Concordia Healthcare Corp. ("Concordia" or the "Company") (TSX: CXR) (OTCQX: CHEHF), a diverse healthcare company focused on legacy pharmaceutical products, orphan drugs, and medical devices for the diabetic population, today announced its financial and operational results for the three and nine months ended September 30, 2014.
All financial references are in U.S. dollars unless otherwise noted.
Third Quarter 2014 Highlights
- Third quarter, 2014 revenue increase of 147 per cent compared to the third quarter of 2013;
- Third quarter, 2014 adjusted EBITDA up 137 per cent versus the same period in 2013;
- On September 30, 2014, the Company announced its subsidiary, Concordia Pharmaceuticals Inc. (CPI), completed the acquisition of Zonegran® (zonisamide) for commercialization and sale in the United States, including Puerto Rico. CPI acquired Zonegran® from Eisai Inc. for US$91.4 million in cash, including approximately US$1.4 million for purchased inventory. The acquisition of Zonegran® further diversifies Concordia's growing pipeline of legacy drugs.
- Concordia's board of directors approved a $0.075 dividend per common share. A record date of January 15, 2015 was declared by the board of directors with a distribution of proceeds expected to occur on January 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.
- On August 11, 2014, the Company announced that its subsidiary Pinnacle Biologics, Inc. enrolled the first group of patients in a randomized Phase 2 trial to evaluate photodynamic therapy (PDT) with PHOTOFRIN® for patients with epithelioid malignant pleural mesothelioma. The study is expected to enroll 102 patients over four years, and is being supported by an $8 million grant from the National Cancer Institute.
- On August 5, 2014, the Company and Pinnacle Biologics, Inc. announced the initiation of a randomized Phase 3 clinical trial to treat a rare form of bile duct cancer for which there currently is no acceptable therapy. The trial is studying the efficacy and safety of PDT with PHOTOFRIN® for injection as treatment for unresectable advanced perihilar cholangiocarcinoma Bismuth type III/IV.
Going forward, Concordia plans to grow its businesses by:
- supplementing its existing portfolio by acquiring or in-licensing additional legacy products;
- developing PHOTOFRIN® for new indications including cholangiocarcinoma;
- acquiring additional orphan drugs; and
- expanding its Specialty Healthcare Distribution Division by distributing additional products.
"The successful integration of Donnatal® into our growing portfolio of legacy pharmaceutical products helped drive Concordia's top and bottom line financial growth for the third quarter," said Mark Thompson, Chief Executive Officer of Concordia. "Looking ahead, we are excited about Zonegran®'s upside, and we remain focussed on potential M&A opportunities that could further diversify our pipeline of high-margin assets."
Third Quarter 2014 Financial Results
The Company's net revenue was $36,432,000 and $79,295,000 for the three and nine months ended September 30, 2014, respectively, while gross profit for the same periods was $31,936,000 and $66,391,000.
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 in the third quarter of 2014 was $29.2 million, compared to $14.7 million in the third quarter of 2013. The acquisition of Donnatal® accounted for the majority of the increase in revenue over the same quarter in 2013. The impact of Donnatal® was partially offset by the expected decline in revenue from Kapvay® due to the loss of exclusivity on the product in the fourth quarter of 2013.
Legacy Pharmaceuticals gross profit for the third quarter of 2014 was $26.2 million compared to $12.1 million in the prior year comparable period. The increase of $14.1 million was primarily due to sales growth in the division, with the acquisition of Donnatal® accounting for the majority of the increase. Legacy Pharmaceuticals gross margin in the third quarter of 2014 was 89.8% compared with 82.5% in 2013. The increase in gross margin is primarily driven by the Donnatal® acquisition.
Legacy Pharmaceuticals revenue for the nine months ended September 30, 2014 increased by $34.3 million over the prior year comparable period. Revenue in 2014 reflects a full three quarters of operations, compared to less than two quarters of operations in 2013. Gross profit for the nine months ended September 30, 2014 increased by $29.4 million over the same period in the prior year.
Cost of sales for the three months ended September 30, 2014 and 2013 were $3.0 million and $2.6 million, respectively, and reflect the costs of active pharmaceutical ingredients, excipients, packaging, freight costs and royalties. Cost of sales was $9.2 million and $4.3 million for the nine months ended September 30, 2014 and 2013, respectively.
Orphan Drugs Division
Net revenues for the Orphan Drugs Division were $3.0 million and $7.4 million for the three months and nine months ended September 30, 2014, respectively. Orphan Drugs revenue represents the sales of Photofrin® lasers and fibers. Orphan Drugs revenue for the first nine months of 2014 was impacted in the second quarter of 2014 by a reduction in end user inventory of Photofrin® as hospitals continue to optimize inventory holdings, and by a product expiry issue which required the Company to replace certain channel inventory at no cost. Revenue in the third quarter of 2014 recovered to a level consistent with the first quarter of 2014.
Cost of sales for the three months ended September 30, 2014 was $0.8 million. Cost of sales for the nine months ended September 30, 2014 of $1.1 million includes a reversal of a take-or-pay provision of $0.6 million in the second quarter of 2014. During the second quarter the Company, in consultation with external advisors, determined that it did not have an obligation to pay its manufacturer for the provision.
Gross profits were $2.3 million and $6.3 million for the three months and nine months ended September 30, 2014, respectively.
Specialty Healthcare Distribution Division
Net revenues for the Specialty Healthcare Distribution division were $4.2 million and $13.8 million for the three months and nine months ended September 30, 2014, respectively, and related primarily to sales and distribution of diabetes testing supplies and orthotics for diabetic patients.
Costs of sales for the three months ended September 30, 2014 were $0.7 million and $2.6 million for the nine months ended September 30, 2014 and related to the cost of products, warehousing and freight.
Gross profits were $3.5 million and $11.2 million for the three months and nine months ended September 30, 2014, respectively.
Overall for the Company, operating income was $14,868,000 and $22,538,000 for the three and nine months ended September 30, 2014. For the three months ended September 30, 2013, operating income was $7,897,000.
Operating expenses were $17,068,000 and $43,853,000 for the three months and nine months ended September 30, 2014. For the three months ended September 30, 2013, operating expenses were $4,250,000.
Net cash provided by operating activities was $136,000 for the three months ended September 30, 2014 and net cash used in operating activities was $9,259,000 for nine months ended September 30, 2014. For the three months ended September 30, 2013, net cash provided by operating activities was $9,857,000.
As at September 30, 2014 and November 13, 2014 the Company had 28,861,239 common shares issued and outstanding. As at September 30, 2014 and November 13, 2014, there were 2,002,280 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 third quarter, 2014 results on Friday, November 14, 2014 at 8:30 am ET.
Concordia Healthcare Corp.