January 7, 2016
Concordia Healthcare Corp.
Donnatal Approved Through ANDA, Risk of Generic Competition Reduced
Impact: Positive
First impression
Following Donnatal's 1947 approval based on safety alone, the FDA has approved Donnatal through an ANDA. Donnatal is a unique product and was approved in 1947 when the FDA focused on safety and not efficacy. The product has been under the Drug Efficacy Study Implementation (DESI) review since 1975. The FDA recently approved the drug as a generic through an ANDA and Donnatal is now listed in the FDA's National Drug Code (NDC) directory.
Generic competition unlikely in the future as Donnatal is not a reference listed drug (RLD). Following the FDA's decision to approve Donnatal through an ANDA, it is our understanding that it is highly unlikely that Donnatal will face generic competition in the future as any company seeking approval to market a generic equivalent must refer to a reference listed drug, not an ANDA-approved product. We view this as a very positive outcome for CXRX, as this minimizes the remaining risk surrounding Donnatal. Although Donnatal revenues accounted for 38% of 2014E revenues pre-Covis, and 17% of 2014E revenues post-Covis, Donnatal now only contributes 10% of CXRX's overall revenues. This is still significant, and Donnatal remains the largest product in CXRX's portfolio post-AMCo acquisition.
Revenues of ~$80MM in 2015E, $102MM in 2016E. We have forecasted Donnatal revenues of ~$80MM in 2015E, and ~$102MM in 2016E. We note that this 'market exclusivity' that Concordia now has with Donnatal will allow management to invest more in the brand, and we anticipate management will leverage this capability using one or more of the following tactics; (i) increased sales force, (ii) DTC campaign, (iii) awareness campaign.
Concordia Investor Day to occur in Q1. We expect management to provide an update in the coming weeks regarding a date for its Investor Day, at which we hope management will provide further information on AMCo organic growth, product launches, and more detailed 2016E guidance.
Continued weakness presents buying opportunity. We note that given CXRX's recent weakness, we would remain buyers.
Sector: Biotech & Pharma, Healthcare
Outperform
NASDAQ: CXRX; TSX: CXR Price: USD 40.43
All values in USD unless otherwise noted.