Mr. Allan Oberman reports
CONCORDIA INTERNATIONAL CORP. ANNOUNCES FOURTH QUARTER AND FISCAL 2017 RESULTS
Concordia International Corp. has released its financial and operational results for the three and 12 months ended Dec. 31, 2017. All financial references are in U.S. dollars unless otherwise noted.
"We believe that our accomplishments in 2017, which included the development of DELIVER, our long-term growth strategy, have positioned Concordia to have a promising 2018," said Allan Oberman, chief executive officer of Concordia. "As we make progress towards the potential realignment of our capital structure, our global team remains focussed on leveraging our diverse portfolio of medicines, global sales platform and product pipeline in order to support our aspirations for long-term growth."
Consolidated fourth quarter and fiscal 2017 financial and operational results:
- Reported fourth quarter revenue of $150.2-million, compared with $170.4-million for the fourth quarter of 2016, and $154.6-million for the third quarter of 2017;
Generally accepted accounting principles net loss for the fourth quarter of $431.8-million included impairment charges of $207.7-million. The impairments consisted of a $44.3-million impairment of intellectual property rights within the Concordia North America segment with respect to Nilandron, as well as $163.4-million of impairments from the Concordia international segment with respect to intellectual property, manufacturing processes, and in-process research and development;
Reported fourth quarter adjusted earnings before interest, taxes, depreciation and amortization of $70.8-million, compared with $80.5-million for the fourth quarter in 2016, and $78.6-million in the third quarter of 2017;
Generated cash flows from operating activities of $283.2-million in 2017, compared with $408.3-million in 2016;
As of Dec. 31, 2017, the company's liquidity consisted of $327-million of cash and cash equivalents;
On Oct. 20, 2017, Concordia announced its intention to realign its capital structure by commencing a court proceeding under the Canada Business Corporations Act. The CBCA is a Canadian corporate statute that contains provisions allowing Canadian corporations to restructure certain debt obligations. The CBCA is not a bankruptcy or insolvency statute. Under the CBCA process, Concordia's management continues to lead day-to-day operations and operate its business as usual, while meeting its commitments to employees, suppliers and customers.
Fourth quarter 2017 segment results
The company changed the composition of its reporting segments during the first quarter of 2017. As a result, Concordia has presented prior period segment information to conform with the current period presentation by aggregating the 2016 segment information of the Concordia North America segment with the segment information of the 2016 orphan drugs segment into a single reporting segment entitled, Concordia North America.
Concordia North America segment's fourth quarter 2017 revenue of $36.5-million was consistent with third quarter 2017 revenue of $36.9-million.
Revenue for the three months ended Dec. 31, 2017, decreased by $5.2-million or 12.4 per cent compared with the corresponding period in 2016. This decrease is attributable to competitive pressures on products such as Donnatal and Plaquenil AG.
Concordia international segment's revenue for the fourth quarter of 2017 was $113.7-million compared with $117.7-million in the third quarter of the year.
This decrease is attributable to volume and price declines on key products, including Liothyronine Sodium, and was partially offset by the impact of the sterling strengthening against the U.S. dollar, resulting in $1.6-million of additional translated revenue.
Revenue for the three months ended Dec. 31, 2017, decreased by $15.0-million or 11.7 per cent compared with the corresponding period in 2016. The main drivers of the decrease were primarily due to ongoing competitive market pressures and were partially offset by foreign currency translation gains.
During the fourth quarter of 2017, the company launched two new products into markets that have a current IMS estimated market value of $10-million.
Concordia also has 17 products that have already been approved or are awaiting approval by regulators. These products, if launched, are expected to compete in markets that have a current IMS estimated market value in excess of $150-million.
In addition, the company currently has 32 products under development that are anticipated to launch in the next three to five years. These products, if launched, are expected to compete in markets that have a current IMS estimated market value in excess of $1.8-billion. Concordia believes that these products include several first-to-market or early-to-market opportunities for difficult-to-make products.
In addition, the company has 15 products identified for potential development that, if launched, are expected to compete in markets that have a current IMS estimated market value in excess of $350-million.
