Concordia Healthcare Corp. Announces First Quarter 2015 Results

May 14, 2015, 17:48 ET from Concordia Healthcare Corp.

-          First quarter 2015 revenue increase of 117% compared to the first quarter of 2014 –

-         First quarter 2015 adjusted EBITDA up 232% versus the same period in 2014 -

TORONTO, May 14, 2015 /CNW/ - Concordia Healthcare Corp. ("Concordia" or the "Company") (TSX: CXR) (OTCQX: CHEHF), a diverse healthcare company focused on legacy pharmaceutical products and orphan drugs, today announced its financial and operational results for the three months ended March 31, 2015.  All financial references are in U.S. dollars unless otherwise noted. 

Financial Results              

(in US$)

Three Months Ended

March 31, 2014

Three Months Ended

March  31, 2015

Revenue

$16,810,000

$36,435,000

Gross profit

$12,956,000

$32,090,000

Operating income

$4,939,000

$16,189,000

Net income (loss)

($1,836,000)

$5,668,000

Earnings (loss) per share basic

($0.09)

$0.20

Earnings (loss) per share diluted

($0.09)

$0.19

Adjusted earnings per share1

$0.05

$0.53

EBITDA2

$3,546,000

$20,069,000

Adjusted EBITDA3

$5,903,000

$19,580,000

Cash and cash equivalents

$77,973,000

$35,363,000

 

First Quarter 2015 Highlights

  • First quarter 2015 revenue increase of 117% compared to the first quarter of 2014;
  • First quarter 2015 adjusted EBITDA up 232% versus the same period in 2014;
  • On March 9, 2015, Concordia announced the acquisition of substantially all the assets of Covis Pharma S.à.r.l and Covis Injectables S.à.r.l. (collectively, "Covis") for US$1.2 billion;
  • Subsequent to quarter end, on April 21, 2015, the Company completed the Covis Acquisition. The drug portfolio acquired from Covis consists of 18 products, being comprised of 12 branded and 5 generic contracts and a product distributed by a third party in Australia pursuant to a distribution agreement. 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.
  • The acquisition was structured as an all-cash transaction with a purchase price of US$1.2 billion. The Company paid for the assets through a mix of term loans, bonds and equity as disclosed in prior press releases.
  • On March 13, 2015, S&P Dow Jones Indices announced Concordia would be included in the S&P TSX Composite Index, effective after the close on Friday, March 20, 2015. Inclusion in the index is expected to result in increased exposure for Concordia to a broader range of potential investors.
  • Concordia's board of directors approved a $0.075 dividend per common share. A record date of July 15, 2015 was declared by the board of directors with a distribution of proceeds expected to occur on July 31, 2015. Declarations and payments will be made in U.S. dollars. All future quarterly dividends will be subject to quarterly financial review and board approval.
  • The underlying demand for Donnatal®, indicated for the treatment of irritable bowel syndrome, was unaffected by the inventory changes in the period. Weekly demand throughout the period trended upward as improvements to Concordia's physician targeting and promotional strategy that were implemented during the fourth quarter of 2014, and the first quarter of 2015, began to take effect. Specifically, comparing the first and second eight-week periods in 2015, total prescriptions and new prescriptions increased 3.6% and 6.8%, respectively. In the first quarter of 2015, one wholesaler reduced the level of Donnatal® inventory it historically carried from approximately eight weeks of sales to approximately four weeks of sales, resulting in a one-time reduction of revenue. This brings the inventory to levels consistent with that of Concordia's products held by all wholesalers. In addition, another large wholesaler delayed sales of Donnatal® inventory purchases until after its fiscal year-end period of March 31. These inventory adjustments in the period affected Concordia's EBITDA by approximately $3.5 million.

"The first quarter of 2015 was a transformational period for the Company," said Mark Thompson, Chief Executive Officer of Concordia. "The acquisition of the Covis assets provides product diversification and a much larger platform from which to grow our business. While we have owned the Covis assets for less than three weeks, we are encouraged by the collective performance of these products since we closed the transaction. The integration of the assets acquired from Covis, which feature stable revenue, strong margins and free cash flow, continues as planned. Donnatal® is showing increased prescription trends, which demonstrates that our field force is having an impact. The inventory adjustment is normal-course supply chain activity, and we believe it does not reflect the overall prescription demand for this asset. Sales of Donnatal® in April 2015 were the highest recorded by the Company." 

