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Concordia Healthcare Is Worse Than Valeant


Concordia Healthcare has a severely flawed business model.

Concordia overpaid for "old drugs" which have no growth potential.

Concordia's old drug portfolio are depreciating assets.

Bankruptcy imminent unless Concordia changes its business model.

Concordia Healthcare (NASDAQ:CXRX) just took another huge hit last Friday as the stock plummeted a near -9.4%, as Brexit fears caused heightened investor pessimism. It was the second worst performer on the entire TSX that day, and as I warned in my previous piece, Concordia would get hit extra hard if there are temporary sell-offs or if a recession occurs in the next few months.

Readers of my piece who took my recommendation to sell the company would have saved themselves a nasty downfall. There are many investors out there that believe Concordia is a safe pick because there is very little downside because the stock has already fallen so much. This is a mistake and I believe the downfall is warranted and the stock may experience even more downside, as it faced this Friday.

Concordia has a highly leveraged business model that has been compared to the likes of Valeant Pharmaceuticals (NYSE:VRX). While Concordia is not as corrupt as Valeant by hiking drug prices by unreasonable amounts, I believe Concordia actually has the worse business model. Unlike Valeant, Concordia buys off-patent drugs, which have zero barriers to entry and this breaks Warren Buffett's concept of having a moat to keep competition from stealing market share.

I believe the leverage will eventually be the downfall of Concordia, and it will inevitably sell its portfolio of old drugs, which it paid a premium for, at a discount in order to pay off its huge debt. Buying high and selling low is not a recipe for a successful company, and investors should probably cut their losses and find a...