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Concordia International Announces Second Quarter 2016 Results

  • Second quarter 2016 revenue of $231.7 million, an increase of 1.4 per cent over the first quarter of 2016 and 208 per cent over the second quarter of 2015
  • Reported second quarter GAAP net loss of $570.5 million, GAAP earnings per share loss of $11.18, which was primarily due to an adjustment to the carrying values of Nilandron® and Plaquenil® by $567 million due to generic competition
  • Second quarter 2016 adjusted EBITDA1 of $142.3 million and adjusted earnings per share of $1.38
  • Concordia's International segment launched 13 new products since October 21, 2015; the Company remains on track to meet its target of 60 plus launches in the next three years
  • Revises 2016 guidance2 to US$859 million to US$888 million of revenue and adjusted EBITDA1 to US$510 million to US$540 million

OAKVILLE, ON, Aug. 12, 2016 /PRNewswire/ - Concordia International Corp. ("Concordia" or the "Company") (NASDAQ: CXRX) (TSX: CXR), an international pharmaceutical company focused on legacy pharmaceutical products and orphan drugs, today announced its financial and operational results for the three and six months ended June 30, 2016. All financial references are in U.S. dollars unless otherwise noted.

"Our international segment continues to perform well as the team executes and delivers on its business plan," said Mark Thompson, Chairman and Chief Executive Officer of Concordia. "However, we have revised our 2016 guidance to reflect the impact of unexpected competition on several products in our North America segment, and current foreign currency exchange rates. Notwithstanding these revisions, we continue to maintain a strong free cash flow profile, our debt structure has no ongoing maintenance covenants and we are in compliance with all of our debt covenants. Furthermore, the business we have built reflects the value of having therapeutic and geographic diversity across our global platform. We remain committed to building a dynamic international specialty pharmaceutical company and driving long-term shareholder value."

Second Quarter 2016 Highlights

  • Reported Concordia International segment revenue of $151.5 million, compared to $139.9 million in the first quarter of 2016. There were no comparative second quarter 2015 results for Concordia's International segment, which was acquired in the fourth quarter of 2015.
  • Reported Concordia North America segment revenue of $77.5 million compared to $72.4 million in the second quarter of 2015.
  • Since October 21, 2015, the Company's International segment has launched 13 products. These products include branded and generic therapies for the treatment of prostate cancer, pain, depression, and obesity.
  • On June 30, 2016, Concordia announced that the U.S. Food and Drug Administration approved the Company's premarket approval application for its new Photofrin® Laser. The newly approved laser, which is designed for use with Photofrin® to treat esophageal cancer, Barrett's Esophagus and non-small cell lung cancer, has been re-engineered with technological advancements in laser design.
  • Subsequent to quarter end, in July 2016, the United States Patent and Trademark Office granted Concordia's subsidiary a patent for a lighting system used to perform in-vitro potency testing of Photofrin®. The Company believes that the patent strengthens the intellectual property profile of photodynamic therapy (PDT) with Photofrin®.

In connection with an ordinary course continuous disclosure review by the Ontario Securities Commission (the "OSC"), the Company has included additional disclosure with respect to its 2015 annual and first quarter 2016 results in its second quarter Management's Discussion & Analysis ("MD&A") to provide greater prominence to the Company's GAAP measures for those periods. The additional disclosure can be found on pages 15 to 17 of the MD&A. While this information was previously included in the Company's 2015 annual MD&A and first quarter 2016 MD&A, the Company and the OSC believe that, given the transactions entered into by the Company during those periods, the additional disclosure included in the second quarter 2016 MD&A is helpful in understanding the Company's GAAP measures over the periods indicated.

Management Changes and Suspension of Dividend

The Company announced today that Adrian de Saldanha, Concordia's Chief Financial Officer, will be leaving the organization to pursue other opportunities. Mr. de Saldanha will be replaced by Concordia's current Executive Vice President, Edward Borkowski. Mr. de Saldanha will remain with the Company during a transition period. The board of directors of the Company (the "Board") wishes to thank Mr. de Saldanha for his contributions to Concordia's growth.

As a result of his appointment as Chief Financial Officer, Mr. Borkowski will step down from his position on the Board.