First Quarter 2015 Financial Results

The Company's net revenue was $36,435,000 for the three months ended March 31, 2015, while gross profit for the same period was $32,090,000.

Net revenue and gross profit are derived from Concordia's Legacy Pharmaceuticals Division, its Orphan Drugs Division, and its Specialty Healthcare Distribution.

Legacy Pharmaceuticals Division

Legacy Pharmaceuticals Division revenue for the three months ended March 31, 2015 was $31.1 million, compared to $9.3 million in the same quarter of prior year.  The additions of Donnatal® and Zonegran® in the second and third quarters of 2014, respectively, drove an increase in revenue of approximately $24.0 million, which was partially offset by a combined decline in revenue from Kapvay®, Orapred® and Ulesfia® of approximately $2.2 million.

Gross profit for the Legacy Pharmaceuticals Division for the three months ended March 31, 2015 was $27.7 million compared to $7.1 million in the prior year.  The increase of $20.6 million was primarily due to sales growth in the division, with the acquisition of Donnatal® and Zonegran® accounting for the majority of the increase. 

Cost of sales for the three months ended March 31, 2015 and 2014 were $3.4 million and $2.2 million, respectively, and reflect the costs of active pharmaceutical ingredients, excipients, packaging, freight costs and royalties.  Legacy Pharmaceuticals Division gross margin in the first quarter of 2015 was 89.1% compared with 76.3% in the same quarter of 2014.  The increase in gross margin is primarily driven by high margins on Donnatal®.

Orphan Drugs Division

Net revenues for the Orphan Drugs Division were $3.1 million and $3.6 million for the three months ended March 31, 2015 and 2014, respectively. Revenue for the Orphan Drugs Division represents the sales of Photofrin®, Ethyol®, lasers and fibers. The decrease of $0.5 million in Orphan Drugs revenue was primarily driven by a slight decline in volume of sales of Photofrin® in the United States as compared to the same quarter in the prior year.

Cost of sales for the three months ended March 31, 2015 was $0.5 million, compared to $0.7 million in the same period in the prior year.

Gross profits were $2.6 million and $2.9 million for the three months ended March 31, 2015 and 2014, respectively. Gross margin was 84.3% in the first quarter of 2015, compared to 80.4% in the same quarter in the prior year.  The gross margin for the Orphan Drugs Division in the first quarter of 2014 was negatively impacted by provisions taken for obsolete inventory, which were not repeated in the first quarter of 2015.

Specialty Healthcare Distribution Division

Net revenues for the Speciality Healthcare Distribution Division (SHD) declined by $1.6 million from $3.9 million in the first quarter of 2014 to $2.3 million in the first quarter of 2015. The decline in SHD revenue and gross profit is primarily attributable to changes by two of the pharmacy benefit managers (PBMs) that Complete Medical Homecare, Inc. ("CMH"), a subsidiary of the Company, contracts with, whereby the PBMs removed certain generic diabetic testing products from their formularies that had been supplied by CMH to its patient base. The resulting loss in revenue negatively impacted the performance of the SHD Division in the first quarter of 2015.

Costs of sales for the three months ended March 31, 2015 and 2014 were $0.5 million and $1.0 million, respectively, and related to the cost of products, warehousing and freight. 

Gross profits were $1.8 million and $3.0 million for first quarter of 2015 and 2014, respectively. Gross margin improved from 76.0% in the first quarter of 2014 to 78.9% in the current quarter primarily due to product mix.

Overall for the Company, operating income was $16,189,000 for the three months ended March 31, 2015.

Operating expenses were $15,901,000 for the three months ended March 31, 2015.

Net cash provided by operating activities was $4,146,000 for the three months ended March 31, 2015.  

As at March 31, 2015 and May 14, 2015, the Company had, respectively, 28,873,739 and 33,304,040 common shares issued and outstanding. As at March 31, 2015 and May 14, 2015, there were, respectively, 2,032,280 and 1,931,500 options outstanding that entitle the holders thereof to purchase one common share per option of the Company.

