Form 6-K Concordia International For: Mar 31

May 15, 2018 6:13 PM

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of: May 2018

Commission File Number: 001- 37413

Concordia International Corp.

(Translation of registrant’s name into English)

277 Lakeshore Road East, Suite 302

Oakville, Ontario

L6J 1H9

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): o

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): o

On May 15, 2018, Concordia International Corp. (“Concordia”) released its first quarter 2018 results. In conjunction with this announcement Concordia is filing the following exhibits:


Exhibit 99.1	Press release of Concordia International Corp., dated May 15, 2018


Exhibit 99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2018.


Exhibit 99.3	Unaudited Condensed Interim Consolidated Financial Statements as at and for the three months ended March 31, 2018.

This report on Form 6-K shall be deemed to be incorporated by reference into Concordia’s Registration Statements on Form S-8 (File No. 333-209498) and to be a part thereof from the date on which this report is filed, to the extent not superseded by documents or reports subsequently filed or furnished.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Concordia International Corp.


By:	/s/ David Price
	Name:	David Price
	Title:	Chief Financial Officer

Date: May 15, 2018

EXHIBIT INDEX


Exhibit No.	Description


Exhibit 99.1	Press release of Concordia International Corp., dated May 15, 2018


Exhibit 99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2018.


Exhibit 99.3	Unaudited Condensed Interim Consolidated Financial Statements as at and for the three months ended March 31, 2018.

Concordia International Corp. Announces First Quarter 2018 Results


•	First quarter 2018 revenue of $152 million


•	First quarter 2018 GAAP net loss of $56 million


•	First quarter 2018 adjusted EBITDA¹of $72 million


•	Generated cash flow from operations of $51 million in the first quarter of 2018 and concluded the quarter with a cash balance of $344 million

•

On May 2, 2018, announced the execution of a support agreement with debtholders holding in aggregate more than 72 per cent of its affected secured debt and more than 64 per cent of its affected unsecured debt in connection with a proposed recapitalization transaction that would raise $586.5 million, and reduce the Company’s outstanding debt by approximately $2.4 billion and reduce its annual interest costs by approximately $172 million

OAKVILLE, ON – May 15, 2018 – Concordia International Corp. (“Concordia” or the “Company”) (NASDAQ: CXRX) (TSX: CXR), an international specialty pharmaceutical company focused on becoming a leader in European specialty, off-patent medicines, today announced its financial and operational results for the first quarter of 2018. All financial references are in U.S. dollars (USD) unless otherwise noted.

“Concordia’s first quarter results were consistent with management’s expectations,” said Graeme Duncan, interim Chief Executive Officer of Concordia. “The Company has also recently made significant progress

towards the realignment of its capital structure. Looking forward, we are optimistic Concordia can complete its proposed recapitalization transaction by July 31, 2018 and emerge as a stronger business.”

Consolidated First Quarter 2018 Financial and Operational Results


•	Reported first quarter revenue of $152.3 million, compared to $160.6 million for the first quarter of 2017, and $150.2 million for the fourth quarter of 2017.


•	GAAP net loss for the first quarter of $55.7 million.


•	Reported first quarter adjusted EBITDA¹ of $72.0 million, compared to $84.2 million for the first quarter of 2017, and $70.8 million for the fourth quarter of 2017.


•	On a constant currency basis, first quarter 2018 revenue and adjusted EBITDA were 2.2% and 2.0% lower than their respective amounts in the fourth quarter of 2017.


•	Generated cash flows from operating activities of $50.6 million in the first quarter of 2018, compared to $86.2 million in the first quarter of 2017.


•	As of March 31, 2018, the Company’s liquidity consisted of $343.8 million of cash and cash equivalents.

•

On May 2, 2018, Concordia announced the execution of a support agreement with debtholders holding in aggregate more than 72 per cent of its affected secured debt and more than 64 per cent of its affected unsecured debt in connection with a proposed recapitalization transaction that would raise $586.5 million and reduce the Company’s outstanding debt by approximately $2.4 billion and reduce its annual interest costs by approximately $172 million.


•	In connection with the proposed recapitalization transaction, on May 2, 2018, the Ontario Superior Court of Justice (“the Court”) issued an interim order authorizing the holding of meetings of affected debtholders and shareholders to vote on Concordia’s CBCA plan of arrangement pursuant to which the proposed recapitalization transaction is to be implemented.

•

Completion of the proposed recapitalization transaction will be subject to, among other things, approval of the CBCA plan of arrangement by the requisite majorities of the secured debtholders and the unsecured debtholders at the meetings to be held on June 19, 2018, such other approvals as may be required by the Court or the TSX, other applicable regulatory approvals, approval of the CBCA plan of arrangement by the Court and the satisfaction or waiver of applicable conditions precedent.

First Quarter 2018 Segment Results

Concordia International segment’s revenue for the first quarter of 2018 was $113.0 million compared to $113.7 million in the fourth quarter of the 2017.

Revenue for the first quarter of 2018 decreased by $5.8 million or 5%, compared to the corresponding period in 2017.

This decrease is attributable to volume and price declines on key products, including Liothyronine Sodium, Trazodone, and Prednisolone. These revenue decreases were partially offset by an increase in revenue from Nitrofurantoin. The sterling strengthening against the U.S. dollar resulted in $14.7 million of additional translated revenue in the first quarter of 2018 compared to the corresponding period in 2017.

Concordia North America segment’s first quarter 2018 revenue of $39.3 million was moderately higher than fourth quarter 2017 revenue of $36.5 million.

Revenue for the first quarter of 2018 decreased by $2.5 million or 6%, compared to the corresponding period in 2017. The decrease was primarily attributable to competitive pressures on products, including Donnatal® and Kapvay®. These decreases were partially offset by an increase in revenue from Plaquenil® authorized generic.

Pipeline Update

In the first quarter of 2018, Concordia launched one new product into markets that have a current IMS estimated market value in excess of $20 million.

Concordia also has 28 products that have already been approved or are awaiting approval by the regulators. These products, if launched, are expected to compete in markets that have a current IMS estimated market value in excess of $250 million.

In addition, the Company currently has 17 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 $1.4 billion.

The Company believes that these products include several first-to-market or early-to-market opportunities for difficult-to-make products.

Additionally, Concordia has 14 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 is now comprised of approximately 60 products that could compete in markets that have a current IMS estimated market value in excess of $2 billion.

With its recently announced leadership transition, the Company will continue to evaluate the composition of its pipeline of medicines.

Leadership Transition

Concordia announced on May 2, 2018, that Graeme Duncan has been appointed interim Chief Executive Officer of the Company. Mr. Duncan succeeded Concordia’s previous CEO, Allan Oberman, who left the Company to pursue other opportunities.

The Company also announced on May 2, 2018, that its Chief Corporate Development Officer, Sarwar Islam, left the Company to pursue other opportunities. Guy Clark, previously Chief Strategy Officer at AMCo Pharmaceuticals from 2013 to 2015, joined Concordia, effective May 3, 2018, as the Company’s Chief Corporate Development Officer.

Consolidated Financial Results



	Three months ended
(in $000's, except per share data)	Mar 31, 2018		Mar 31, 2017
Revenue	152,264		160,557
Gross profit	101,106		115,415
Gross profit %	66	%	72	%
Total operating expenses	112,345		97,049
Operating income (loss)	(11,239	)	18,366

Income tax expense (recovery)	4,704		4,489
Net loss	(55,694	)	(78,824	)

Loss per share
Basic	(1.09	)	(1.54	)
Diluted	(1.09	)	(1.54	)

EBITDA⁽¹⁾	94,503		56,932
Adjusted EBITDA⁽¹⁾	72,024		84,242

Consolidated Results of Operations

Revenue for the first quarter of 2018 decreased by $8.3 million, or 5%, compared to the corresponding period in 2017. This decrease was due to lower sales from both segments, partially offset by higher foreign exchange

rates impacting translated revenues from the Concordia International segment for the first quarter of 2018 compared to the corresponding period in 2017. Revenues were lower primarily due to lower volumes resulting from competition on a number of the Company's products in both segments.

Gross profit for the first quarter of 2018 decreased by $14.3 million or 12%, compared to the corresponding period in 2017 primarily due to the revenue decreases described above. The decrease in gross profit percentage of 6% for the first quarter of 2018 compared to the corresponding period in 2017, is primarily due to a change in the mix of product sales within both segments.

Operating expenses for the first quarter of 2018 increased by $15.3 million, or 16%, compared to the corresponding period in 2017. Operating expenses were higher for the first quarter of 2018 primarily due to $10.3 million higher restructuring costs arising from the Company's initiative to realign its capital structure and $8.9 million higher amortization charges on intangible assets, partially offset by $1.7 million lower share-based compensation expense and $1.6 million lower general and administrative costs.

General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, public company costs, travel, facility leases and other administrative expenditures. General and administrative expenses of $12.2 million for the first quarter of 2018 decreased by 11%, compared to the corresponding period in 2017. 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 of $9.8 million for the first quarter of 2018 increased by $0.05 million compared to the corresponding period in 2017 primarily as a result of unfavorable foreign exchange rate movements impacting translation.

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 first quarter of 2018 of $7.1 million decreased by $0.9 million, or 11%, compared to the corresponding period in 2017. This decrease is primarily due to a refund for regulatory fees.

The current income tax expense recorded for the first quarter of 2018 decreased by $1.3 million compared to the corresponding period in 2017. Income taxes were lower primarily due to lower taxable income compared to the corresponding period in 2017, partially offset by the impact of foreign exchange translation of the income tax expense from the Concordia International segment.

The net loss for the first quarter of 2018 was $55.7 million. Significant components comprising the net loss for the first quarter of 2018 are interest and accretion expenses of $80.1 million and amortization of intangible assets of $65.6 million offset by gross profit of $101.1 million.

Adjusted EBITDA of $72.0 million for the first quarter of 2018 decreased by $12.2 million, or 15%, compared to the corresponding period in 2017. The decline is primarily due to lower sales and gross margins from both segments, partially offset by higher foreign exchange rates impacting translated results during the first quarter of 2018.

As of March 31, 2018, the Company had cash and cash equivalents of $344 million and 51,283,574 common shares issued and outstanding.

This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent an exemption from registration under the Securities Act of 1933.

Conference Call Notification

The Company will hold a conference call on Tuesday, May 15, 2018, at 8:30 a.m. ET hosted by senior management. A question-and-answer session will follow the corporate update.



CONFERENCE CALL DETAILS
DATE:	Tuesday, May 15, 2018
TIME:	8:30 a.m. ET
DIAL-IN NUMBER:	(647) 427-7450 or (888) 231-8191
TAPED REPLAY:	(416) 849-0833 or (855) 859-2056
REFERENCE NUMBER:	6279535

This call is being webcast and can be accessed by going to:

https://event.on24.com/wcc/r/1662068/13765CA15C10901698E03BCE3F0B1174

An archived replay of the webcast will be available by clicking the link above.

About Concordia

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.

Concordia operates out of facilities in Oakville, Ontario and, through its subsidiaries, operates out of facilities in Bridgetown, Barbados; London, England and Mumbai, India.

Non-IFRS Measures

This press release makes reference to certain measures that are not recognized measures under International Financial Reporting Standards (“IFRS”). These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute to the Company’s financial information reported under IFRS. Management uses non-IFRS measures such as

EBITDA, adjusted EBITDA, and adjusted gross profit to provide investors with supplemental information of the Company’s operating performance and thus highlight trends in the Company’s core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, to assess its ability to meet future debt service requirements, in making capital expenditures, and to consider the business’s working capital requirements. Readers are cautioned that the non-IFRS measures contained herein may not be appropriate for any other purpose.

Adjusted Gross Profit

As used herein, adjusted gross profit is defined as gross profit adjusted for non-cash fair value increases to the cost of acquired inventory from a business combination. Under IFRS, acquired inventory is required to be written-up to fair value at the date of acquisition. As this inventory is sold the fair value adjustment represents a non-cash cost of sale amount that has been excluded in adjusted gross profit in order to normalize gross profit for this non-cash component.



	Three months ended
(in $000’s)	Mar 31, 2018	Mar 31, 2017
Gross profit per financial statements	101,106	115,415
Add back: Fair value adjustment to acquired inventory	—	311
Adjusted Gross profit	101,106	115,726

EBITDA

EBITDA is defined as net loss from continuing operations adjusted for net interest and accretion expense, income tax expense, depreciation and amortization. Management uses EBITDA to assess the Company’s operating performance.

Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA adjusted for certain charges including costs associated with acquisitions, restructuring initiatives, and other costs (which includes onerous contract costs and direct costs associated with contractual terminations), management retention costs, non-operating gains / losses, integration costs, legal settlements (net of insurance recoveries) and related legal costs, non-cash items such as unrealized gains / losses on derivative instruments, share based compensation, fair value changes including purchase consideration and derivative financial instruments, asset impairments, fair value increases to inventory arising from purchased inventory from a business combination, gains / losses from the sale of assets and unrealized gains / losses related to foreign exchange. Management uses Adjusted EBITDA, among other non-IFRS financial measures, as the key metric in assessing business performance when comparing actual results to budgets and forecasts. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures.

The table below sets forth the reconciliation of net loss from continuing operations to EBITDA and to adjusted EBITDA for the three month periods ended March 31, 2018 and March 31, 2017.



