Concordia Healthcare Corp. T.CXR.R

RBC

[retiredcf]

May 13, 2016

Concordia Healthcare Corp.

Q1/16 In Line (Rev & EBITDA Beat, EPS Below), Guidance Reaffirmed

Impact: Slight Positive

First impression

• Slight Beat vs. consensus on revenue and EBITDA, a bit below on EPS. CXRX's Q1 results, which were the first reported results with a full quarter of AMCo-related revenues were a bit above consensus for revenue and Adj. EBITDA but below on Adj. EPS. In our view, the results were a bit better than expected on key revenue and EBITDA metrics. We remain buyers of CXRX given its continued discount to the peer group.

• Revenue - Slightly Ahead of Expectations: Q1/16 revenues were $228.5MM for the quarter vs. our $224.9MM forecast and consensus of $226.3MM (FactSet: 7 analysts, range $216.6-242.8MM). AMCo revenues were $140MM vs our $143MM forecast and US sales were $86MM vs our $77MM estimate. The large YoY increase is attributed to the addition of the Covis portfolio (deal closed in April 2015) and AMCo (deal closed October 21, 2015). We expect the AMCo shortfall was FX related vs our forecast and US strength was likely due to Lanoxin and Plaquenil AGs. We also note that adj. gross margins of 78.1% were in line with our ~77.9% forecast.

• Adj. EBITDA - Above Consensus and RBCCM: Adj. EBITDA $140.8MM vs. $138.4MM consensus (FactSet: 8 analysts, range $133.2-142.6MM) and our forecast of $138.5MM.

• Cash EPS of $1.35 slighty above our $1.34 forecast but below $1.39 consensus. Q1 cash EPS of $1.35 was slight above our $1.34 estimate but below consensus of $1.39 (FactSet: 7 analysts, range $1.25-$1.53). Cash EPS in Q1/15 was $0.54. We believe EBITDA remains a better measure of success given the company's debt level and how the street values the company.

• Guidance reaffirmed on a constant exchange basis. Management also reaffirmed its 2016 guidance of $1.02-1.06B in revenue (consensus $982MM), Adj. EBITDA of $610-640MM (consensus $603MM), Adj. EPS of $6.29-6.77, and year-end Net Debt/EBITDA of ~5.5x. We do not know if the guidance includes the new acquisitions but as the deal closes on May 31st, we would expect not at this point.

• Product Launches and Acquisitions. The company has launched 10 new products in internation markets plus announced that it had acquired four generic products for 21MM pounds plus 7MM (contingent payment). These products were acquired for 2.6x sales with closing expected on May 31st.

• Conference call at 8:30 a.m. ET. Management will discuss results on a conference call at 8:30am. Dial in is 647-427-7450 or 888-231-8191, reference number: 87616030.

Sector: Biotech & Pharma, Healthcare

Outperform

NASDAQ: CXRX; TSX: CXR Price: USD 23.03