TD CXy(CXRX-Q, CXR-T) US$28.54 Q3 Essentially In-line; F2016 Guidance Reaffirmed
Event
We would characterize Q3/15 as a transitional quarter; and the results as essentially in-line. Q3/15 was the last quarter before the consolidation of the AMCo business. Revenues grew 6% sequentially (organic) to $94.9 million, as compared to TD and consensus estimates of $97.9 million and $94.3 million, respectively. Adjusted EBITDA was $71.7 million, versus TD and consensus estimates of $73.0 million and $67.7 million. Key highlights included: (i) continued sequential Donnatal volume growth; (ii) essentially in-line Covis performance; and (iii) reaffirmed F2016 guidance calling for $610 million to $640 million in EBITDA.
Exhibit 1. Q3/15 Results vs. Estimates Q3/15A TD Cons Variance* Q3/15A Q3/14A Growth Q3/15A Q2/15A Growth Legacy Pharmaceuticals 90.6 92.3 90.6 29.2 210% 90.6 72.4 25% Specialty Healthcare Distribution 1.9 2.5 1.9 4.2 -55% 1.9 2.3 -18% Orphan Drugs (Photofrin) 2.4 3.1 2.4 3.0 -21% 2.4 2.8 -14% Total Revenue 94.9 97.9 94.3 1% 94.9 36.4 160% 94.9 77.5 22% Adj. EBITDA** 71.7 73.0 67.7 6% 71.7 20.3 254% 71.7 55.5 29% * Variance to Consensus Vs. Estimates Y/Y Performance Sequential Performance **Adj. EBITDA excludes non-recurring charges and non-cash items. (in $mm) Source: Bloomberg,
Company reports and TD Securities Inc. estimates Impact – SLIGHTLY POSITIVE
Concordia's legacy business appears to be tracking to the low single-digit organic growth scenario we are projecting for this portfolio in F2016. However, it is the AMCo portfolio that generates 75% of our F2016 organic growth forecast. We may have to wait until H1/16 to validate our growth estimates for the AMCo business.
TD Investment Conclusion
We are maintaining our BUY rating; largely on the premise that the AMCo assets can fuel mid-teen growth at Concordia during F2016. At the same time, we are flagging several headwinds that could restrain Concordia over the next 12 months - (i) balance sheet constraints; (ii) the new political / media environment in the U.S.; and (iii) a potential need to tweak the deal strategy going forward.