	Three months ended
(in $000’s)	Mar 31, 2018		Mar 31, 2017
Net loss	(55,694	)	(78,824	)

Interest and accretion expense	80,122		92,541
Interest income	(706	)	(18,479	)
Income taxes	4,704		4,489
Depreciation	470		488
Amortization of intangible assets	65,607		56,717
EBITDA	94,503		56,932
Fair value adjustment to acquired inventory	—		311
Acquisition related, restructuring and other	15,494		5,216
Share-based compensation	1,267		2,952
Fair value (gain) loss on purchase consideration and derivatives	425		27,506
Foreign exchange (gain) loss	1,341		990
Unrealized foreign exchange (gain) loss	(41,006	)	(9,665	)
Adjusted EBITDA	72,024		84,242

Notice Regarding Trademarks

This press release includes trademarks that are protected under applicable intellectual property laws and are the property of Concordia or its affiliates or its licensors. Solely for convenience, the trademarks of Concordia, its affiliates and/or its licensors referred to in this press release may appear with or without the ® or TM symbol, but such references or the absence thereof are not intended to indicate, in any way, that the Company or its affiliates or licensors will not assert, to the fullest extent under applicable law, their respective rights to these trademarks. Any other trademarks used in this press release are the property of their respective owners.

Notice regarding future-oriented financial information:

To the extent any forward-looking statements or forward-looking information in this press release or in statements made during the earnings conference call constitute future-oriented financial information or financial outlooks within the meaning of applicable securities laws, such information is being provided to demonstrate the potential financial performance of the Company and readers are cautioned that this information may not be appropriate for any other purpose and that they should not place undue reliance on such future-oriented financial information and financial outlooks.

Future-oriented financial information and financial outlooks (collectively, “FOFI”), as with forward-looking statements and forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out below under “Notice Regarding Forward-Looking Statements”, a number of which are beyond the Company’s control. In addition, the following is summary of the significant assumptions underlying the FOFI contained in the Company’s earnings disclosure:

• prescription trends;

• pricing for the Company’s products;

• future market demand trends;

• mix of sales to government and non-government customers;

• gross profits for each product;

• foreign currency rates, including translation between the U.S. dollar and the pound sterling;

• inventory levels;

• operating cost estimates;

• ability to develop and market future product launches;

• anticipated timing of future product launches;

• cost to develop future products;

• anticipated timing to exit markets;

• operating cost synergies realized; and

• annual cost of current tax by jurisdiction

The FOFI do not purport to present the Company’s financial condition in accordance with IFRS, and there can be no assurance that the assumptions made in preparing the FOFI will prove accurate. It is expected that there will be differences between actual and forecasted results, and the differences may be material, including due to the occurrence of unforeseen events occurring subsequent to the preparation of the FOFI. The inclusion of the FOFI in the earnings disclosure should not be regarded as an indication that Concordia considers the FOFI to be a reliable prediction of future events, and the FOFI should not be relied upon as such.

Risks and other factors related to FOFI include those risks and other factors referenced in this press release as well as in Concordia’s filings with the Canadian Securities Administrators and the Securities and Exchange Commission, including (a) the factors described under the heading “Forward-looking Statements” in Concordia’s Management’s Discussion and Analysis dated May 15, 2018 for the period ended March 31, 2018 and (b) the factors described under the heading “Risk Factors” in Concordia’s

Annual Report on Form 20-F dated March 8, 2018, both of which are available on SEDAR, online at www.sedar.com and on EDGAR, online at www.sec.gov.

Notice Regarding Forward-Looking Statements:

This press release and statements made during the earnings conference call may include forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of Canadian securities laws, regarding Concordia and its business, which may include, but are not limited to: statements with respect to Concordia's long-term growth strategy (including the components of the DELIVER strategy), the completion of the proposed recapitalization transaction including obtaining any necessary approvals, satisfying any conditions and the expected timing thereof, the terms of any proposed recapitalization transaction (including the terms and/or size of the private placement offering), Concordia emerging from its proposed recapitalization transaction as a stronger business, Concordia’s focus on realigning its capital structure, changes to Concordia’s organizational structure, Concordia’s global teams being focussed on leveraging the Company’s diverse portfolio of medicines, global sales platform, and product pipeline in order to support the Company’s long-term growth, the Company's ability to operate in the ordinary course, discussions with Concordia's lenders and their advisors with respect the proposed recapitalization transaction, a proposed recapitalization transaction, reducing the Company's existing debt and interest expense (including the amounts thereof), positioning the Company for long-term growth, the Company's available liquidity to operate its business and meet its financial commitments (including commitments to employees, customers, suppliers and business partners), the benefits of the CBCA process, proceedings under the CBCA including with respect to CBCA proceedings compared to proceedings under bankruptcy and insolvency statutes, the ability of the CBCA process to protect the Company's business, preserve Concordia's cash and/or give Concordia additional time to reach a consensual transaction, Concordia's intention to make scheduled interest and amortization payments, Concordia's management continuing to lead day-to-day operations, achieving the best possible recapitalization transaction, reaching a consensual transaction with holders of the Company's debt, maximizing Concordia's potential, implementing a plan of arrangement, addressing certain payments as part of a proposed recapitalization transaction, protection for the Company and its subsidiaries against

defaults and any related steps or actions under CBCA proceedings, the focus on becoming a leader in European specialty, off-patent medicines, Concordia's objectives and priorities, the outlook for 2018, the implementation of Concordia's long term growth strategy (and the timing thereof), the stabilization of Concordia's business, the execution, timing and impact of Concordia's business stabilization objectives, Concordia's liquidity, the improvement of working capital and liquidity based on near term initiatives and efficiencies launched by the Company, Concordia's financial performance (including the performance of its operating segments), the ability of Concordia to execute and deliver on business plans and growth strategies, the ability to drive long-term stakeholder value, the implementation of actions to manage competitive challenges, the Company taking actions to rebuild value for stakeholders (and the ability of Concordia to rebuild value for its stakeholders), optimism about Concordia's future, the growth of Concordia and the rate of revenue growth, the sources of revenue growth, the stability of Concordia's business (including, without limitation, with respect to its business in certain jurisdictions), the diversification of the Company's geographic and therapeutic platform, product lines and/or sales channels, Concordia's ability to expand globally, Concordia’s pipeline of products, Concordia’s intention to continue to evaluate additional opportunities above and beyond its current pipeline to further increase the Company’s pipeline and portfolio, the intention to launch products, the number of potential product launches, the development and/or approval of new products, the timing of product launches, success of product launches, the size and/or estimated value of the markets in which Concordia has launched or intends to launch products, Concordia's ability to launch first-to-market, early-to-market or difficult-to-make products, potential product launches including first-to-market or early-to-market opportunities for difficult-to-make products, Concordia's network of partners, Concordia's revenue by geography, expected debt levels and leverage, free cash flows, Concordia's debt structure, expected sources of funds (including expected levels of cash on hand), future growth of the Company (including, without limitation, the Company's expansion globally), the ability to pay certain obligations of Concordia, the ability to use the Company's expected cash flow and cash on hand to pay certain future obligations, the Company's cash on hand and cash flows being sufficient to meet the Company's liquidity needs, concentration of Concordia's business, cash on hand after satisfying obligations during 2018, the performance of Concordia's products and segments, the revenue-generating capabilities and/or potential of Concordia's assets, Concordia's financial strength, the continued and/or expected profitability of Concordia's products and/or services, the sales and/or demand for Concordia's

products, the deployment of cash towards value creating initiatives (including to fund future acquisitions and the launch of pipeline products, and settle other obligations as they become due), the expansion into new indications and new markets for Concordia's existing and/or future products, Concordia's ability to evaluate growth opportunities on a global scale (and the availability of such opportunities), the ability to expand existing sales of Concordia's products in certain markets, market opportunities for Concordia's products, Concordia's ability to provide patients with safe and efficacious medicines, the safety and efficacy of Concordia's products, the ability to obtain necessary approvals, enrollment of patients into clinical trials, the outcomes and success of clinical trials, Concordia’s intention to reduce operating costs across the business and other factors. Often, but not always, forward-looking statements and forward-looking information can be identified by the use of words such as "plans", "is expected", "expects", "scheduled", "intends", "contemplates", "anticipates", "believes", "proposes" or variations (including negative and grammatical variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements are based on the current expectations of Concordia's management, and are based on assumptions and subject to risks and uncertainties. Although Concordia's management believes that the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this press release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting Concordia, including risks associated with the proposed recapitalization transaction including the inability to complete a proposed recapitalization transaction or complete a proposed recapitalization transaction in a timely or efficient manner or on the terms set forth in Concordia’s public filings, the inability of the Company to obtain the necessary approvals and satisfy conditions to complete the proposed recapitalization transaction, the inability to reduce the Company's debt and/or interest payments, the inability to position the Company for long-term growth, the inability of the Company to emerge as a stronger business post-recapitalization, the inability to execute the DELIVER strategy, risks associated with Concordia’s organizational structure, including the ability to retain qualified staff and executives, the inability of Concordia’s current organizational structure to support Concordia’s business, the inability of the Company’s global teams to leverage the Company’s diverse portfolio of medicines, global sales platform, and product pipeline in order to support the Company’s long-term growth, the Company's available liquidity being insufficient to operate its business and meet its

financial commitments (including commitments to employees, customers, suppliers and business partners), risks associated with proceedings under the CBCA, Concordia's management no longer leading day-to-day operations, the inability to achieve the best possible recapitalization transaction, the inability to reach a consensual transaction with holders of the Company's debt, the inability to maximize Concordia's potential, Concordia's failure to make scheduled interest and amortization payments (which could result in a loss of the protections afforded by the CBCA process (including the stay of proceedings thereunder), the inability to negotiate with Concordia's lenders, the CBCA process not providing the protection sought by Concordia, third parties not complying with the CBCA order and taking steps against Concordia and its subsidiaries, the inability of the CBCA process to preserve Concordia's cash, the inability to implement a plan of arrangement under the CBCA process, the risks associated with issuing and allocating new equity including the significant dilution of the Company's outstanding common shares, the value of existing equity following the completion of a recapitalization being limited or having no value, the inability to address certain payments as part of a proposed recapitalization, the inability of CBCA proceedings to protect the Company and its subsidiaries against defaults and any related steps or actions, Concordia defaulting on its obligations (including under its debt agreements) which could result in Concordia having to file for bankruptcy or insolvency, Concordia being put into an insolvency or bankruptcy proceeding, including due to the failure to achieve a consensual transaction in the CBCA process, the Company's inability to become a leader in European specialty, off-patent medicines, Concordia's inability to stabilize its business, Concordia's inability to implement its long term strategic plan or being delayed in implementing such plan, the inability of Concordia to accelerate growth by maximizing its existing assets and future market opportunities, the inability of Concordia to expand its product portfolio (including, without limitation, the inability of Concordia to launch products due to regulatory impediments or competitive market changes), the inability of Concordia to add additional products to its pipeline of products, the inability of Concordia to optimize its operating platform, changes in laws, including tax laws, that could result in Concordia's operating platform being adversely affected, Concordia's inability to strengthen its financial foundation, cash on hand and cash flows from operations being insufficient to meet Concordia's liquidity needs, the inability to implement Concordia's objectives and priorities, which could result in financial strain on the Company and continued pressure on the Company's business, Concordia's securities, risks associated with developing new product indications, increased indebtedness and leverage, the inability to generate cash flows, revenues

and/or stable margins, the inability to grow organically, the inability to repay debt and/or satisfy future obligations, risks associated with Concordia's outstanding debt, risks associated with the geographic markets in which Concordia operates and/or distributes its products, risks associated with fluctuations in exchange rates (including, without limitation, fluctuations in currencies), risks associated with the use of Concordia's products to treat certain diseases, the pharmaceutical industry and the regulation thereof, the failure to comply with applicable laws, risks relating to distribution arrangements, possible failure to realize the anticipated benefits of acquisitions and/or product launches (including the product launches described herein), risks associated with the integration of assets and businesses into Concordia's business, product launches (including, without limitation, unsuccessful product launches), the inability to develop and/or obtain approvals for new products, the inability to launch products or the delay in launching products, regulatory delays in product approvals, the inability to launch first-to-market, early-to-market or difficult-to-make products, the inability to capture a share of any market in which Concordia has launched or intends to launch its products, the fact that historical and projected financial information may not be representative of Concordia's future results, the failure to obtain regulatory approvals (including, without limitation, with respect to Photofrin® as a new treatment for certain forms of cancer or with respect to the product launches described herein), the FDA permitting unapproved products to remain on the market and compete with Concordia's products (including, without limitation, Donnatal®), economic factors, market conditions, acquisition opportunities, risks associated with the acquisition and/or launch of pharmaceutical products (including, without limitation, the product launches described herein), risks regarding clinical trials and/or patient enrollment into clinical trials, the equity and debt markets generally, risks associated with growth and competition (including, without limitation, with respect to Concordia's niche, hard-to-make products and Concordia's key products in its International and North America segments (including the competitive pressures on some of the products described herein)), general economic and stock market conditions, risks associated with the United Kingdom's exit from the European Union (including, without limitation, risks associated with regulatory changes in the pharmaceutical industry, changes in cross-border tariff and cost structures and the loss of access to the European Union global trade markets), risks associated with regulatory investigations (including the current investigations being undertaken by competition authorities with respect to the Company's operations), risks related to the introduction of new legislation, or amendments to existing legislation, in the jurisdictions in which Concordia carries on business (including,

without limitation, the U.K. Health Service Medical Supplies (Costs) Act), risks related to patent infringement actions, the loss of intellectual property rights, risks associated with class action litigation, risks associated with Concordia's inability to defend itself in certain legal actions or being found to have violated certain laws (including, without limitation, the regulatory investigations and class actions which Concordia is currently subject to), which may require Concordia to make certain payments in respect of such legal matters or which may result in certain fines being levied against Concordia, Concordia’s inability to reduce operating costs across the business and risks and uncertainties detailed from time to time in Concordia's filings with the Securities and Exchange Commission and the Canadian Securities Administrators and many other factors beyond the control of Concordia. Although Concordia has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements and forward-looking information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement or forward-looking information can be guaranteed. Except as required by applicable securities laws, forward-looking statements and forward-looking information speak only as of the date on which they are made and Concordia undertakes no obligation to publicly update or revise any forward-looking statement or forward-looking information, whether as a result of new information, future events, or otherwise.

