We recently visited CXRX's AMCo operations in London and left with a better understanding of the company's opportunity outside the U.S.
On this side of the Atlantic, AMCo was a relatively unknown private UK specialty
pharmaceutical company before CXRX acquired it in September 2015 for ~$3.5
billion. As a result, its operations, which now account for ~60% of CXRX's total
business, have been somewhat of a black box for investors as: (i) the UK market
is unique and likely underappreciated, (ii) AMCo focuses on leveraging nuances
in the UK market to its advantage, (iii) there is limited historical financial
data, and iv) third-party data to track the underlying growth are difficult to
obtain.
After spending time with management discussing the market dynamics at work
within the UK system, we believe AMCo is well positioned to continue to grow its
business using a number of strategies available to it, including: developing new
products, selectively promoting neglected brands, and optimizing price where
appropriate. Furthermore, we left our meetings feeling that the management team
in place at AMCo has a deep understanding of the market, the business, and the
opportunities that are available going forward.
We believe Concordia's shares will likely trade higher as the market becomes
more comfortable with the growth potential of AMCo, which should become apparent as the company reports results over the next 3-4 months. As a result, we
maintain our $75 price target, Sector Outperform.