Concordia Healthcare Corp. T.CXR.R

RBC

[retiredcf]

March 23, 2016

Concordia Healthcare Corp.

Q4/15 - Slight Beat to RBC and Consensus, Guidance Reiterated (Constant FX Basis)

Impact: Positive

First impression

• Slight Beat vs. consensus; expect more detail from the conference call tomorrow. CXRX's Q4 results, which contained a partial contribution from AMCo (closed Oct 21st, 2015) were a bit above consensus and our recently revised outlook for revenue ($189.9MM) and Adj. EBITDA ($118.8MM). The beat vs. our forecast is largely related to stronger than anticipated AMCo (Concordia International) revenues of $115.7MM vs. our $92.2MM forecast. Legacy (Concordia North America) revenues of $74.2MM were weaker than our expected $92.2MM likely due in part to the genericization of Dibenzyline. We also note that gross margins of 78% were a bit below our expectations (~82%) and reflect a higher proportion of lower margin AMCo revenue vs. U.S. legacy revenue. We remain buyers of CXRX given its continued discount to the peer group.

• Q4 revenues of $191.9MM for the quarter vs. $42.9MM last year, above our $189.4MM forecast and consensus of $187.9MM. Concordia reported Q4 revenues of $191.9MM for the quarter vs. $42.9MM last year, above our $189.4MM forecast and consensus of $187.9MM (FactSet: 10 analysts, range $154.5-201.4MM). 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).

• Adj. EBITDA $120.1MM vs. $117.5MM consensus, RBC forecast of $118.8MM. Adjusted EBITDA in Q4 was $120.1MM vs. $25.4MM last year, our $118.8MM forecast, and consensus of $117.5MM (FactSet: 9 analysts, range $110.5-120.7MM). The YoY increase is largely due to M&A activity (Covis and AMCo).

• Cash EPS of $1.24 in-line with our $1.23 forecast, below $1.29 consensus. Q4 cash EPS of $1.24 was slightly above our $1.23 estimate but below consensus of $1.29 (FactSet: 6 analysts, range $1.23-$1.48). Cash EPS in Q4/14 was $0.74. We note that without the $1.48 outlier, the EPS would have been essentially in-line.

• Guidance reaffirmed but on a constant exchange basis. Management also reaffirmed its 2016 guidance of $1.02-1.06B in revenue (consensus $1.0B), Adj. EBITDA of $610-640MM (consensus $612MM), Adj. EPS of $6.29-6.77, and year-end Net Debt/EBITDA of ~5.5x. We believe this signals that nothing has changed operationally, but does not reflect recent FX headwinds, particularly those facing sterling/USD. However, we note that our forecasts already take into account these FX headwinds.

• Conference call on Thursday, March 24th, at 8:30 a.m. ET. Management will discuss results on a conference call tomorrow morning (March 24th) at 8:30am. Dial in is 647-427-7450 or 888-231-8191, reference number: 45328971. On the call, we are looking for detail on AMCo strength and legacy weakness.

Sector: Biotech & Pharma, Healthcare

Outperform

NASDAQ: CXRX; TSX: CXR Price: USD 30.49
 

[digitel]

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[Theodore50]

digital: just why not come out and say you have shorted CXR!  And you would love for some dummies here on SH to put some merit on you bs posts.  CXR IS going to open higher. Just cover your shorts early ok. My free advice to you. Good luck, you're going to need it,

[digitel]

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