¹Management uses non-IFRS measures such as EBITDA, Adjusted EBITDA, adjusted net income, adjusted gross profit, and Adjusted EPS to provide a supplemental measure of operating performance. Please refer to the “Non-IFRS Measures” section of this press release for further information.

For more information please contact:

Adam Peeler

Concordia International Corp.

905-842-5150 x 240

[email protected]

FIRST QUARTER ENDED MARCH 31, 2018

MANAGEMENT’S

DISCUSSION AND ANALYSIS

May 15, 2018



Table of Contents
	1	Management's Discussion and Analysis	2
	2	Business Overview and Segments	3
	3	Recent Events	4
	4	Results of Operations	8
	5	Segment Performance	10
	6	Corporate and Other Costs	12
	7	Selected Quarterly Financial Information	14
	8	Balance Sheet Analysis	16
	9	Liquidity and Capital Realignment	18
	10	Lending Arrangements and Debt	20
	11	Contractual Obligations	21
	12	Related Party Transactions	22
	13	Non-IFRS Financial Measures	23
	14	Critical Accounting Estimates	26
	15	Contingencies	27
	16	Outstanding Share Data	29
	17	Control Environment	30
	18	Forward-looking Statements	31

1 Management Discussion and Analysis

The following Management’s Discussion and Analysis ("MD&A") summarizes Concordia International Corp.’s ("Concordia" or the "Company", or "we" or "us" or "our") consolidated operating results and cash flows for the three month period ended March 31, 2018 with a comparative prior period, and the Company’s balance sheet as at March 31, 2018 with a comparative period to December 31, 2017. The MD&A was prepared as of May 15, 2018 and should be read in conjunction with the unaudited condensed interim consolidated financial statements and the notes thereto as at and for the three month period ended March 31, 2018 and the consolidated financial statements and Management's Discussion and Analysis for the year ended December 31, 2017. Financial information in this MD&A is based on financial statements that have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and amounts are stated in thousands of United States Dollars ("USD"), which is the reporting currency of the Company, unless otherwise noted. The significant exchange rates used in the translation to the reporting currency are:



	US$ per Great British pound (£)
As at, and for the periods ended	Spot	Average
January 1, 2016 to March 31, 2016	1.4395	1.4321
April 1, 2016 to June 30, 2016	1.3395	1.4354
July 1, 2016 to September 30, 2016	1.3008	1.3136
October 1, 2016 to December 31, 2016	1.2305	1.2438
January 1, 2017 to March 31, 2017	1.2489	1.2387
April 1, 2017 to June 30, 2017	1.3004	1.2781
July 1, 2017 to September 30, 2017	1.3402	1.3088
October 1, 2017 to December 31, 2017	1.3494	1.3276
January 1, 2018 to March 31, 2018	1.4037	1.3910

Certain prior period financial information has been presented to conform to the current period presentation.

Some of the statements contained in this MD&A constitute forward-looking information within the meaning of applicable Canadian securities legislation and forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (collectively, "forward-looking statements"), which are based upon the current internal expectations, estimates, projections, assumptions and beliefs of the Company's management ("Management"). Refer to the "Forward-Looking Statements" section of this MD&A for a discussion of certain risks, uncertainties, and assumptions relating to forward-looking statements. Additional information relating to the Company, including the Company’s Annual Report on Form 20-F, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. The results of operations, business prospects and financial condition of Concordia will be affected by, among other things, the "Risk Factors" set out in Concordia’s Annual Report on Form 20-F dated March 8, 2018 and other documents filed with the Canadian Securities Administrators and the United States Securities and Exchange Commission, available on SEDAR at www.sedar.com and EDGAR at www.sec.gov.

Certain measures used in this MD&A do not have any standardized meaning under IFRS. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. See "Results of Operations", "Segment Performance", "Selected Quarterly Financial Information", and "Non-IFRS Financial Measures".



Concordia Management's Discussion and Analysis	Page 2

2 Business Overview and Segments

Concordia is an international specialty pharmaceutical company, owning or licensing, through its subsidiaries, a diversified portfolio of branded and generic prescription products. The Company has two reporting segments, which consist of Concordia International and Concordia North America, in addition to its Corporate cost centre.

* In above, “CIS” means the Commonwealth of Independent States and “CEE” means Central and Eastern Europe.

The registered and head office of the Company is located at 277 Lakeshore Rd. East, Suite 302, Oakville, Ontario, L6J 1H9. The Company’s records office is located at 333 Bay St., Suite 2400, Toronto, Ontario, M56 2T6. The Company’s common shares are listed on the Toronto Stock Exchange under the symbol "CXR" and on the NASDAQ under the symbol "CXRX".

Concordia International

The Concordia International segment consists of a diversified portfolio of branded and generic products that are sold to wholesalers, hospitals and pharmacies in over 90 countries. The Concordia International segment specializes in the acquisition, licensing and development of off-patent prescription medicines, which may be niche, hard to make products. The segment’s over 200 products are manufactured and sold through an out-sourced manufacturing network and marketed internationally through a combination of direct sales and local distribution relationships. The Concordia International segment operates primarily outside of the North American marketplace.

Concordia North America

The Concordia North America segment has a diversified product portfolio that focuses primarily on the United States pharmaceutical market. These products include, but are not limited to, Donnatal® for the treatment of irritable bowel syndrome; Zonegran® for the treatment of partial seizures in adults with epilepsy; Nilandron® for the treatment of metastatic prostate cancer; Lanoxin® for the treatment of mild to moderate heart failure and atrial fibrillation; Plaquenil® for the treatment of lupus and rheumatoid arthritis; and Photofrin® for the treatment of certain types of cancer. Concordia North America’s product portfolio consists of branded products and authorized generic contracts. The segment’s products are manufactured through an out-sourced production network and sold primarily through a third party distribution network in the United States.

Corporate

The Corporate cost centre represents certain centralized costs including costs associated with the Company's head office and senior management located in Canada and costs associated with being a public reporting entity.



Concordia Management's Discussion and Analysis	Page 3

3 Recent Events

Canada Business Corporations Act (the "CBCA") Proceedings

On October 20, 2017, the Company announced that it and one of its wholly-owned subsidiaries commenced a court proceeding under the CBCA.

On May 2, 2018, the Company announced a proposed transaction to realign its capital structure (the “Recapitalization Transaction”).

The proposed Recapitalization Transaction would raise new equity capital of $586.5 million, and to reduce the Company’s total outstanding debt by approximately $2.4 billion.

In connection with the proposed Recapitalization Transaction, the Company entered into a support agreement (the “Support Agreement”) with certain holders of the Company’s existing secured debt (the “Secured Debt”) and certain holders of the Company’s existing unsecured debt (the “Unsecured Debt”) that are subject to confidentiality agreements with Concordia and which hold in the aggregate approximately $1.6 billion in principal amount, or approximately 72%, of the Company’s Secured Debt and approximately $1.0 billion in principal amount, or approximately 64% of the Company’s Unsecured Debt (the “Initial Consenting Debtholders”). The Initial Consenting Debtholders are comprised of an ad hoc committee of holders of Secured Debt and an ad hoc committee of holders of Unsecured Debt. Pursuant to the Support Agreement, the Initial Consenting Debtholders have, among other things, agreed to support the Recapitalization Transaction and vote in favour of the plan of arrangement (the “CBCA Plan”) in Concordia’s previously announced proceedings (the "CBCA Proceedings") under the CBCA pursuant to which the Recapitalization Transaction is expected to be implemented.

In addition, on May 2, 2018 Concordia obtained an interim order (the “Interim Order”) issued by the Ontario Superior Court of Justice (the "Court") in the CBCA Proceedings authorizing, among other things, the holding of the following meetings (the “Meetings”) scheduled for June 19, 2018: (i) a meeting of holders of the Secured Debt (the “Secured Debtholders”); (ii) a meeting of holders of the Unsecured Debt (the “Unsecured Debtholders”); and (iii) a meeting (the "Shareholders' Meeting") of holders of the Company’s common shares (the “Shareholders”), in each case to consider and vote upon, among other things, the CBCA Plan to implement the Recapitalization Transaction.

Certain Key Recapitalization Transaction Terms

The Recapitalization Transaction contemplates the following key terms and conditions:

Secured Debt

•

The Company’s Secured Debt in the aggregate principal amount of approximately $2.2 billion, plus accrued and unpaid interest, will be exchanged for (i) cash in an amount equal to any outstanding accrued and unpaid interest (at contractual non-default rates) in respect of the Secured Debt, (ii) cash in the amount of $500 million (the “Secured Creditor Cash Pool”), (iii) any Additional Cash Amount (as defined below) and (iv) new secured debt (the “New Secured Debt”) comprised of new senior secured term loans (“New Senior Secured Term Loans”) and new senior secured notes (“New Senior Secured Notes”). The Company expects the aggregate principal amount of the New Secured Debt to be issued to Secured Debtholders pursuant to the Recapitalization Transaction to be approximately $1.4 billion;

•

Each Secured Debtholder will receive its pro rata share of the New Secured Debt, in the form of either New Senior Secured Term Loans or New Senior Secured Notes depending on the type of Secured Debt held by such Secured Debtholder, subject to (i) holders of the Company’s existing secured term loans as of the record date of May 9, 2018 (the “Record Date”) having the right to elect to receive their New Secured Debt in the form of New Senior Secured Notes, provided that any such elections may be subject to certain re-allocations pursuant to the terms of the Recapitalization Transaction, and (ii) Secured Debtholders receiving New Senior Secured Term Loans having the right to elect to receive their New Senior Secured Term Loans denominated in USD or Euros, provided that any such elections may be subject to certain re-allocations pursuant to the terms of the Recapitalization Transaction;

•

Secured Debtholders as of the Record Date who vote in favour of the CBCA Plan on or prior to the early consent date of June 6, 2018 (the “Early Consent Date”), as it may be extended by Concordia (the “Early Consenting Secured Debtholders”) will be entitled to receive on implementation of the Recapitalization Transaction pursuant to the CBCA Plan early consent consideration in the form of cash equal to 5% of the principal amount of Secured Debt owing to such Early Consenting Secured Debtholder as of the Record Date and voted in favour of the CBCA Plan (the “Secured Debtholder Early Consent Cash Consideration”) as additional consideration in exchange for their Secured Debt;

•

If the aggregate amount of Secured Debtholder Early Consent Cash Consideration that becomes payable pursuant to the Recapitalization Transaction is less than $100 million, then an amount equal to the difference between $100 million and the amount of Secured Debtholder Early Consent Cash Consideration that becomes payable (the “Additional Cash Amount”) will be paid on a pro rata basis to each Secured Debtholder as additional consideration in exchange for their Secured Debt; and

•

The final principal amount of New Secured Debt to be issued pursuant to the Recapitalization Transaction shall be in such amount that results in the aggregate consideration payable to Secured Debtholders pursuant to the Recapitalization Transaction by way of the Secured Creditor Cash Pool, the New Secured Debt and the Secured Debtholder Early Consent Cash Consideration (but not including the payment of accrued and unpaid interest or the Additional Cash Amount) being equal to 93.3835% of the principal amount of Secured Debt owing to such Secured Debtholders if such Secured Debtholders are Early Consenting Secured Debtholders,



Concordia Management's Discussion and Analysis	Page 4

and approximately 88.3835% of the principal amount of Secured Debt owing to such Secured Debtholders if such Secured Debtholders are not Early Consenting Secured Debtholders.

