April 22, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Concordia Healthcare Corp. , based in Oakville, Ontario, is rumored to be the takeover target of New York-based private equity investment banking firm The Blackstone Group. Concordia jumped from $25.01 on April 19 to a current price of $32.26 at the rumors.
Concordia manages and acquires legacy drugs, and buys and develops orphan drugs. It has a diversified portfolio of more than 200 established off-patent compounds. Its Orphan Drug Division is currently made up of Photofrin for rare forms of cancer.
The company announced yesterday that it had created a special committee of independent members of the board of directors to evaluate various strategic options. The statement does say, however, “there can be no assurance any transaction will occur.”
The sources told Bloomberg that talks with Blackstone are very early and may not happen. There may also be other bidders.
On its part, Concordia has been in acquisition mode since 2013. In 2015, it announced plans to buy Amdipharm Mercury Ltd in a deal priced at $3.5 billion. Since 2013, it has spent $5 billion on various acquisitions and deals.
Concordia acquired Amdipharm from Cinvent, a European private equity firm. The deal was a combination of debt financing and cash. There was $2.8 billion in debt financings, $520 million is gross proceeds from a public equity offering, and cash. In addition, Concordia provided 8.49 million common shares of stock, which represented about 14.2 percent of Concordia’s outstanding common shares.
Company shares fell about 73 percent since the Amdipharm deal, primarily over concerns about the company’s debt levels. It also was the target of short sellers.
Another problem is comparisons to another Canadian drug company, Valeant Pharmaceuticals . A noted serial acquirer with more than 108 deals in the last 8 years, Valeant is currently in a major crisis. Company shares have tanked, William Ackman’s Pershing Square Capital Management, one of Valeant’s biggest investors, sold about 5 million company shares on the last day of trading in 2015, and there are a number of ongoing U.S. Securities and Exchange Commission (SEC) investigations. The company is also looking for a new chief executive officer and needs to pay down about $30 billion in debt. To do so it is potentially selling off Bausch & Lomb.
“Concordia has been the subject of an unrelenting and unscrupulous attack by a group of short sellers for several months,” said Mark Thompson, Concordia’s chief executive officer, in a statement last month. “We will continue to monitor this situation and will act accordingly. However, we are extremely excited about the business we have built and the opportunity to delivery long-term shareholder value.”
In its annual financial reports on March 23, 2016, Concordia reported revenue of $394.2 million, up from $104.9 million in the previous year. Net income from continuing operations, however, was down, showing a loss of $29.4 million in 2015 compared to a gain of $8.9 million in 2014.
The revenue increase was primarily credited to Concordia International products, and organic growth from Donnatel, its adjunctive therapy for irritable bowel syndrome. The operational losses were related to acquisitions, as well as debt-related charges.
“Concordia’s accomplishments in 2015 have created a global infrastructure that diversified the Company across product lines, geographies and sales channels,” said Mark Thompson, the company’s founder, chairman, and chief executive officer, in a March 23 statement. “Our infrastructure uniquely positions the Company to provide safe and effective medicines to patients in more than 100 countries, which we believe will allow us to evaluate growth opportunities on a global scale going forward. In addition, our achievements in 2015, in particular the acquisition of the portfolio of products from Covis, the purchase of AMCo and the organic growth we have generated from key products such as Donnatal, have resulted in substantial year-over-year revenue and adjusted EBITDA growth.”