Therefore, in total, Concordia's current pipeline comprises more than 60 products that could compete in markets that have a current IMS estimated market value in excess of $2-billion.
Going forward, Concordia intends to continue to evaluate additional opportunities above and beyond the 60 products to further increase the company's pipeline and portfolio.
New organization leadership structure
The company today announced that Graeme Duncan, president of Concordia's international segment, will be leaving the organization effective June 30, 2018.
There are no plans to fill this position.
"We are grateful to Graeme for the contributions he has made to Concordia, and wish him well in his future endeavours," said Mr. Oberman. "In alignment with DELIVER, our long-term growth strategy, we have now fully implemented a unified organization structure consisting of four global functions, supporting four geographic business units. I look forward to working more closely with these leaders and their teams as we focus on accelerating Concordia's growth."
The following senior leaders will continue to oversee Concordia's four geographic, commercial business units and will report directly to Mr. Oberman:
- Paul Burden, promoted to managing director, United Kingdom and Ireland, will continue to oversee Concordia's largest business unit (U.K. and Ireland). Mr. Burden joined Concordia in September, 2016, and has served as vice-president, commercial business, U.K. and Ireland, since then.
Simon Tucker, vice-president, commercial business, will continue to oversee Concordia's rest of world business unit.
Sanjeeth Pai, president, Concordia North America, will continue to oversee the company's North American business unit.
Glenn Kutschera, vice-president and general manager, Pinnacle Biologics, will continue to oversee the company's commercial efforts around photodynamic therapy by Photofrin for the treatment of certain types of cancer.
These individuals and their teams will be supported by the following global functional leaders and their respective support teams:
Karl Belk, senior vice-president, global pharmaceutical operations, will continue to lead Concordia's global pharmaceutical operations, overseeing the company's supply chain, supplier relationships, quality, regulatory, technical and operations divisions.
Sarwar Islam, Concordia's chief corporate development officer, will continue to lead the company's efforts in strategy, corporate development, business development, portfolio development, and mergers and acquisitions.
David Price, Concordia's chief financial officer, will continue to lead the company's finance, human resources, and investor and public relations functions.
Francesco Tallarico, Concordia's chief legal officer, will continue to lead the company's legal and compliance efforts.
The company believes this streamlined management structure, where all senior leaders report to the CEO, will ultimately help accelerate the execution of the DELIVER strategy.
CONSOLIDATED FINANCIAL RESULTS
(in thousands, except per share)
For the year ended Dec. 31
Revenue $626,169 $816,159
Gross profit 435,537 594,957
Gross profit % 70% 73%
Adjusted gross profit 435,848 616,369
Adjusted gross profit % 70% 76%
Total operating expenses 1,600,485 1,537,264
Operating income (loss) from continuing operations (1,164,948) (942,307)
Income tax recovery (36,757) (34,801)
Net (loss) from continuing operations (1,590,735) (1,314,093)
(Loss) per share, from continuing operations
Basic (31.10) (25.76)
Diluted (31.10) (25.76)
(Loss) per share, including discontinued operations
Basic (31.10) (25.79)
Diluted (31.10) (25.79)
EBITDA (953,613) (885,117)
Adjusted EBITDA 315,410 468,144
Consolidated results of operations
Revenue for the year ended Dec. 31, 2017, decreased by $190.0-million, or 23 per cent, compared with 2016. This decrease was due to lower sales from both the Concordia North America and Concordia international segments, as well as unfavourable foreign exchange rate movements, compared with the corresponding period in 2016.
Revenues were lower primarily due to lower volumes, mainly as a result of new market entrants on a number of the company's products. Concordia North America segment revenue for the year ended Dec. 31, 2017, decreased by $97.9-million or 38 per cent when compared with 2016, mainly as a result of lower volumes on key products, including Plaquenil AG, Donnatal and Nilandron.
Concordia international segment revenue for the year ended Dec. 31, 2017, decreased by $92.1-million or 17 per cent primarily due to volume and price declines on key products, including Prednisolone, Liothyronine Sodium and Fusidic Acid.