Unsecured Debt

•

The Company’s Unsecured Debt in the aggregate principal amount of approximately $1.6 billion, plus accrued and unpaid interest, will be exchanged for (i) new common shares of Concordia representing approximately 8% of the outstanding common shares of Concordia immediately following the implementation of the Recapitalization Transaction (the “Unsecured Debt Exchange Shares”) and (ii) any Reallocated Unsecured Shares (as defined below);

•

Unsecured Debtholders as of the Record Date who vote in favour of the CBCA Plan on or prior to the Early Consent Date, as it may be extended by Concordia (the “Early Consenting Unsecured Debtholders”) will be entitled to receive on implementation of the Recapitalization Transaction pursuant to the CBCA Plan early consent consideration in the form of new common shares of Concordia equal to their pro rata share (calculated based on the principal amount of Unsecured Debt held by such Early Consenting Unsecured Debtholders as at the Record Date and voted in favour of the CBCA Plan, divided by the aggregate principal amount of Unsecured Debt outstanding as at the Record Date) of a pool of common shares (the “Unsecured Early Consent Share Pool”) representing approximately 4% of the outstanding common shares of Concordia immediately following implementation of the Recapitalization Transaction pursuant to the CBCA Plan (the “Unsecured Debtholder Early Consent Shares”) as additional consideration in exchange for their Unsecured Debt; and


•	If less than 100% of Unsecured Debt is voted in favour of the CBCA Plan by Early Consenting Unsecured Debtholders, any shares remaining in the Unsecured Early Consent Share Pool not issued as Unsecured Debtholder Early Consent Shares (the “Reallocated Unsecured Shares”) will be issued to all holders of Unsecured Debt on a pro rata basis as additional consideration for their Unsecured Debt.

Private Placement

•

Approximately $586.5 million (the “Total Offering Size”) in cash will be invested to acquire new common shares of Concordia representing in the aggregate approximately 88% of the outstanding common shares of Concordia immediately following the implementation of the Recapitalization Transaction (the “Private Placement Shares”) by certain parties who executed a subscription agreement with the Company (the “Subscription Agreement”) concurrently with the execution of the Support Agreement (the “Private Placement Parties”) pursuant to a private placement (the “Private Placement”);


•	The proceeds of the Private Placement will be used towards paying the Secured Creditor Cash Pool and the Secured Debtholder Early Consent Cash Consideration to be paid as part of the consideration for the exchange of the Secured Debt;

•

Each of the Private Placement Parties will be entitled to receive its pro rata share (based on its subscription commitment) of cash consideration in the aggregate amount of $44 million (subject to any corresponding adjustments to the extent the Total Offering Size is reduced pursuant to the terms of the Subscription Agreement) (the “Private Placement Consideration”), which is payable on the terms set out in the Subscription Agreement, including on completion of the Recapitalization Transaction and certain earlier events; and

•

Pursuant to the Subscription Agreement, the Private Placement Parties and the Company expect to agree on certain governance terms and registration rights. The governance terms will be described in more detail in the Company’s management information circular to be mailed to Secured Debtholders, Unsecured Debtholders and Shareholders in connection with the various Meetings to be held to approve the CBCA Plan.

Existing Shares and Equity Claims

•

Upon completion of the Recapitalization Transaction, existing Shareholders will retain their existing common shares of Concordia, subject to a share consolidation of one common share in exchange for 300 existing common shares to be implemented as part of the Recapitalization Transaction and the dilution resulting from the issuance of common shares pursuant to the Recapitalization Transaction, such that the existing Shareholders will own approximately 0.35% of the outstanding common shares of Concordia immediately following implementation of the Recapitalization Transaction; and

•

All other equity interests in Concordia, including all options, warrants, rights or similar instruments, will be cancelled on implementation of the Recapitalization Transaction pursuant to the CBCA Plan, and all equity claims, other than existing equity class action claims against Concordia (the “Existing Equity Class Action Claims”), will be released pursuant to the CBCA Plan, provided that any recovery in respect of any Existing Equity Class Action Claims will be limited to recovery as against any applicable insurance policies maintained by the Company.

Share Dilution

•

The existing common shares retained by the Shareholders upon implementation of the Recapitalization Transaction and the common shares to be issued under the CBCA Plan, including the Unsecured Debt Exchange Shares, the Reallocated Unsecured Shares, the Unsecured Debtholder Early Consent Shares and the Private Placement Shares, shall be subject to dilution following the completion of the Recapitalization Transaction pursuant to the issuance of any new common shares under the management equity incentive plan to be adopted pursuant to the Recapitalization Transaction.



Concordia Management's Discussion and Analysis	Page 5

Subject to the satisfaction or waiver of applicable conditions, the Recapitalization Transaction is expected to be completed by July 31, 2018.

In connection with the Recapitalization Transaction, it is anticipated that Concordia will continue from the Business Corporations Act (Ontario) to the CBCA.

Alternative Implementation Process

The Recapitalization Transaction is being implemented pursuant to the CBCA Plan. The Company is also soliciting votes to advance the Recapitalization Transaction pursuant to insolvency proceedings under Chapter 11 of the United States Bankruptcy Code (a “Chapter 11 Process”), contemporaneously with soliciting votes in respect of the CBCA Plan. Concordia currently intends to complete and implement the CBCA Plan pursuant to the CBCA Proceedings. Contemporaneous solicitation of votes in respect of a Chapter 11 Process ensures that the Company has the future ability to also complete the Recapitalization Transaction under such an alternative implementation process if the Company elects to do so in the future, subject to certain conditions and consent requirements as provided for in the Support Agreement. In addition, in accordance with the terms of the Interim Order, a vote cast in favour of the CBCA Plan at the Meetings may also be counted in favour of implementing a plan of arrangement on substantially similar terms in any insolvency proceedings under the Companies’ Creditors Arrangement Act (Canada) that may be commenced by the Company, to the extent such proceedings are consented to by the majority private placement parties and the majority initial consenting debtholders.

Management and Board of Director Changes

On May 2, 2018, the Company announced that it appointed Graeme Duncan as its interim Chief Executive Officer, and also announced the departure of Allan Oberman, the Company's former Chief Executive Officer and Board Member. The Company paid approximately $7.7 million in severance to the former Chief Executive Officer.

On May 2, 2018, the Company also announced that it appointed Guy Clark as the Company's Chief Corporate Development Officer, and also announced the departure of Sarwar Islam, the Company's former Chief Corporate Development Officer.

Relocation of Corporate Head Office

During the second quarter of 2018, the Company's corporate head office is expected to be relocated to 5770 Hurontario Street, Suite 310, Mississauga, Ontario, L5R 3G5. At the Shareholders' Meeting, Shareholders will be asked to approve a resolution to move the corporate head office to Mississauga, Ontario.

Notification of the termination of the Currency Swaps and termination of Revolving Commitments

On October 20, 2017, the counterparty to the Company's August 17, 2016 cross currency swap agreement ("August Swap Agreement") and November 3, 2016 cross currency swap agreement ("November Swap Agreement", and together with the August Swap Agreement, the "Currency Swaps") notified the Company that it would be terminating the Currency Swaps effective October 23, 2017 due to commencement of the CBCA Proceedings. As part of the Recapitalization Transaction, the Company has agreed to the amount of the Currency Swaps liability ($114,431), which amount will be addressed in the same manner as the Secured Debt under the Recapitalization Transaction. In addition, on October 27, 2017, the Company terminated the revolving commitments under the Company's credit agreement dated October 21, 2015, as amended ("Credit Agreement"). No amounts had been drawn or were outstanding in respect of the revolving commitments at such time.

Rating Agency Changes

On May 7, 2018, Standard & Poors Global Ratings ("S&P") lowered its issue-level ratings on Concordia’s Secured Debt to "CC" from "CCC-". S&P noted that its “SD” corporate credit rating and "D" rating on Concordia’s Unsecured Debt remained unchanged. In addition, on May 8, 2018, Moody’s Investors Service ("Moody’s") placed the Company’s “Ca” Corporate Family Rating and Ca-PD/LD Probability of Default Rating under review for upgrade. Moody’s also affirmed its "Caa2" senior secured ratings and "C" senior unsecured ratings. The SGL-4 Speculative Grade Liquidity Rating was also affirmed. To the extent that the Company intends to complete any future transactions following the Recapitalization Transaction, the Company’s ability to complete any such transactions may be effected by credit rating agency decisions.

Business Impact in Relation to Brexit

On June 23, 2016, the United Kingdom held a referendum and voted to withdraw from the European Union ("Brexit"). On March 29, 2017, the United Kingdom delivered notice to the European Council in accordance with Article 50 of the Treaty on European Union of the United Kingdom’s intention to withdraw from the European Union. The Company understands that the timeframe for the negotiated withdrawal of the United Kingdom from the European Union is approximately two (2) years from the date of the withdrawal notification. However, as no member state has formally withdrawn from the European Union in the past, there is no precedent for the operation of Article 50 and, as a result, the timing and outcome of Brexit continues to be uncertain at this time. The Concordia International segment has significant operations within the United Kingdom and other parts of the European Union, and therefore continues to monitor developments related to Brexit, including the impact resulting from currency market movements.



Concordia Management's Discussion and Analysis	Page 6

Business Impact in Relation to the UK Health Service Medical Supplies (Costs) Act 2017 (the "Act")

The Act received Royal Assent on April 27, 2017. The Act introduces provisions in connection with controlling the cost of health service medicines and other medical supplies. The Act also introduces provisions in connection with the provision of pricing and other information by manufacturers, distributors and suppliers of those medicines and medical supplies. The Company continues to monitor the implementation of the Act and its impact on its business. Refer to the "Risk Factors" section of the Company's Annual Report on Form 20-F dated March 8, 2018.



Concordia Management's Discussion and Analysis	Page 7

4 Results of Operations



	Three months ended
(in $000's, except per share data)	Mar 31, 2018		Mar 31, 2017
Revenue	152,264		160,557
Gross profit	101,106		115,415
Gross profit %	66	%	72	%
Total operating expenses	112,345		97,049
Operating income (loss)	(11,239	)	18,366

Income tax expense (recovery)	4,704		4,489
Net loss	(55,694	)	(78,824	)

Loss per share
Basic	(1.09	)	(1.54	)
Diluted	(1.09	)	(1.54	)

EBITDA⁽¹⁾	94,503		56,932
Adjusted EBITDA⁽¹⁾	72,024		84,242
Adjusted EPS⁽¹⁾	(0.19	)	0.22

Notes:


(1)	Represents a non-IFRS measure. For the relevant definitions and reconciliation to reported results, see "Non-IFRS Financial Measures" section of this MD&A. Management believes non-IFRS measures, including Adjusted EBITDA, provide supplementary information to IFRS measures used in assessing the performance of the business.

Revenue

Revenue for the first quarter of 2018 decreased by $8,293, or 5%, compared to the corresponding period in 2017. This decrease was due to lower sales from both segments, partially offset by higher foreign exchange rates impacting translated revenues from the Concordia International segment for the first quarter of 2018 compared to the corresponding period in 2017. Revenues were lower primarily due to lower volumes resulting from competition on a number of the Company's products in both segments. The Concordia International segment revenue for the first quarter of 2018 decreased by $5,779, or 5%, due to $20,463 lower revenue primarily as a result of volume and price declines on key products, including Liothyronine Sodium, Trazodone and Predisolone, partially offset by $14,684 higher revenue as a result of favourable foreign exchange rates positively impacting translated results. The Concordia North America segment revenue for the first quarter of 2018 decreased by 6% when compared to the corresponding period in 2017, mainly as a result of lower volumes on key products, including Donnatal® and Kapvay®. Refer to the "Segment Performance" section of this MD&A for a further discussion on segmental and product specific performance.

Gross Profit and Gross Profit %

Gross profit for the first quarter of 2018 decreased by $14,309, or 12%, compared to the corresponding period in 2017 primarily due to the revenue decreases described above. The decrease in gross profit percentage of 6% for the first quarter of 2018 compared to the corresponding period in 2017, is primarily due to a change in the mix of product sales within both segments. Refer to the "Segment Performance" section of this MD&A for a further discussion on segmental and product specific performance.

Operating Expenses

Operating expenses for the first quarter of 2018 increased by $15,296, or 16%, compared to the corresponding period in 2017. Operating expenses were higher during the first quarter of 2018 primarily due to $10,278 higher restructuring costs arising from the Company's initiative to realign its capital structure and $8,890 higher amortization charges on intangible assets, partially offset by $1,685 lower share based compensation expense and $1,570 lower general and administrative costs. For a further detailed description of operating expenses, refer to the "Corporate and Other Costs" section of this MD&A. For a further detailed description of certain segment operating expenses, refer to "Segment Performance" section of this MD&A.

Operating income (loss) for the first quarter of 2018 decreased by $29,605 compared to the corresponding period in 2017 due to the decrease in gross profit and higher operating expenses as described above.



Concordia Management's Discussion and Analysis	Page 8

The current income tax expense recorded for the first quarter of 2018 decreased by $1,296 compared to the corresponding period in 2017. Income taxes were lower primarily due to lower taxable income compared to the corresponding period in 2017, partially offset by the impact of foreign exchange translation of the income tax expense from the Concordia International segment. The deferred income tax expense recorded for the first quarter of 2018 increased by $1,511 and is mainly the result of movements in the foreign exchange rates, partially offset by the reversal of certain temporary differences.

The net loss for the first quarter of 2018 was $55,694 and EPS loss was $1.09 per share. Significant components comprising the net loss for the first quarter of 2018 are interest and accretion expenses of $80,122 and amortization of intangible assets of $65,607 offset by gross profit of $101,106. Refer to the "Corporate and Other Costs" section of this MD&A for further information related to expenses impacting net loss.

