Concordia Healthcare Corp. to Acquire Covis Pharma Commercial Assets for US$1.2 Billion

/Not for release in the United States./

• Creates Diversified, Scaled Specialty Pharmaceutical Company and Expands Concordia's Platform for Future Growth
  • Addition of 18 Branded and Authorized Generic Products Provides Revenue Diversification and Enhances the Legacy Portfolio Margin Profile
  • Excellent Fit with Concordia's Existing Operations and Product Portfolio
• Compelling Financial Profile of the Portfolio:
  • 2014E Revenues between US$140 and US$145 million
  • 2014E Q4 Revenues between US$47 and US$52 million
  • 2014E Gross Margin of Approximately 90%
• Immediately Recognizable Synergies of Approximately US$20 million
• The Transaction is Expected to be Over 50% Accretive to Adjusted EPSⁱ in 2015
• Fully Committed Financing from RBC Capital Markets
• Concordia to Hold Conference Call to Discuss Covis Transaction at 8:30 am ET on Monday, March 9, 2015

TORONTO, March 9, 2015 /CNW/ - Concordia Healthcare Corp. ("Concordia" or the "Company") (TSX: CXR) (OTCQX: CHEHF), a diverse healthcare company focused on legacy pharmaceutical products, orphan drugs, and medical devices for the diabetic population, today announced it has entered into a definitive asset purchase agreement to acquire substantially all of the commercial assets of privately held Covis Pharma S.à.r.l and Covis Injectables, S.à.r.l (together "Covis") for US$1.2 billion in cash. All financial references are in U.S. dollars unless otherwise noted.

The Covis drug portfolio being acquired (the "Portfolio") consists of 18 branded and authorized generic products with stable revenue, strong margins and free cash flow.  The distinctive product portfolio includes branded pharmaceuticals, injectables and authorized generics that address life threatening and other serious medical conditions in various therapeutic areas including cardiovascular, central nervous system, oncology and acute care markets.  Key products are Nilandron®, for the treatment of metastatic prostate cancer; Dibenzyline®, for the treatment of pheochromocytoma; Lanoxin®, for the treatment of mild-to-moderate heart failure and atrial fibrillation; and, Plaquenil®, for the treatment of lupus and rheumatoid arthritis.

In its fourth quarter of 2014, Covis expects to have revenue between US$47 and US$52 million related to the Portfolio. Overall for 2014, Covis expects to have revenue between US$140 and US$145 million with a gross profit margin of approximately 90%.

Concordia believes that it can integrate the Portfolio it is acquiring into its existing business and leverage its existing infrastructure. Through the elimination of redundant distribution and G&A expenses, Concordia expects to recognize immediate synergies of approximately $20 million. 

"Covis' strong commercial momentum will have an immediate and material impact on our top and bottom line financial results," said Mark Thompson, Chief Executive Officer of Concordia. "In the longer-term, this transaction creates greater scale and diversification for Concordia, which should support the continued execution of our aggressive growth plans."      

Transaction Details

The acquisition is structured as an all-cash transaction with a purchase price of US$1.2 billion for the Portfolio being acquired.  The Company plans to pay for the acquisition through a mix of term loans, bonds and equity. The Company has entered into a commitment letter with Royal Bank of Canada ("RBC"), pursuant to which, RBC has agreed to provide credit facilities and bridge commitments of up to US$1.6 billion (the "Credit Facilities") to fully pay for the acquisition price and refinance all outstanding Concordia debt. The Credit Facilities are subject to a number of customary conditions. All obligations of the Company under the term loans will be secured by first priority perfected security interests in the assets of the Company and the assets of and equity interests in its subsidiaries. The bridge commitments will be unsecured. The Company is targeting leverage to be below 5x at the closing of the acquisition and expects net leverage to fall to ~3x by year end 2016. The transaction is expected to be over 50% accretive to Concordia Adjusted EPS in 2015.

The acquisition, which is expected to close in the second quarter of 2015, is subject to satisfaction of customary closing conditions (including receipt of required regulatory approvals). The Board of Directors of all parties to the transaction have approved the acquisition.

2014 Guidance

For the full year 2014 Concordia expects to have revenue between US$119 and US$122 million, adjusted EBITDAⁱⁱ between US$61.5 and US$63 million and Adjusted EPS between US$1.79 and US$1.83 per share.  For the fourth quarter of 2014 Concordia expects to have revenue between US$40 and US$43 million, adjusted EBITDA between US$23.5 and US$25 million and Adjusted EPS between US$0.66 and US$0.70 per share. 

Conference Call Notification 

Management will host a conference call and webcast to the announcement on Monday, March 9, 2015 at 8:30 am ET. Following management's presentation, there will be a question-and-answer session. To participate in the conference call, please dial (888) 231-8191 or (647) 427-7450.

To join the webcast, please use the following link:   http://www.newswire.ca/en/webcast/detail/1496751/1667333

A digital conference call replay will be available until midnight on March 23, 2015 ET by calling (416) 849-0833 or (855) 859-2056. Please enter the password 1261132 when instructed. A webcast replay will be available for 365 days by accessing a link through the Events section at visit www.concordiarx.com.

