March 15, 2017
Concordia International Corp.
Q4 Below Expectations, No 2017 Guidance or Clarity on Management's Focus
Impact: Negative
First impression
Below Consensus on U.S. Legacy Revenue, Adj. EBITDA, and Adj. EPS.
CXRX's Q4 results, which faced lower expectations from the Street amid continued operational challenges, were below consensus and below our forecasts in both the U.S. and international businesses. The company has decided not to provide guidance for 2017, a decision that we understand given the ongoing operational and regulatory concerns the company is facing. We do, however, believe that investors would benefit from clarity as to where management will allocate its resources as the majority of questions from investors over the past several weeks have revolved around whether or not management will continue to invest any resources in its U.S. legacy business.
Revenue - Below Expectations: Q4/16 revenues were $170.4MM for the quarter vs. our $185.1MM forecast and consensus of $181.7MM (FactSet: 6 analysts, range $173.9-185.6MM). AMCo revenues were $128.7MM vs. our $136.9MM estimate and U.S. sales were $39.3MM vs. our $45.9MM estimate. We note that Concordia International recorded an in-process R&D impairment charge of $58.5MM (discontinued projects or projects with lower potential when compared to the Oct/15 AMCo acquisition). Concordia's GAAP net loss includes a $562.1MM impairment charge ($306.9MM North America, $255.2MM International); a significant charge to which the company did not provide any detail. We also note that management has not provided any metrics as to how key U.S. products performed in the quarter. We view this negatively as transparency into the company's portfolio is further reduced.
Adj. EBITDA - Below Consensus: Adj. EBITDA was $80.5MM vs. $103.6MM consensus (FactSet: 6 analysts, range $99.0-110.5MM) and our forecast of $102.0MM.
Adj. EPS of $0.13 Below Our $0.49 Forecast and $0.53 Consensus. Q4 Adj. EPS of $0.13 was below our $0.49 estimate and consensus of $0.53 (FactSet: 6 analysts, range ($0.03)-$0.58).
Conference call at 8:30 a.m. ET. Management will discuss results on a conference call at 8:30am. Dial in is 1-888-231-8191.
Sector: Biotech & Pharma, Healthcare
Underperform Speculative Risk NASDAQ: CXRX; TSX: CXR Price: USD 2.19
All values in USD unless otherwise noted.