EBITDA and Adjusted EBITDA

EBITDA is higher than the net loss as it excludes: interest and accretion expense; interest income; income taxes; depreciation; and amortization of intangible assets. Refer to the "Non-IFRS Financial Measures" section of this MD&A for a full reconciliation. EBITDA for the first quarter of 2018 increased by $37,571 compared to the corresponding period in 2017. The increase in EBITDA was primarily due to $27,314 lower fair value loss on derivative financial instruments and $31,341 higher unrealized foreign exchange gain, partially offset by $14,309 lower gross profit and $10,278 higher acquisition related, restructuring and other costs.

Adjusted EBITDA also includes adjustments for: impairments; fair value adjustments to acquired inventory; acquisition related, restructuring and other costs; share-based compensation; fair value (gain) loss including purchase consideration and derivative financial instruments; foreign exchange (gain) loss; unrealized foreign exchange (gain) loss; and legal settlements and related legal costs (refer to the "Non-IFRS Financial Measures" section of this MD&A for a full reconciliation and description of these expenses). Adjusted EBITDA for the first quarter of 2018 decreased by $12,218, or 15%, compared to the corresponding period in 2017. The decline is primarily due to lower sales and gross margins from both segments, partially offset by higher foreign exchange rates impacting translated results during the first quarter of 2018. Adjusted EBITDA by segment for the three month period ended March 31, 2018 was $51,748 from Concordia International and $24,273 from Concordia North America. Refer to the "Segment Performance" section of this MD&A for a further discussion on segment performance. In addition, during the first quarter of 2018 the Company incurred $3,997 of Corporate costs related to the Corporate Head Office. Corporate expenses decreased by $1,641 compared to the corresponding period in 2017, primarily due to lower general and administrative expenses, including professional fees incurred during the first quarter of 2018.



Concordia Management's Discussion and Analysis	Page 9

5 Segment Performance

Concordia International



	Three months ended
(in $000's)	Mar 31, 2018		Mar 31, 2017
Revenue	112,950		118,729
Cost of sales	41,673		37,501
Gross profit	71,277		81,228
Gross profit %	63	%	68	%
Adjusted Gross Profit ⁽¹⁾	71,277		81,539
Adjusted Gross Profit %⁽¹⁾	63	%	69	%
General and Administrative, Selling and Marketing and Research and Development Expenses	19,529		18,298
Adjusted EBITDA⁽¹⁾	51,748		63,241

Notes:


(1)	Represents a non-IFRS measure. For the relevant definitions see "Non-IFRS Financial Measures" section of this MD&A.

Revenue for the first quarter of 2018 decreased by $5,779 or 5%, compared to the corresponding period in 2017. A $20,463 decrease in revenue was partially offset by a $14,684 increase in revenue as a result of the Great British Pound ("GBP") strengthening against the USD, given a significant portion of the segment revenues are earned in GBP. Declines to revenue attributable to key products during the quarter, excluding the impact of foreign currency translation, were: (i) a $9,488 decrease from Liothyronine Sodium; (ii) a $2,384 decrease from Trazodone; (iii) a $2,064 decrease from Prednisolone; (vi) a $1,643 decrease from Biperiden Hydrochloride; and (v) a $1,244 decrease from Prochlorperazine. These lower product volumes and revenues are primarily due to ongoing competitive market pressures resulting in market share erosion. These revenue decreases were partially offset by $2,751 increased revenue from Nitrofurantoin. The remaining decrease was primarily due to general competitive market pressures across the segment's product portfolio.

Cost of sales for the first quarter of 2018 increased by $4,172 or 11%, compared to the corresponding period in 2017. The increase in cost of sales during the first quarter of 2018 is primarily due to the impact of foreign exchange, partially offset by volume declines from products described above.

Gross profit for the first quarter of 2018 decreased by $9,951 primarily due to the factors described above.

Gross profit as a percentage of revenue for the first quarter of 2018 decreased by 5% compared to the corresponding period in 2017. The decrease was primarily due to a shift in product mix, with certain higher margin products experiencing additional market competition, when compared to the first quarter of 2017.

General and administrative, selling and marketing and research and development costs increased by $1,231 primarily due to the impact of foreign exchange. Excluding the $2,249 unfavorable impact of foreign exchange, these costs decreased by $1,018 as a result of lower general and administrative expenses.



Concordia Management's Discussion and Analysis	Page 10

Concordia North America



	Three months ended
(in $000's)	Mar 31, 2018		Mar 31, 2017
Revenue	39,314		41,828
Cost of sales	9,485		7,641
Gross profit	29,829		34,187
Gross profit %	76	%	82	%
General and Administrative, Selling and Marketing and Research and Development Expenses	5,556		7,548
Adjusted EBITDA⁽¹⁾	24,273		26,639

Notes:


(1)	Represents a non-IFRS measure. For the relevant definitions, see "Non-IFRS Financial Measures" section of this MD&A.

Revenue for the first quarter of 2018 decreased by $2,514 or 6%, compared to the corresponding period in 2017. The decrease was primarily due to: (i) a $3,533 decrease from Donnatal®, as a result of additional competitive pressures that have resulted in a loss of market share; and (ii) a $2,456 decrease from Kapvay®. In the first quarter of 2018, Donnatal® continued to face pressure from a non-FDA approved product being distributed by a competitor and an additional competitive product launched in the second quarter of 2017. These decreases were partially offset by a $1,516 increase in revenue from Plaquenil® authorized generic. The remaining decrease was primarily due to general competitive market pressures across the segment's product portfolio.

Cost of sales for the first quarter of 2018 increased by $1,844, or 24%, compared to the corresponding period in 2017. The increase in cost of sales when compared with the decrease in revenue is due to a shift in product mix to lower margin products.

Gross profit for the first quarter of 2018 decreased by $4,358, or 13%, primarily due to lower revenue as described above.

Gross profit as a percentage of revenue for the first quarter of 2018 decreased by 6%, compared to the corresponding period in 2017. The decrease was primarily due to a shift in product mix.

General and administrative, selling and marketing and research and development costs decreased by $1,992 primarily due to lower bad debt expenses and a refund of regulatory fees, partially offset by higher selling and marketing costs associated with the co-promotion agreement for sales of Donnatal®.



Concordia Management's Discussion and Analysis	Page 11

6 Corporate and Other Costs

The following table details expenses from the Company's Corporate cost centre and other operating expenses from the business segments:



	Three months ended
(in $000's)	Mar 31, 2018		Mar 31, 2017
General and administrative	12,178		13,748
Selling and marketing	9,798		9,752
Research and development	7,106		7,984
Acquisition related, restructuring and other	15,494		5,216
Share-based compensation	1,267		2,952
Amortization of intangible assets	65,607		56,717
Depreciation expense	470		488
Fair value (gain) loss	425		192
Interest and accretion expense	80,122		92,541
Interest income	(706	)	(18,479	)
Fair value (gain) loss on derivative financial instruments	—		27,314
Foreign exchange (gain) loss	1,341		990
Unrealized foreign exchange (gain) loss	(41,006	)	(9,665	)
Total	152,096		189,750

General and Administrative Expenses

General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, public company costs, travel, facility leases and other administrative expenditures. General and administrative expenses for the first quarter of 2018 decreased by 11%, compared to the corresponding period in 2017. This decrease is a result of the Company's objective to reduce operating costs across the business.

Selling and Marketing Expenses

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 first quarter of 2018 increased by $46 compared to the corresponding period in 2017 primarily as a result of unfavorable foreign exchange rate movements impacting translation.

Research and Development Expenses

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 (Pharmacovigilence) of the Company. Research and development costs for the first quarter of 2018 decreased by $878, or 11%, compared to the corresponding period in 2017. This decrease is primarily due to a refund of regulatory fees.

Acquisition Related, Restructuring and Other Costs

Acquisition related, restructuring and other costs during the first quarter of 2018 were $15,494. Acquisition related, restructuring and other costs for the first quarter of 2018 increased by 197% primarily due to costs associated with consultants involved in the Company's capital realignment initiative.

Significant costs incurred during the first quarter of 2018 include $8,261 of costs associated with the Company's realignment of its capital structure which include costs of the Company's advisors and advisors of the lending syndicate, $2,326 of management retention costs, $1,931 of costs related to severance, and $2,487 related to ongoing regulatory matters relating to the UK Competition and Markets Authority ("CMA") investigations (refer to the "Litigation and Arbitration" section of this MD&A for further details). The remaining costs relate primarily to costs associated with the ongoing class action lawsuits involving the Company (refer to the "Litigation and Arbitration" section of this MD&A for further details).



Concordia Management's Discussion and Analysis	Page 12

Share-Based Compensation

The share based compensation expense relates to the fair value of share-based option, restricted share unit ("RSU") and deferred share unit ("DSU") awards to employees, management and directors of the Company. Share based compensation during the first quarter of 2018 was $1,267. The decrease in the expense of $1,685 for the period is primarily due to no RSUs or DSUs being issued since the second quarter of 2017, and the impact of the staged vesting of the outstanding share-based options and RSUs.

Amortization of Intangible Assets

Amortization of intangible assets was $8,890 higher for the first quarter of 2018 compared to the corresponding period in 2017. The higher expense is due to the Company's change in accounting estimate with respect to amortizing intangible assets in both segments. The expense for the first quarter of 2018 of $65,607 is comprised of the following amounts:


•	Amortization related to acquired product rights and manufacturing processes for the first quarter of 2018 was $57,255;


•	Amortization related to distribution and supplier contracts for the first quarter of 2018 was $7,751. Distribution and supplier contracts are amortized on a straight-line basis over 5 years; and


•	Amortization related to other intangibles for the first quarter of 2018 was $601.

Interest and Accretion

Interest and accretion expenses for the first quarter of 2018 were $80,122 representing a decrease of $12,419 compared to the corresponding period in 2017. The decrease is primarily due to:


•	The termination of the Currency Swaps during the fourth quarter of 2017 which resulted in $18,303 lower interest expense during the first quarter of 2018 (as well as lower interest income as described below); and


•	The acceleration of all deferred financing fees during the fourth quarter of 2017 which resulted in $7,461 lower costs compared to the corresponding period in 2017.

Offset primarily by:


•	A $12,230 higher interest expense on the Company's debt agreements as a result of: (i) events of default on certain of the Company's debt agreements; (ii) higher LIBOR rates; and (iii) a change in foreign exchange rates resulting in higher interest expense on the Company's GBP denominated term loan.

Interest Income

Interest income for the first quarter of 2018 was $706, representing a decrease of $17,773 due to the termination of the Currency Swaps during the fourth quarter of 2017 as a result of the CBCA Proceedings.

Fair value loss on Derivative Contracts

The fair value loss on derivative contracts was $nil for the first quarter of 2018 compared with $27,314 in the corresponding period in 2017 as a result of the termination of the Currency Swaps. On October 20, 2017, the Company was notified by the counterparty to the Currency Swaps that one or more events of default had occurred under the Currency Swaps as a result of the Company obtaining a preliminary interim order from the Court pursuant to the arrangement provisions of the CBCA. As a result of the foregoing, the counterparty designated October 23, 2017 as the early termination date with respect to all transactions under the Currency Swaps. As part of the Recapitalization Transaction, the Company has agreed to the amount of the Currency Swaps liability ($114,431), which amount will be addressed in the same manner as the Secured Debt under the Recapitalization Transaction.

Foreign Exchange (Gain) Loss and Unrealized Foreign Exchange (Gain) Loss

Foreign exchange (gain) loss for the first quarter of 2018 was a loss of $1,341.

Unrealized foreign exchange gain for the first quarter of 2018 was $41,006. The primary component of the unrealized foreign exchange gain is a result of IFRS requiring that inter-company trading balances denominated in a currency other than the functional currency of an entity being retranslated with the exchange differences flowing through the consolidated statement of loss with the off-set within other comprehensive income (loss).

The foreign exchange translation impact of the Concordia International segment is recorded within other comprehensive loss. During the first quarter of 2018, there was a total of $10,569 foreign exchange gains, net of tax, associated with the translation of entities with a different functional currency, primarily within the Concordia International segment, offset by $22,690 of foreign exchange losses associated with the translation of the Company's GBP denominated term loan.



Concordia Management's Discussion and Analysis	Page 13

7 Selected Quarterly Financial Information



For the three months ended (in $000’s, except per share amounts)	Q1-2018		Q4-2017		Q3-2017		Q2-2017		Q1-2017		Q4-2016		Q3-2016		Q2-2016
Revenue	152,264		150,205		154,622		160,785		160,557		170,408		185,504		231,712
Gross profit	101,106		100,200		108,610		111,312		115,415		120,464		137,034		177,607
Adjusted Gross profit ⁽¹⁾	101,106		100,200		108,610		111,312		115,726		120,858		138,540		178,476
Operating income (loss)	(11,239	)	(211,648	)	9,589		(981,255	)	18,366		(524,962	)	42,636		(514,931	)
Net income (loss), continuing operations	(55,694	)	(431,773	)	(69,485	)	(1,010,653	)	(78,824	)	(663,761	)	(75,147	)	(570,384	)

Cash	343,834		327,030		341,303		301,782		336,156		397,917		162,616		145,341
Total assets	2,324,626		2,322,335		2,651,844		2,611,489		3,619,665		3,731,574		4,229,695		4,349,554
Total liabilities	4,301,682		4,232,848		4,128,960		4,022,218		4,058,725		4,109,147		3,928,646		3,982,125

EBITDA⁽¹⁾	94,503		(170,126	)	63,144		(903,563	)	56,932		(569,997	)	30,213		(454,285	)
Adjusted EBITDA⁽¹⁾	72,024		70,778		78,582		81,808		84,242		80,508		104,444		142,344

Earnings (Loss) per share
Basic	(1.09	)	(8.42	)	(1.36	)	(19.78	)	(1.54	)	(13.00	)	(1.47	)	(11.18	)
Diluted	(1.09	)	(8.42	)	(1.36	)	(19.78	)	(1.54	)	(13.00	)	(1.47	)	(11.18	)
Adjusted ⁽¹⁾	(0.19	)	(0.28	)	0.06		0.19		0.22		0.13		0.69		1.38

Amounts shown above are results from continuing operations, excluding discontinued operations, except for total assets and liabilities amounts.