Conference Call Notification 

Management will host a conference call to discuss the first quarter 2015 results on Friday, May 15, 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.

A digital conference call replay will be available until midnight on May 29, 2015 (ET) by calling (416) 849-0833 or (855) 859-2056. Please enter the password 35450259 when instructed. A webcast will be available by accessing a link through the Events section at visit www.concordiarx.com, or by using the following link:

http://event.on24.com/r.htm?e=987328&s=1&k=7C6A452766458FDC8F49AD827DFAECAF

About Concordia

Concordia is a diverse healthcare company focused on legacy pharmaceutical products and orphan drugs. Concordia's Legacy Pharmaceutical Division, Concordia Pharmaceuticals Inc., consists of 23 products including 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; Plaquenil®, for the treatment of lupus and rheumatoid arthritis, Donnatal® for the treatment of irritable bowel syndrome and Zonegran® (zonisamide) for treatment of partial seizures in adults with epilepsy. Concordia's orphan 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; Charlottesville, Virginia and has a specialty healthcare distribution (SHD) division that operates out of Kansas City, Missouri. Pinnacle Biologics Inc. is located in Chicago, Illinois.

1As used herein, adjusted earnings per share is defined as adjusted net income divided by the weighted average number of fully diluted shares outstanding.  Adjusted net income is defined as net income (loss) adjusted for one-time charges including costs associated with acquisitions and the Company's listing on the TSX, non-recurring gains, non-cash items such as unrealized gains / losses on derivative instruments, share based compensation, change in fair value of contingent consideration, realized / unrealized gains / losses related to foreign exchange revaluation, depreciation, amortization, accelerated interest accretion expense, the tax impact of the above items and one-time tax expenses associated with one-time gains. 

2As used herein, EBITDA is defined as net income adjusted for net interest expense, income tax expense, depreciation and amortization. Management uses EBITDA to assess the Company's operating performance.

3As used herein, Adjusted EBITDA is defined as EBITDA adjusted for one-time charges including acquisitions costs and costs associated with the Company's listing on the TSX, non-recurring gains, non-cash items such as unrealized gains / losses on derivative instruments, change in fair value of contingent consideration, other income expenses, share-based compensation and realized / unrealized gains/losses related to foreign exchange revaluation. Management uses Adjusted EBITDA as a key metric in assessing business performance when comparing actual results to budgets and forecasts. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures.

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 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 earnings per share 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 effect of future sales of Concordia's products on Concordia's financial performance 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 are not limited to, the impact of the acquisition of pharmaceutical products (including, the Covis Acquisition) on Concordia's financial performance (including with respect to revenue to its revenue, margins and cash flows), the performance of Concordia's products, the ability to integrate new products into Concordia's existing infrastructure, the revenue-generating capabilities and/or potential of Concordia's assets, Concordia's financial strength, the ability of Concordia's products and/or business divisions to generate a stable revenue stream for the development of products and/or acquisition opportunities, the continued and/or expected profitability of Concordia's products and/or services, the sales and/or demand for Concordia's products, the impact of physician targeting and/or promotional strategies on demands and/or prescriptions for Concordia's products, the payment of dividends in respect of Concordia's common shares, increased exposure for Concordia to a broader range of potential investors, Concordia's growth, the expansion into new indications for Concordia's existing and/or future products, the acquisition of additional products and/or assets (including orphan drugs and legacy products), in-licencing additional products, the distribution of additional products, the ability to obtain necessary approvals, the ability to expand existing sales of Concordia's products in certain markets, the receipt of approval to market and distribute Concordia's products in certain markets, the outcomes and success of distribution arrangements, market opportunities for Concordia's products,  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 press 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 relating to the use of Concordia's products to treat certain diseases, the pharmaceutical industry, regulatory investigations, the failure to comply with applicable laws, 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 acquisitions, risks associated with the integration of assets into Concordia's business, increased indebtedness, the fact that historical financial information may not be representative of Concordia's future results,  the failure to obtain regulatory approvals, economic factors, market conditions, acquisition opportunities, risks associated with the acquisition of pharmaceutical products, the inability to complete acquisitions, the equity markets generally, risks associated with growth and competition, general economic and stock market conditions 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.

SOURCE Concordia Healthcare Corp.