Financial and Legal Advisors

RBC Capital Markets is acting as financial advisor to Concordia and Sullivan & Cromwell LLP and Fasken Martineau DuMoulin LLP are acting as Concordia's legal counsel. Lowenstein Sandler LLP is acting as Covis' legal counsel. Bourne Partners served as the exclusive financial advisor to Covis in the sale process.

About Concordia

Concordia is a diverse healthcare company focused on legacy pharmaceutical products, orphan drugs, and medical devices for the diabetic population. Concordia's legacy pharmaceutical division, Concordia Pharmaceuticals Inc., consists of the following products: ADHD-treatment Kapvay® (clonidine extended release tablets), head lice treatment Ulesfia® (benzyl alcohol) Lotion, asthma-related medication Orapred ODT® (prednisolone sodium phosphate orally disintegrating tablets), irritable bowel syndrome treatment Donnatal® (belladonna alkaloids, phenobarbital) and Zonegran® (zonisamide) for treatment of partial seizures in adults with epilepsy. Concordia's specialty healthcare distribution (SHD) division, Complete Medical Homecare, distributes medical supplies targeting diabetes and related conditions. Concordia's orphan drugs division, Concordia Laboratories Inc., manufactures PHOTOFRIN®. PHOTOFRIN® is marketed by Pinnacle Biologics, Inc. in the United States.

Concordia operates out of facilities in Oakville, Ontario; Bridgetown, Barbados; Kansas City, Missouri; Chicago, Illinois and Charlottesville, Virginia.

About Covis

Covis Pharma S.à.r.l. and Covis Injectables S.à r.l. are subsidiaries of Covis Pharma Holdings S.à r.l..  Headquartered in Zug, Switzerland, Covis Pharma S.à r.l. is a global specialty pharmaceutical company providing therapeutic solutions to patients which will continue operating as a speciality pharmecutical business following consummation of the transaction.  The company's distinctive product portfolio addresses life threatening and other serious medical conditions in various therapeutic areas including: cardiovascular, central nervous system, oncology and acute care markets. Covis is focused on acquiring high-quality, established branded pharmaceuticals that are under-managed by larger pharmaceutical companies.

The investor group in Covis has significant investment and operational experience in the specialty pharmaceutical industry.  Controlled by certain affiliates of Cerberus Capital Management, L.P., one of the world's leading private investment firms, the investor group also includes Princeton Biopharma Capital Partners, LLC and Bourne Partners.

Notice regarding non-IFRS measures:

This press release makes reference to certain measures that are not recognized measures under International Financial Reporting Standards ("IFRS"). These non-IFRS measures do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's or Covis' results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analyses of the Company's financial information reported under IFRS. Management uses non-IFRS measures such as EBITDA, adjusted EBITDA and adjusted EPS to provide a supplemental measure of operating performance and thus highlight trends in the core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess its ability to meet future debt service, capital expenditure, and working capital requirements. Readers are cautioned that the non-IFRS measures contained herein may not be appropriate for any other purpose.

Notice regarding future-oriented financial information:

To the extent any forward-looking statements in this press release constitutes future-oriented financial information or financial outlooks within the meaning of securities laws, such information is being provided to demonstrate the potential benefits of the acquisition and the financing described herein and readers are cautioned that this information may not be appropriate for any other purpose and that they should not place undue reliance on such future-oriented financial information and financial outlooks. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out below under "Notice regarding forward-looking statements".

Notice regarding forward-looking statements:

This press release includes forward-looking statements and forward-looking information (collectively, "forward-looking statements") regarding Concordia and its business, which may include, but is not limited to, statements with respect to the acquisition and the completion and timing thereof, synergies resulting from the acquisition including the elimination of redundant distribution expenses and the ability to achieve greater cost efficiencies and higher margins, the completion of the financing, the entering into of documentation with respect to the financing, the impact of the acquisition on Concordia's financial performance (including with respect to its revenues, margins, earnings per share (EPS) and EBITDA), financial results and performance of Concordia and Covis for fiscal 2014 and the fourth quarter of 2014, Concordia's growth and other factors. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative and grammatical variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations of Concordia's management, and are based on assumptions and subject to risks and uncertainties. Although Concordia's management believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting Concordia, including risks regarding the pharmaceutical industry, regulatory investigations, the failure to comply with applicable laws, the failure to obtain regulatory approvals, risks relating to the use of Concordia's products to treat certain diseases, risks relating to distribution arrangements, risks relating to the markets in which Concordia operates and/or distributes its products, possible failure to realize the anticipated benefits of the acquisition (including synergies and accretion), risks associated with the integration of the Portfolio into Concordia's business, increased indebtedness, ability to achieve the full amount of cost synergies, the fact that historical and pro forma combined financial information may not be representative of Concordia's results post acquisition, the reliance on information provided by Covis, economic factors, market conditions, the equity markets generally, risks associated with growth and competition, risks associated with the acquisition and financing of the acquisition and many other factors beyond the control of Concordia. Although Concordia has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Concordia undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Notice regarding United States securities laws:

This announcement does not constitute an offer to sell or the solicitation of an offer to buy any security, nor shall there be any sale of the securities referenced in this announcement in any jurisdiction, including the United States, in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Securities may not be offered or sold in the United States absent registration or an exemption from registration, and any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the Company that will contain detailed information about the Company and management, as well as financial statements of the Company and Covis.

SOURCE Concordia Healthcare Corp.