Notes:
(1) Represents a non-IFRS measure. For the relevant definitions see the "Non-IFRS Financial Measures" section of this MD&A. For the relevant reconciliation to reported results, see the "Non-IFRS Financial Measures" section of this MD&A for the first quarter of 2018 and corresponding period in 2017, and for other periods presented, refer to previous publicly filed MD&As.

During the quarterly periods presented above, the Company has experienced a declining trend in operating results. Subsequent to the second quarter of 2016, the business experienced greater than expected market competition on certain products and industry specific environmental changes, which together have resulted in the Company recording a significant amount of impairment charges with respect to acquired intangible assets from its acquisitions, including intellectual property rights and goodwill. Management has focused the discussion and analysis below on comparing to the most recent quarters presented above in order to describe the most current business trends that have occurred in the first quarter of 2018.

Revenues in the first quarter of 2018 were $152,264 which consisted of $112,950 from the Concordia International segment, and $39,314 from the Concordia North America segment. Revenues during the fourth quarter of 2017 were $150,205 which consisted of $113,663 from the Concordia International segment, and $36,542 from the Concordia North America segment. Revenue from the Concordia International segment decreased by $713, or 1%, primarily due to the impact of: (i) $1,992 lower revenue from Fusidic Acid; (ii) $1,355 lower revenue from Carbimazole; and (iii) $1,188 lower revenue from Hydralazine Hcl, partially offset by: (i) a $5,492 increase in revenue as a result of the GBP strengthening against the USD; (ii) $1,505 higher revenue from Nitrofurantoin; and (iii) $1,442 higher revenue from Agripressin. The remaining decrease was primarily due to general competitive market pressures across the Concordia International segment's product portfolio. The Concordia North America segment revenue increase of $2,772 is primarily due to $3,737 higher revenue from the Plaquenil® authorized generic product. Donnatal® continues to experience competitive pressure from a non-FDA approved product being distributed by a third party and most recently the launch of an additional competitive product in the second quarter of 2017. Refer to the "Litigation and Arbitration" section of this MD&A.

Gross profit and adjusted gross profit in the first quarter of 2018 increased by $906 compared to the fourth quarter of 2017. Gross profit as a percentage of revenue in the first quarter of 2018 was 66% compared with the fourth quarter of 2017 of 67%. The decrease in gross profit as a percentage of revenue is primarily due to the shift in product mix within the Concordia North America segment as gross profit as a percentage of revenue within the Concordia International segment was flat.

Net loss from continuing operations during the first quarter of 2018 compared to the fourth quarter of 2017, decreased by $376,079. The decrease in net loss is primarily due to the fourth quarter of 2017 including impairment charges totaling $207,662, and $143,969 higher accretion expenses as a result of accelerating the accretion of deferred financing costs.



Concordia Management's Discussion and Analysis	Page 14

Adjusted EBITDA in the first quarter of 2018 of $72,024 consisted of $51,748 related to Concordia International, $24,273 related to Concordia North America, offset by $3,997 related to Corporate expenses. This is compared with fourth quarter 2017 Adjusted EBITDA of $70,778, which consisted of $56,116 related to Concordia International, $19,880 related to North America, offset by $5,218 related to Corporate expenses. Adjusted EBITDA for the first quarter of 2018 was $1,246 higher than the fourth quarter of 2017. The net increase of total adjusted EBITDA of $1,246 is primarily due to favourable foreign exchange rate movements of $2,680 and $1,221 lower Corporate expenses, partially offset by net product declines as described above.



Concordia Management's Discussion and Analysis	Page 15

8 Balance Sheet Analysis



As at (in $000's)	Mar 31, 2018		Dec 31, 2017		Change
As at (in $000's)	Mar 31, 2018		Dec 31, 2017		$		%
Working capital	243,277		281,288		(38,011	)	(14	)%
Long-lived assets	1,740,063		1,752,261		(12,198	)	(1	)%
Other current liabilities	3,824,774		3,804,684		20,090		1	%
Long-term liabilities	138,597		141,844		(3,247	)	(2	)%
Shareholder's deficit	(1,977,056	)	(1,910,513	)	(66,543	)	3	%

Working capital

Concordia defines working capital as total current assets less accounts payable and accrued liabilities, income taxes payable and provisions. The $38,011 decrease in working capital from December 31, 2017 to March 31, 2018 is primarily due to the following factors:


•	Inventory decreased by $6,236 primarily due to $2,390 and $3,846 lower inventory on hand within the Concordia International and Concordia North America segments, respectively. These decreases are primarily due to product sales during the first quarter of 2018;


•	Accounts payable and accrued liabilities increased by $53,993. The increase in accounts payable and accrued liabilities is primarily due to an increase in interest payable on the Company's debt of $52,563. Interest payments on Unsecured Debt have not been paid as a result of the CBCA Proceedings resulting in a stay of interest and principal payments on these facilities; and


•	Provisions decreased by $1,875. The decrease is primarily due to lower expected returns within the Concordia North America segment.

Offset primarily by:


•	Cash and cash equivalents increased by $16,804 primarily due to cash from operating activities of $50,558, primarily offset by debt amortization and interest payments of $38,859, as further discussed in the "Liquidity and Capital Realignment" section of this MD&A; and


•	Accounts receivable increased by $2,054. Concordia International segment accounts receivable increased by $3,173 primarily as a result of foreign exchange rate movements. Concordia North America accounts receivable decreased by $1,119 primarily due to the timing of receipts from customers.

Long-lived assets

Long-lived assets consist of fixed assets, intangible assets and goodwill. The $12,198 decrease in long-lived assets from December 31, 2017 to March 31, 2018 is primarily due to intangible asset amortization recorded during the first quarter of 2018 of $65,607, partially offset by a $52,015 increase due to foreign exchange translation. This increase from foreign exchange translation is a result of the movement in the GBP/USD period end exchange rates from 1.3494 as at December 31, 2017 to 1.4037 as at March 31, 2018.

Other current liabilities

Other current liabilities consist of the current portion of long-term debt, purchase consideration payable and cross currency swap liability. The $20,090 increase from December 31, 2017 to March 31, 2018 is primarily due to the increase in the current portion of long-term debt of $14,939 as a result of $26,221 foreign exchange rate movement from December 31, 2017 to March 31, 2018, partially offset by $11,282 of principal repayments.

Long term liabilities

Long-term obligations consist of purchase consideration payable, other liabilities and deferred income tax liabilities. The $3,247 decrease in long term liabilities from December 31, 2017 to March 31, 2018 is primarily due to the decrease in deferred tax liabilities of $1,491 due to the reversal of certain deferred tax liabilities in respect of assets recorded as a result of purchase price accounting and changes to the carrying value of certain assets due to their impairment and/or changes in the applicable foreign exchange rate.



Concordia Management's Discussion and Analysis	Page 16

Shareholders’ deficit

Shareholders’ deficit increased by $66,543 from December 31, 2017 to March 31, 2018. The increase is primarily related to:


•	A net loss for the first quarter of 2018 of $55,694; and


•	A net foreign exchange impact of $12,121 from the translation of the Concordia International segment, the Currency Swaps and the GBP denominated term loan.

Offset primarily by:


•	A $1,272 net change in equity for share based compensation expense, issuance of options, vesting of RSUs and related reversal of deferred income tax assets.



Concordia Management's Discussion and Analysis	Page 17

9 Liquidity and Capital Realignment

Realignment of Capital Structure and Going Concern

During the 2017 fiscal year, the Company announced as part of its long-term strategy an objective to realign its capital structure, which includes an intention to significantly reduce the Company’s existing secured and unsecured debt obligations. On October 20, 2017, as part of the Company’s efforts to realign its capital structure, the Company and one of its wholly-owned direct subsidiaries commenced a court proceeding under the CBCA. The CBCA is a Canadian corporate statute that includes provisions that allow Canadian corporations to restructure certain debt obligations, and is not a bankruptcy or insolvency statute. The preliminary interim order issued by the Court provides a stay of proceedings, which continues to be effective, against any third party that is party to, or a beneficiary of, any loan, note, commitment, contract or other agreement with the Company or any of its subsidiaries, including the Company's debtholders, from exercising any rights or remedy or any proceeding, including, without limitation, terminating, demanding, accelerating, setting-off, amending, declaring in default or taking any other action under or in connection with any loan, note, commitment, contract, or other agreement of the Company and its subsidiaries on the terms set out in the Court order.

In connection with the Company's efforts to realign its capital structure and as contemplated by the CBCA Proceedings, the Company has elected to not make scheduled payments on the following debt obligations: payments under its 7% unsecured senior notes; payments under its 9.5% unsecured senior notes; and payments under its unsecured extended equity bridge facility. During the CBCA Proceedings, the Company has been, and intends to, continue to make scheduled ordinary course interest and principal payments under its secured debt facilities, as applicable. The commencement of the CBCA Proceedings and non-payment of the scheduled payments noted above resulted in events of default under the Company's credit facilities and the Company's Currency Swaps, and therefore the outstanding debt and cross currency swap liabilities have been presented as current liabilities. Refer to the "Lending Arrangements and Debt" section of this MD&A for additional details associated with events of default applicable under certain of the Company's credit facilities and Currency Swaps.

Proposed Recapitalization Transaction

On May 2, 2018, the Company announced a proposed Recapitalization Transaction to realign its capital structure. The details of the Recapitalization Transaction are described within the "Recent Events" section of this MD&A, and in the Company's term sheet dated as of May 1, 2018, the support agreement between the Company, certain subsidiaries of the Company and certain holders of the Company’s secured debt and unsecured debt dated as of May 1, 2018, and the subscription agreement between the Company, certain subsidiaries of the Company, and certain holders of the Company’s secured debt and unsecured debt dated as of May 1, 2018. A management information circular outlining all key terms of the Recapitalization Transaction is expected to be mailed to relevant stakeholders prior to the scheduled June 19, 2018 Meetings where secured and unsecured debtholders and shareholders will vote on the approval of, among other things, the Company's CBCA Plan. The Company believes the Recapitalization Transaction, once completed, will realign the Company's capital structure, and significantly reduce the Company's outstanding debt.

Upon completion of the Recapitalization Transaction, the Company expects to have New Secured Debt of approximately $1.4 billion and cash on hand in excess of $200 million, after payment of related advisor fees and recapitalization transaction costs.

Going Concern

Future liquidity and operations of the Company are dependent on the ability of the Company to restructure its debt obligations and to generate sufficient operating cash flows to fund its on-going operations. If the Company does not complete the realignment of its capital structure through the CBCA Plan described in the "Recent Events" section of this MD&A, it will be necessary to pursue other restructuring strategies, which may include, among other alternatives, proceedings under the Companies Creditors Arrangement Act and / or a filing under the United States Bankruptcy Code. The Company may not be able to restructure and reduce its debt obligations and this results in a material uncertainty that may cast significant doubt upon the Company’s ability to continue as a going concern.

The Company had approximately $344 million of cash on hand as of March 31, 2018 (December 31, 2017 - $327 million) and believes it has sufficient liquidity in the near term to operate its business and meet its ordinary course financial commitments while it works toward implementing the Recapitalization Transaction.



Concordia Management's Discussion and Analysis	Page 18

Sources and Uses of Cash



	Three months ended
(in $000’s)	Mar 31, 2018		Mar 31, 2017
Cash flow from Operating Activities	50,558		86,204
Cash flow used in Investing Activities	(1,583	)	(317	)
Cash flow used in Financing Activities	(38,859	)	(151,515	)
Total	10,116		(65,628	)

The Company's business continues to generate cash flow from operating activities. Cash flows from operations represent net income adjusted for changes in working capital, non-cash items and excludes interest paid as this is recorded within cash used in financing activities.

Cash flow from operating activities for the first quarter of 2018 decreased by $35,646 compared to the corresponding period in 2017. The decrease is primarily due to $14,309 lower gross profit from both segments, $10,278 higher acquisition related, restructuring and other costs primarily as a result of the Company's capital realignment initiative and $13,546 lower favourable working capital movements.

Cash flow used in financing activities during the three months ended March 31, 2018 is comprised of: $27,577 of contractual interest payments; and $11,282 of scheduled long-term debt principal repayments.

Cash and Capital Management

The purpose of cash and capital management is to ensure that there is sufficient cash to meet all the financial commitments and obligations of the Company as they come due. Since inception, the Company has financed its cash requirements primarily through the issuances of securities, short-term borrowings, long-term debt as well as cash flows generated from operations.