Gross profit for the year ended Dec. 31, 2017, decreased by $159.4-million or 27 per cent, compared with 2016 primarily due to the revenue decreases described above. The decrease in gross profit as a percentage of revenue for the year ended Dec. 31, 2017, compared with 2016 is primarily due to changes in product mix within the Concordia North America and Concordia international segments.
Operating expenses for the year ended Dec. 31, 2017, increased by $63.2-million, or 4 per cent compared with 2016. Operating expenses were higher primarily due to $62.5-million higher impairment charges recorded during 2017 and $43.6-million higher amortization of intangible assets, partially offset by $22-million lower share-based compensation, $14.2-million lower litigation settlements, and $12.9-million lower selling and marketing costs.
General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, continuing public company costs, travel, facility leases, and other administrative expenditures. General and administrative expenses for the year ended Dec. 31, 2017, decreased by $5.8-million or 10 per cent compared with 2016. This decrease is a result of the company's objective to reduce operating costs across the business.
Selling and marketing expenses reflect costs incurred by the company for the marketing, promotion and sale of the company's broad portfolio of products across the company's segments. Selling and marketing costs for the year ended Dec. 31, 2017, decreased by $12.9-million or 25 per cent compared with 2016. These costs have decreased primarily due to the termination of the Donnatal contract sales force in 2016, which has been replaced by a co-promotion agreement with Redhill Biopharma Ltd. Sales and marketing expenses in 2017 within the Concordia North America segment have decreased by $11.6-million and have decreased by $1.2-million within the Concordia international segment.
Research and development expenses reflect costs for clinical trial activities, product development, professional and consulting fees and services associated with the activities of the medical, clinical and scientific affairs, quality assurance costs, regulatory compliance, and drug safety costs (pharmacovigilance) of the company. Research and development costs for the year ended Dec. 31, 2017, decreased by $9.2-million or 23 per cent compared with 2016. This decrease is due to fewer continuing clinical programs in 2017 compared with 2016, including the cancellation of the company's cholangiocarcinoma trial in December, 2016, and the company moving certain external service provider activities previously incurred by the Concordia North America segment to the company's integrated operations in Mumbai, India.
The current income tax expense recorded for the year ended Dec. 31, 2017, decreased by $18.4-million compared with 2016. Income taxes were lower primarily due to the impact of lower foreign exchange translation of the income tax expense from the Concordia international segment as well as lower taxable income compared with 2016.
The net loss from continuing operations for the year ended Dec. 31, 2017, was $1,590.7-million. Significant components comprising the net loss in 2017 are impairment charges of $1,194.8-million and the deduction of other significant cash and non-cash expenses which include, but are not limited to, amortization expense and interest and accretion expenses.
Adjusted EBITDA for the year ended Dec. 31, 2017, decreased by $152.7-million or 33 per cent compared with 2016. The decline is primarily due to lower sales and gross margins from both the Concordia North America and Concordia international segments, as well as unfavourable foreign exchange rate movements impacting translated results during 2017. Adjusted EBITDA by segment for the 12-month period ended Dec. 31, 2017, was $99.3-million from Concordia North America and $236.7-million from Concordia international. In addition, during the 12-month period ended Dec. 31, 2017, the company incurred $20.7-million of corporate costs related to the corporate head office.
As of Dec. 31, 2017, the company had cash and cash equivalents of $327-million and 51,282,901 common shares issued and outstanding.
Conference call notification
The company will hold a conference call on Thursday, March 8, 2018, at 8:30 a.m. ET, hosted by senior management.
Conference call details
Date: Thursday, March 8, 2018
Time: 8:30 a.m. ET
Dial-in numbers: 647-427-7450 or 888-231-8191
Taped replay: 416-849-0833 or 855-859-2056
Reference No.: 9289998
This call is being webcast and can be accessed on-line.
An archived replay of the webcast will be available on-line.
About Concordia International Corp.
Concordia is an international specialty pharmaceutical company with a diversified portfolio of more than 200 patented and off-patent products, and sales in more than 90 countries. Going forward, the company is focused on becoming a leader in European specialty, off-patent medicines.
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