Before joining Concordia, Mr. Borkowski was the CFO of Amerigen Pharmaceuticals, a privately held, generic pharmaceutical company focused on oral controlled release products. Previously, he was the CFO and Executive Vice President of Mylan N.V. During Mr. Borkowski's seven-year tenure at Mylan, from 2002 to 2009, he helped lead the company from a US$900 million revenue U.S.-based firm, to an international leader in generic and branded pharmaceuticals through a number of strategic acquisitions and internally focused development of new products.

Subsequent to quarter end, on August 11, 2016, Concordia's Board unanimously agreed to suspend the $0.075 dividend per common share, payable quarterly. The Company believes the dividend payments can be better deployed towards long-term value-creating initiatives or debt repayment.

Financial Results

(in $000s,

from continuing operations)

Three Months
Ended June 30,
2016

Three Months
Ended June 30,
2015

Six Months
Ended June 30,
2016

Six Months
Ended June 30,
2015

Revenue

$231,712

$75,198

$460,247

$109,311

Gross profit

$177,607

$68,966

$337,459

$99,250

Adjusted gross profit1

$178,476

$68,966

$356,971

$99,250

Operating income (loss)

($494,042)

$24,274

($434,124)

$34,079

Net income (loss),
continuing operations

($570,384)

($3,252)

($575,185)

$534

Earnings (loss) per share,
continuing operations – basic

($11.18)

($0.10)

($11.28)

$0.02

Earnings (loss) per share,
continuing operations – diluted

($11.18)

($0.10)

($11.28)

$0.02

Adjusted earnings per share1,
continuing operations – diluted

$1.38

$1.11

$2.73

$1.69

EBITDA1

($454,285)

$31,387

($345,333)

$49,227

Adjusted EBITDA1

$142,344

$54,350

$283,192

$73,616

Cash and cash equivalents

$145,341

$137,250

$145,341

$137,250

Consolidated Operating Results

The Company's consolidated operating results are generated by three operating segments: Concordia's North America segment, International segment and Orphan Drugs segment.

Revenue for the three and six months ended June 30, 2016 increased by $156.5 million and $350.9 million, respectively, compared to the corresponding periods in 2015. The increases were primarily due to $151.5 million and $291.4 million of revenue for the quarter and year to date, respectively, from the Concordia International segment acquired on October 21, 2015 which was not included in the comparative period. The revenue increase was also due to additional revenue of $7.5 million and $64.3 million for the quarter and year to date, respectively, from the portfolio of products and authorized generic contracts (the "Covis Portfolio") acquired from Covis Pharma S.a R.L. and Covis Injectables S.a R.L. (collectively, "Covis") on April 21, 2015 which was only owned for a portion of the comparative quarter.

Gross profit for the three and six months ended June 30, 2016 increased by $108.6 million, and $238.2 million, respectively, compared to the corresponding periods in 2015. The increases were primarily due to the timing of the Concordia International segment and Covis Portfolio acquisitions during 2015 described above. Gross profit in 2016 was also impacted by a non-cash inventory fair value adjustment of $0.9 million and $19.5 million for the quarter and year to date, respectively, increasing the cost of sales due to an increase in the fair value of inventory associated with the acquisition of the Concordia International segment.

Adjusted gross profit for the three and six months ended June 30, 2016, which represents gross profit removing the impact of this non-cash fair value adjustment described above, increased by $109.5 million, and $257.7 million, respectively, compared to the corresponding periods in 2015.

The change in gross profit and adjusted gross profit as a percentage of revenue in the current quarter and year to date compared to the corresponding periods in 2015 reflects the impact of lower margins related to the Concordia International business segment, offset in part by higher margins associated with certain products included in the Concordia North America business segment.

Operating expenses for the three and six months ended June 30, 2016 increased by $627.0 million and $706.4 million, respectively, compared to the corresponding periods in 2015. Operating expenses were higher in both periods primarily due to the impairment of $567.1 million to the carrying value of Nilandron® and Plaquenil® resulting from increased generic competition.

Operating income for the three and six months ended June 30, 2016 decreased by $518.3 million and $468.2 million, respectively, compared to the corresponding period in 2015 due to the impairment of the carrying value mentioned above and increased operating expenses reflecting the increased size and scale of the Company's business, partially offset by increased gross profit from the Concordia International segment and the Covis Portfolio.

The net loss from continuing operations for the three and six months ended June 30, 2016 was $570.4 million and $575.2 million, respectively, and earnings...


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