Liquidity risk is the risk that the Company may encounter difficulty meeting obligations associated with financial liabilities. The Company manages liquidity risk through the management of its capital structure.

As described above and in the "Recent Events" section of this MD&A, the Company's capital management plan was to enter into the CBCA Proceedings to realign its capital structure. During this period, the Company has been, and intends to, continue to make scheduled ordinary course interest and principal payments under its Secured Debt facilities, as applicable. The Company has not made scheduled payments under its Unsecured Debt facilities As a result of certain events associated with the CBCA Proceedings, the Company may not have the ability to transfer certain funds, which could have an impact on the Company's liquidity.

In managing the Company’s capital, Management estimates future cash requirements by preparing annual financial forecasts for review and approval by the Board. The financial forecasts are reviewed and updated periodically and establish approved activities for the year and estimates the costs associated with those activities. Forecast to actual variances are prepared and reviewed by Management and are presented regularly to the Board.



Concordia Management's Discussion and Analysis	Page 19

10 Lending Arrangements and Debt



As at (in $000’s)	Mar 31, 2018	Dec 31, 2017
Term Loan
- USD term loan	1,054,625	1,061,500
- GBP term loan	672,900	651,086
Extended Bridge Facility	100,832	100,832
9.5% Senior Notes	790,000	790,000
7% Senior Notes	735,000	735,000
9% Secured Notes	350,000	350,000
Total Debt	3,703,357	3,688,418
Less: Current Portion	3,703,357	3,688,418
Long-Term Debt	—	—

As at March 31, 2018, approximately 82% of total long term debt was denominated in USD (December 31, 2017 - 82%) and 18% denominated in GBP (December 31, 2017 - 18%).

The commencement of the CBCA Proceedings on October 20, 2017 resulted in an event of default under the Credit Agreement, indentures governing the Company's 9% senior secured notes and 9.5% unsecured notes and the Currency Swaps, which defaults are subject to the stay of proceedings granted by the Court. As a result of the foregoing events of default, a cross default was triggered under the indenture governing the 7% unsecured senior notes and the unsecured extended equity bridge facility, however any demand for payment of this debt has been stayed by the preliminary interim order granted by the Court in the CBCA Proceedings. As a result of these events all debt arrangements are presented as current liabilities. On October 20, 2017, the Company was notified by the counterparty to the Currency Swaps that one or more events of default occurred under the swap agreements as a result of the Company obtaining a preliminary interim order from the Court pursuant to the arrangement provisions of the CBCA. As a result of the foregoing, the counterparty to the Currency Swaps designated October 23, 2017 as the early termination date with respect to all transactions under the Currency Swaps. As part of the Recapitalization Transaction, the Company has agreed to the amount of the Currency Swaps liability ($114,431), which amount will be addressed in the same manner as the Secured Debt under the Recapitalization Transaction.

During the three months ended March 31, 2018, the Company made $11,282 of principal repayments and paid $27,577 of cash interest expense on its secured debt facilities, including the Currency Swaps, as applicable.

Details of the Company's lending arrangements are further disclosed in the notes to the consolidated financial statements for the first quarter of 2018.

The following table presents repayments of long-term debt principal, interest payments on long-term debt, payments on cross currency swap liability and purchase consideration on an undiscounted basis:



(in $000's)	< 3 months	3 to 6 months	6 months to 1 year	1 to 2 years	2 to 5 years	Thereafter	Total

Long-term debt ⁽¹⁾	3,703,357	—	—	—	—	—	3,703,357
Interest on long-term debt⁽²⁾	159,131	—	—	—	—	—	159,131
Cross currency swap liability	114,431	—	—	—	—	—	114,431
Purchase consideration⁽³⁾	6,986	—	—	—	3,770	—	10,756
Total	3,983,905	—	—	—	3,770	—	3,987,675


(1)	All long-term debt as at March 31, 2018 has been presented as a current liability. Refer to the discussion above on long-term debt classification and the CBCA Proceedings.


(2)	The contractual interest amount as at March 31, 2018 reflects the accrued interest payable on long-term debt.


(3)	Refer to the "Contractual Obligations" section of this MD&A for further information.



Concordia Management's Discussion and Analysis	Page 20

11 Contractual Obligations

Contractual Obligations

The Company enters into contractual obligations in the normal course of business. There have been no significant changes to the specified contractual obligations during the three months ended March 31, 2018. Details of the contractual obligations are further disclosed in the notes to the consolidated financial statements for the three months ended March 31, 2018.

During the three months ended March 31, 2018, the Company did not engage in any off-balance sheet financing transactions.



Concordia Management's Discussion and Analysis	Page 21

12 Related Party Transactions

Compensation for directors and key management, consisting of salaries, performance and retention bonuses, other benefits, severance and director fees for the first quarter of 2018 amounted to $1,946 (2017 - $1,315).

Share based compensation expense recorded for key management and directors, for the first quarter of 2018 amounted to $494 (2017 - $1,883).

Certain current employees of the Concordia International segment had an equity interest in the Concordia International segment at the time of its sale to the Company. As a result, pursuant to the share purchase agreement entered into by the Company in connection with the acquisition of the Concordia International segment, these employees received a portion of the consideration paid by the Company to the vendors of the Concordia International segment (including the earn-out consideration paid in December 2016 and February 2017, respectively).



Concordia Management's Discussion and Analysis	Page 22

13 Non-IFRS Financial Measures

This MD&A makes reference to certain non-IFRS measures. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented by other companies. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company’s results of operations from Management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute to the Company’s financial information reported under IFRS. Management uses non-IFRS measures such as EBITDA, Adjusted EBITDA, Adjusted Gross Profit, Adjusted Net Income and Adjusted EPS to provide investors with supplemental information of the Company’s operating performance and thus highlight trends in the Company’s core business that may not otherwise be apparent when relying solely on IFRS financial measures. Securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess its ability to meet future debt service requirements, in making capital expenditures, and to consider the business's working capital requirements.

The definition and reconciliation of Adjusted Gross Profit, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted EPS used and presented by the Company to the most directly comparable IFRS measures follows below.

Adjusted Gross Profit

Adjusted Gross Profit is defined as gross profit adjusted for non-cash fair value increases to the cost of acquired inventory from a business combination. Under IFRS, acquired inventory is required to be written-up to fair value at the date of acquisition. As this inventory is sold the fair value adjustment represents a non-cash cost of sale amount that has been excluded in adjusted gross profit in order to normalize gross profit for this non-cash component.



	Three months ended
(in $000’s)	Mar 31, 2018	Mar 31, 2017
Gross profit per financial statements	101,106	115,415
Add back: Fair value adjustment to acquired inventory	—	311
Adjusted Gross profit	101,106	115,726

EBITDA

EBITDA is defined as net income / loss adjusted for interest and accretion expense, interest income, income taxes, depreciation and amortization. Management uses EBITDA to assess the Company’s operating performance.

Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA adjusted for certain charges including costs associated with acquisitions, restructuring initiatives, and other costs (which includes onerous contract costs and direct costs associated with contractual terminations), management retention costs, non-operating gains / losses, integration costs, legal settlements (net of insurance recoveries) and related legal costs, non-cash items such as unrealized gains / losses on derivative instruments, share based compensation, fair value changes including purchase consideration and derivative financial instruments, asset impairments, fair value increases to inventory arising from purchased inventory from a business combination, gains / losses from the sale of assets and unrealized gains / losses related to foreign exchange. Management uses Adjusted EBITDA, among other Non-IFRS financial measures, as the key metric in assessing business performance when comparing actual results to budgets and forecasts. Management believes Adjusted EBITDA is an important measure of operating performance and cash flow, and provides useful information to investors because it highlights trends in the underlying business that may not otherwise be apparent when relying solely on IFRS measures.



Concordia Management's Discussion and Analysis	Page 23



	Three months ended
(in $000’s)	Mar 31, 2018		Mar 31, 2017
Net loss	(55,694	)	(78,824	)

Interest and accretion expense	80,122		92,541
Interest income	(706	)	(18,479	)
Income taxes	4,704		4,489
Depreciation	470		488
Amortization of intangible assets	65,607		56,717
EBITDA	94,503		56,932
Fair value adjustment to acquired inventory	—		311
Acquisition related, restructuring and other	15,494		5,216
Share-based compensation	1,267		2,952
Fair value (gain) loss on purchase consideration and derivatives	425		27,506
Foreign exchange (gain) loss	1,341		990
Unrealized foreign exchange (gain) loss	(41,006	)	(9,665	)
Adjusted EBITDA	72,024		84,242



Concordia Management's Discussion and Analysis	Page 24

Adjusted Net Income and Adjusted EPS

Adjusted EPS is defined as adjusted net income divided by the weighted average number of fully diluted shares outstanding. Adjusted net income is defined as net income (loss) adjusted for certain charges including costs associated with acquisitions, restructuring initiatives, and other costs (which includes onerous contract costs and direct costs associated with contractual terminations), management retention costs, non-operating gains / losses, integration costs, legal settlements (net of insurance recoveries) and related legal costs, non-cash items such as unrealized gains / losses on derivative instruments, share based compensation, fair value changes including purchase consideration and derivative financial instruments, asset impairments, fair value increases to inventory arising from purchased inventory from a business combination, gains / losses from the sale of assets and unrealized gains / losses related to foreign exchange, non-cash accretion expense and the tax impact of the above items. Management believes Adjusted EPS is an important measure of operating performance and cash flow, and provides useful information to investors.



In $000’s, except per share amounts	Q1-2018		Q4-2017		Q3-2017		Q2-2017		Q1-2017		Q4-2016		Q3-2016		Q2-2016

Weighted average number of fully diluted shares	53,685,667		53,747,659		52,481,324		53,732,989		52,690,190		51,623,190		51,862,590		52,081,161
Net income (loss)	(55,694	)	(431,773	)	(69,485	)	(1,010,653	)	(78,824	)	(663,761	)	(75,147	)	(570,384	)
Adjustments:
Fair value adjustment to acquired inventory	—		—		—		—		311		394		1,506		869
Share-based compensation	1,267		285		2,999		2,475		2,952		3,438		10,069		8,889
Acquisition related, restructuring and other	15,494		21,129		14,266		6,167		5,216		20,309		4,251		7,860
Depreciation	470		475		499		500		488		512		528		469
Amortization of intangible assets	65,607		51,162		51,076		67,470		56,717		41,148		42,715		52,361
Impairments	—		207,662		—		987,103		—		562,105		3,062		567,076
Foreign exchange (gain) loss	(39,665	)	(8,967	)	(23,184	)	(30,514	)	(8,675	)	84,075		55,666		(7,816	)
Fair value (gain) loss on purchase consideration and derivatives	425		41,983		21,357		20,140		27,506		(20,599	)	(323	)	6,288
Gain on debt settlement	—		(21,188	)	—		—		—		—		—		—
Interest accretion	—		140,254		7,995		8,381		7,461		7,453		7,348		7,692
Legal settlement and related legal cost	—		—		—		—		—		783		—		13,463
Tax adjustments ⁽¹⁾	2,146		(15,925	)	(2,621	)	(40,930	)	(1,484	)	(29,125	)	(14,047	)	(15,052	)
Adjusted net income	(9,950	)	(14,903	)	2,902		10,139		11,668		6,732		35,628		71,715
Adjusted EPS diluted, continuing operations	(0.19	)	(0.28	)	0.06		0.19		0.22		0.13		0.69		1.38

Amounts shown above are results from continuing operations, excluding discontinued operations.

Notes:
(1) The Company has included in tax adjustments the current and deferred income taxes presented in the consolidated statements of income (loss) to the extent that these relate to adjustments made to net income (loss) from continuing operations. The income taxes presented in the consolidated statements of income (loss), after including the tax adjustments, represents the Company’s estimate of the income taxes in respect of adjusted net income ("Tax on Adjusted Net Income"). Tax on Adjusted Net Income does not represent the Company’s expectation of its current cash income tax obligations as such obligations are further impacted by: (i) the tax impact of certain adjustments made to net income (loss) from continuing operations but which do impact current cash income tax obligations, e.g., the tax impact of adjustments for stock based compensation, depreciation and amortization; and (ii) when such income tax obligations are required to be paid, which is a function of the laws applicable in the jurisdiction to which the payment is due.



Concordia Management's Discussion and Analysis	Page 25

14 Critical Accounting Estimates

The preparation of financial statements in accordance with IFRS requires management to make estimates, judgments and assumptions that affect reported assets, liabilities, revenues and expenses, gains and losses, and disclosures of contingencies. These estimates and assumptions are subject to change based on experience and new information. Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate is made. Critical accounting estimates are also those estimates which, where a different estimate could have been used or where changes in the estimate that are reasonably likely to occur, would have a material impact on the company’s financial condition, changes in financial condition or financial performance. Critical accounting estimates and judgments are reviewed annually by the Audit Committee of the Board of Directors.

A detailed description of the Company’s critical accounting estimates is provided in Note 4 of the consolidated financial statements for the year ended December 31, 2017 and in the "Critical Accounting Estimates" section of the Company's MD&A for the year ended December 31, 2017, dated March 8, 2018 (the "2017 Annual MD&A").

