impairment charges of $562.10M, and GAAP loss per share of $13.00. The impairment charges consisted of $306.90M related to the Company’s North America segment product portfolio and $255.20M related to the Company’s International segment product portfolio.
  • Adjusted EBITDA of $80.50M and adjusted earnings per share of $0.13, includes a charge of $4.50M of formerly capitalized research and development expenses related to the Company’s phase 3 trial for Photodynamic Therapy with Photofrin®.
  • Stated Concordia International segment results in the fourth quarter that were 1.3% higher on a constant currency basis contrast to the third quarter of 2016, increasing from £104.60M to £106.0M in the period.
  • Total cash and cash equivalents of $397.90M as of December 31, 2016. The Company revealed on February 1, 2017, that it made cash payment of about £73.50M to Cinven6 following the terms of the share purchase agreement to acquire the Company’s International segment. During the year ended December 31, 2016, the Company generated cash flows from operating activities of $408.30M as compared to $122.0M in 2015.

Edward Borkowski, Chief Financial Officer of Concordia, commented: “During the fourth quarter, our North American business continued to be challenged. We remain focused on stabilizing this segment, while evaluating opportunities to further leverage and diversify our International segment. As part of the ongoing planned assessment of the business, we are evaluating all aspects of the Company. We have launched near-term programs that we believe will improve both working capital and operating efficiencies.  Furthermore, we have expanded our disclosure regarding the Company’s liquidity and capital structure in our financial statements. Lastly, considering the industry headwinds the Company is facing, coupled with our efforts to stabilize the business while creating a long-term growth strategy, we do not believe it is appropriate to issue full-year guidance for 2017, at this time. We will continue to assess the timing of providing guidance as we make progress throughout the year.”

Fourth Quarter 2016 Segment Results:

  • On a constant currency basis, the Concordia International segment delivered slightly improved results, increasing by 1.30% in the fourth quarter of 2016 contrast to the third quarter of 2016. Concordia International segment revenue for the fourth quarter of 2016 was $128.70M, contrast with $137.40M in the third quarter of 2016, representing a 6.3% decrease mainly because of foreign exchange translation.
  • Since October 21, 2015, the Company’s International segment launched 36 products. These products include branded and generic therapies for the treatment of prostate cancer, pain, depression, and obesity, among other conditions. The Company took an in-process research and development impairment charge of $58.50M in the fourth quarter of 2016 regarding projects that it decided to discontinue, or certain projects with lower future forecasts contrast with those at the time of the Concordia International acquisition.
  • Concordia North America segment revenue of $39.30M in the fourth quarter of 2016 contrast to $45.50M in the third quarter of 2016. The decrease was because of competitive market pressures.
  • Orphan Drug segment revenue of $2.40M in the fourth quarter of 2016, contrast with $2.60M in the third quarter of 2016.

Merged Operating Results:

Revenue for the year ended December 31, 2016 raised by $421.90M, or 107%, contrast to the corresponding period in 2015. This increase was mainly because of a $441.80M increase in revenue for the year from the Concordia International segment attained on October 21, 2015 and, therefore, was only included in the comparative period for a portion of the fourth quarter of 2015. The increase was mainly offset by a $20.10M decrease in revenue from the Concordia North America segment as a result of generic product launches and other competitive marketplace pressures associated with the Concordia North America product portfolio.

Gross profit for the year ended December 31, 2016 raised by $295.0M, or 98%, contrast to the corresponding period in 2015. This increase was mainly because of a $318.50M increase in gross profit for the year from the Concordia International segment attained on October 21, 2015 and, therefore, was only included in the comparative period for a portion of the fourth quarter of 2015. The increase was partially offset by a $21.90M decrease in gross profit from the Concordia North America segment. The gross profit decrease within the Concordia North America segment was larger than the revenue decrease mainly because of a higher proportion of full year revenue being earned from lower margin authorized generic sales. Gross profit in both 2016 and 2015 was negatively influenced by non-cash inventory fair value adjustments in the amount of $21.40M and $33.90M, respectively, arising as a result of attained inventory from business acquisitions.

Adjusted gross profit for the year ended December 31, 2016, removing the impact of the non-cash fair value adjustments, raised by $282.50M, or 85%, contrast to 2015, which is lower than the gross profit increase because of the higher non-cash inventory fair value adjustment in 2015.

The change in gross profit and adjusted gross profit as a percentage of revenue in the year ended December 31, 2016 contrast to 2015 reflects the impact of lower margins within the Concordia International segment and a change in product sales to lower margin authorized generic products lowering gross profit margins from the Concordia North America segment.

Operating expenses for the year ended December 31, 2016 raised by $1.30B, contrast to 2015. Operating expenses were higher mainly because of impairment charges of $1.10B recorded during 2016, in addition to the raised size of the Company’s business after the completion of the acquisition of the portfolio of products from Covis Pharma S.a.r.l. and Covis Injectables S.a.r.l. and the acquisition of the 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 year ended December 31, 2016 raised by $26.70M, or 90%, contrast to 2015 because of the raised size of the Company. General and administrative expenses for the year as a percentage of revenue were 7%, contrast with 8% in 2015.

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 year ended December 31, 2016 raised by $27.60M, or 118%, contrast to 2015. These costs have raised because of the expansion of Concordia’s product portfolio from 6 core products in the first quarter of 2015 to presently over 200 products.

Research and development costs for the year ended December 31, 2016 raised by $25.60M, or 171%, contrast to 2015. Research and development costs include expenses of the Concordia International segment for product expansion efforts and costs associated with the Concordia North America segment. In December 2016, the Company terminated a phase 3 trial for Photodynamic Therapy with Photofrin® which resulted in $4.50M of formerly capitalized costs being recorded as research and development expenses.

Operating (loss) income from continuing operations, for the year ended December 31, 2016, reflects raised operating expenses contrast to 2015, mainly because of the impairment charges described above, partially offset by the raised gross profit from the Concordia International segment.

The current income tax expense recorded for the year ended December 31, 2016 raised by $27.80M, contrast to 2015. Income taxes were higher mainly because of the raised taxable income from the Concordia International segment.

The net loss from continuing operations for the year ended December 31, 2016 was $1.30B, and loss per share (“EPS”) was $25.76 per share. Noteworthy components comprising the net loss in 2016 are impairment charges of $1.10B, net foreign exchange losses of $124.90M, and the deduction of other noteworthy cash and non-cash expenses which include, but are not limited to, amortization expense and interest and accretion expenses.

Adjusted EBITDA for the year ended December 31, 2016 raised by $202.40M, or 76%, contrast to 2015 mainly because of a full year of operating results from the Concordia International segment. Adjusted EBITDA in 2016 of $468.10M, by segment, was $177.40M from Concordia North America, $319.60M from Concordia International, offset by a loss of $9.0M from Orphan Drugs. In addition, the Company incurred $19.80M of corporate costs related to the Corporate Head Office.

As of December 31, 2016, the Company had cash of $397.90M and, subject to compliance with certain incurrence covenants under the Company’s debt agreements, presently has up to $60.0M available to it in a revolving credit facility before it is subject to financial maintenance covenants under its credit agreement.

As at December 31, 2016 and March 15, 2017, the Company had, respectively, 51,089,556 and 51,089,556 common shares issued and outstanding.

Technical Analysis:

The stock price is going up to its 52-week low with 17.16% and lower from its 52-week high with -94.24%. The stock has shown its weekly performance of 4.78% and monthly performance stands at -10.61%. The stock price is moving down from its 200 days moving average with -76.55% and downward from 50 days moving average with -12.87%.

Analyst recommendation for this stock stands at 4.00.

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