RBC Capital Downgrades Concordia Healthcare (CXRX) to Sector Perform
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RBC Capital downgraded Concordia Healthcare (NASDAQ: CXRX) from Outperform to Sector Perform with a price target of $2.50 (from $10.00) as the US Legacy business significantly underperformed largely due to pricing issues.
Analyst Douglas Miehm commented, "are downgrading Concordia to Sector perform as we believe risks are increasing materially and visibility is worsening. In particular, we highlight the following, (i) Legacy business pricing pressures result in lowered EBITDA which when combined with existing high debt loads, lead to a significantly lower equity valuation (now $2.50/sh); (ii) the CMA investigation and potential NHS revisions could be worse than we have modeled (reminder: Pfizer/Flynn CMA investigation outcome expected by month-end); and (iii) US visibility and disclosure remains poor, even under a new management team. While we can model TRxs, pricing trends have be worse than expected and we expect to continue to have limited information on this key item."
Revenues decline by ~$42MM in 2016E and ~$87MM in 2017E, to $831MM and $740MM. Adj. EBITDA declines by ~$34MM and ~$71MM in 2016E and 2017E, to $490MM and $413MM. Adj. EPS declines by $0.57 and $1.19, to $3.91 and $2.34. U.S. legacy revenue decreases of ~$46MM and ~$90MM in 2016E and 2017E are slightly offset by ~$3.2MM and $2.7MM increases in international revenues.
Shares of Concordia Healthcare closed at $2.03 yesterday.
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