Change in estimate

During the first quarter of 2018, the Company assessed the use of the straight line amortization method for certain intangible assets in both reportable segments and determined that, based on recent developments and historical patterns of commercial benefit, certain assets should be amortized based on a declining balance model to align with corresponding expected future cash flows. Specifically, the Company determined that this method of amortization better reflects the pattern in which acquired product rights and manufacturing processes future economic benefits are expected to be realized by the Company.

This change in estimate resulted in an increase in amortization expense of approximately $18 million in the three month period ended March 31, 2018. The impact for the remainder of the year is estimated to be approximately $55 million.

Current and Future Accounting Pronouncements

Note 3 of the consolidated financial statements as at and for the three month period ended March 31, 2018 describes information relating to current and future significant accounting policies applicable to the Company. The Company adopted IFRS 15, "Revenue from Contracts with Customers" and IFRS 9, “Financial Instruments” on January 1, 2018.



Concordia Management's Discussion and Analysis	Page 26

15 Contingencies

Royalties

The Company has a commitment to pay royalties on certain products acquired from Shionogi Inc. in May 2013 and certain products acquired from Covis Pharma S.à R.L. on April 21, 2015, at certain prescribed rates. These royalties are payable on a quarterly basis. During the three month period ended March 31, 2018 the royalty expense was $101 (2017 - $408).

Litigation and Arbitration

From time to time, the Company becomes involved in various legal and administrative proceedings, which include product liability, intellectual property, commercial, antitrust, government and regulatory investigations, related private litigation and ordinary course employment-related issues. From time to time, the Company also initiates actions or files counterclaims. The Company could be subject to counterclaims or other suits in response to actions it may initiate. The Company believes that the prosecution of these actions and counterclaims is important to preserve and protect the Company, its reputation and its assets. Certain of these proceedings and actions are described below.

Unless otherwise indicated the Company cannot reasonably predict the outcome of these legal proceedings, nor can it currently estimate the amount of loss, or range of loss, if any, that may result from these proceedings. An adverse outcome in certain of these proceedings could have a material adverse effect on the Company's business, financial condition and results of operations, and could cause the market value of its common shares and/or debt securities to decline.

The Company and certain of its former executive officers are the subject of various class action complaints relating to the Company’s August 12, 2016 press release, whereby the Company revised its 2016 guidance. The complaints allege that the Company issued false and misleading statements to investors and/or failed to disclose that: the Company was experiencing a substantial increase in market competition against its drug Donnatal®, and other products; as a result, Concordia’s financial results would suffer, and Concordia would be forced to suspend its dividend; and as a result Concordia’s statements about its business, operations and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times. The class action lawsuits have been consolidated into a single case and a motion to dismiss this action was filed by the Company on February 20, 2017. On March 21, 2017, the plaintiffs in this action filed a response to the motion to dismiss, and on April 5, 2017 the Company filed a reply to plaintiffs' response. On July 28, 2017, the United States District Court, Southern District of New York denied the motion to dismiss in part and granted it in part. On February 7, 2018, the plaintiffs filed a motion for class certification. The Company filed an opposition to the plaintiffs' motion for class certification on March 12, 2018, and the plaintiffs filed a reply in support of class certification on March 28, 2018.

The Company and certain of its former executive officers were also subject to a class action complaint alleging that the Company made false and/or misleading statements, as well as, failed to disclose material adverse facts about the Company's business operations and prospects, in the Company's Registration Statement, Prospectus and Supplemental Prospectus issued in connection with the Company's secondary offering completed on September 30, 2015. Specifically, the claim alleged that the statements were false and/or misleading and/or failed to disclose that: (i) the Company was experiencing a substantial increase in market competition against Donnatal®, and other products; (ii) consequently the Company's financial results would suffer and the Company would be forced to suspend its dividends; and (iii) as a result of the foregoing, the defendant's statements about the Company's business operations and prospects were false and misleading and/or lacked a reasonable basis. On June 27, 2017, the plaintiff in this action voluntarily dismissed the complaint on a without prejudice basis.

The Company and certain of its former executive officers and a former director are subject to a securities class action filed in Quebec, Canada. The amended statement of claim alleges that the Company failed to disclose adverse material facts relating to, and misrepresented, among other things, the Company's business model, growth platforms, proforma revenues and dividend payments in certain disclosures from March 23, 2016 to August 11, 2016. This class action has not yet been certified nor has leave to bring a statutory claim under securities legislation yet been granted. On June 15, 2017, the plaintiff in the action discontinued their claim against the Company's Board of Directors (other than the one former director) and certain of its former executive officers.

On October 19, 2017, a statement of claim was filed in Ontario, Canada against the Company and certain of its former executive officers on behalf of all persons and entities, other than persons resident in Quebec, Canada, which alleges substantially the same claims as the Quebec action described above. This class action has not yet been certified nor has leave to bring a statutory claim under securities legislation yet been granted.



Concordia Management's Discussion and Analysis	Page 27

products, liothyronine, in the United Kingdom between November 2007 and at least July 2017. A statement of objections is a formal statement by the CMA that it considers that a competition infringement may have occurred. On February 15, 2018, the Company announced that the CMA notified the Company that it was closing its investigation related to Fusidic Acid, also one of the three products under investigation. On April 20, 2018, the Company responded in detail to the statement of objections.

On March 3, 2017, the Company announced that the CMA issued a statement of objections to a third party and the Company in relation to the supply of 10mg hydrocortisone tablets in the UK between 2013 and 2016. On May 26, 2017, the Company responded in detail to the statement of objections and on July 20, 2017 the Company attended an oral hearing to present the key points of its response to the CMA decision panel. This investigation includes matters that pre-date the Company’s ownership of the Concordia International segment.

On October 11, 2017, the Company announced that the CMA commenced additional investigations in relation to the UK pharmaceutical sector, and that the Concordia International segment and certain of its products are part of the inquiry. These investigations are at an early information gathering stage and the CMA has confirmed that, at this time, it has not reached a conclusion on whether competition law has been infringed. These investigations include matters that predate the Company's ownership of the Concordia International segment, and involve the following products: Carbimazole, Nitrofurantoin, Prochlorperazine, Dicycloverine, Trazodone and Nefopam.

The Company was subject to a class action proceeding in relation to one of its third party distributors purportedly faxing unsolicited advertisements to market Ulesfia® in violation of the Telephone Consumer Protection Act. On April 9, 2017, the court in this action dismissed the Company's motion to dismiss and on June 8, 2017 the court denied the Company's motion for reconsideration. On November 6, 2017, the court issued an order re-evaluating its previous finding of personal jurisdiction, which order required the plaintiffs in this action to make a new submission rebutting the evidence submitted by defendants showing that there is no personal jurisdiction. On December 1, 2017, the court dismissed this claim against the Company for lack of personal jurisdiction.

During the first quarter of 2016, the Company became aware that a third party had notified wholesalers, through listing services, of its intent to distribute and sell in certain US regions a non-FDA approved copy of Donnatal®. On January 6, 2016, the Company commenced a lawsuit against the third party and its principal owner claiming damages from such conduct, and on April 29, 2016 and May 3, 2016 commenced proceedings against two listing services for the continued listing of the products in their database. In May 2016, the Company became aware that this non-FDA approved product was introduced into certain US regions. On October 4, 2016 and November 16, 2016, the Company dismissed its claims against the listing services on a without prejudice basis, respectively. On March 15, 2017, the court ruled on the third party's motion to dismiss the Company's claim, denying such motion in part and granting it in part. On March 29, 2017, the third party filed its answer and counter claim in response to the Company's claim. On August 16, 2017, this third party filed a motion to amend its counterclaim to add factual allegations detailing the scope of the Company's campaign to disparage its products and interfere with its contractual and business relationships. On November 8, 2017, the court granted the Company's motion for leave to file its second amended complaint, permitting the Company to include its direct false advertising claim. The Company continues to pursue this lawsuit vigorously. In a similar lawsuit commenced against Method Pharmaceuticals, LLC ("Method") and its principal owner, the Company received a favorable jury verdict on April 21, 2016 and was awarded damages in the amount of approximately $733. On March 2, 2017, the United States District Court - Western District of Virginia, Charlottesville Division, granted the Company's motion for enhanced damages in part, to amend the judgment against Method and its principal owner to reflect an award of damages in the total amount of approximately $2.2 million. On March 30, 2017, Method filed a motion to reconsider the order on enhanced damages. On April 13, 2017, the Company filed an opposition to Method's motion to reconsider. On July 19, 2017, the court denied Method's motion to reconsider and further awarded the Company an additional $15 in costs. On August 30, 2017, Method filed a notice of appearance with the United States Court of Appeals for the Fourth Circuit to appeal the enhanced damages award. On February 1, 2018, Method and its principal owner and the Company settled the enhanced damages award.

During the second quarter of 2017, the Company became aware that an additional third party had launched a competitor product to Donnatal®. The Company continues to assess its legal rights against such third party.

On September 16, 2016, the Company announced the introduction of a bill into the U.K. House of Commons to amend and extend existing provisions of the National Health Service Act 2006 to enable the Secretary of State to help manage the cost of health service medicines. On April 27 2017, the U.K. government accorded Royal Assent to the Act. The Act introduces provisions in connection with controlling the cost of health service medicines and other medical supplies. The Act also introduces provisions in connection with the provision of pricing and other information by manufacturers, distributors and suppliers of those medicines and medical supplies. The Company continues to monitor the implementation of the Act. While the effects of the Act are unknown at this time, the Act could impose certain risks and uncertainties on the Company's operations and cash flows.



Concordia Management's Discussion and Analysis	Page 28

16 Outstanding Share Data

The authorized capital of the Company consists of an unlimited number of common shares. As at March 31, 2018 and May 15, 2018 the Company had, respectively, 51,283,574 and 51,283,800 common shares issued and outstanding. As at March 31, 2018 and May 15, 2018, there were, respectively, 1,377,500 and 1,336,667 stock options outstanding that entitle the holders thereof to purchase one common share of the Company per stock option held.

As at March 31, 2018 and May 15, 2018, the Company had, respectively, 2,358,571 and 288,791 unvested RSUs outstanding. Each RSU can be settled either in cash or common shares issued from treasury or a combination of cash and common shares issued from treasury at the sole discretion of the Company.

As at March 31, 2018 and May 15, 2018, the Company had 30,033 unvested DSUs outstanding. Each DSU can be settled either in cash or common shares issued from treasury or a combination of cash and common shares issued from treasury at the sole discretion of the Company.



Concordia Management's Discussion and Analysis	Page 29

17 Control Environment

Management is responsible for establishing and maintaining adequate Internal Control over Financial Reporting and disclosure controls and procedures as defined in the 2017 Annual MD&A.

Based on their evaluation as at March 31, 2018, Management concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act")), are effective to ensure that information required to be disclosed by the Company in reports that are filed or submitted to Canadian and U.S. securities authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In addition, as at March 31, 2018, there were no changes in the internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the three month period ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result, Management's conclusion on the effectiveness of the Company's internal control over financial reporting and its disclosure controls and procedures that were operating effectively as at December 31, 2017 has not changed.

Management will continue to periodically evaluate the Company’s disclosure controls and procedures and internal control over financial reporting, and will make any modifications from time to time as deemed necessary. Based on their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.



Concordia Management's Discussion and Analysis	Page 30

18 Forward-looking Statements

Certain statements contained in this MD&A constitute "forward looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities laws (collectively, "forward-looking statements"), which are based upon the current internal expectations, estimates, projections, assumptions and beliefs of Management. Statements concerning the Company’s objectives, goals, strategies, intentions, plans, beliefs, assumptions, projections, predictions, expectations and estimates, and the business, operations, future financial performance and condition of the Company are forward-looking statements. This MD&A uses words such as "believe", "expect", "anticipate", "estimate", "intend", "may", "will", "would", "could", "plan", "create", "designed", "predict", "project", "seek", "ongoing", "increase", "upside" and similar expressions and the negative and grammatical variations of such expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements reflect the current beliefs of Management based on information currently available to them, and are based on assumptions and subject to risks and uncertainties. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements. In addition, this MD&A may contain forward-looking statements attributed to third-party industry sources.

By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections or other characterizations of future events or circumstances that constitute forward-looking statements will not occur. Such forward-looking statements in this MD&A speak only as of the date of this MD&A. Forward-looking statements in this MD&A include, but are not limited to, statements with respect to:


•	the ability of the Company to compete against companies that are larger and have greater financial, technical and human resources than that of the Company, as well as other competitive factors, such as technological advances achieved, patents obtained and new products introduced by competitors;


•	the performance of the Company’s business and operations;


•	the Company’s capital expenditure programs;


•	the future development of the Company, its growth strategy (including its DELIVER strategy) and the timing thereof;


•	the acquisition strategy of the Company;


•	the Company’s ability to achieve all of its estimated synergies as a result of cost reductions and/or integration initiatives;


•	the estimated future contractual obligations of the Company;


•	the Company’s future liquidity and financial capacity;


•	the Company's ability to satisfy its financial obligations in future periods;


•	the supply and market changes in demand for pharmaceutical products within the Company’s portfolio of pharmaceutical products;


•	cost and reimbursement of the Company’s products;


•	expectations regarding the Company’s ability to raise capital and/or restructure its capital structure;


•	the availability and extent to which the Company’s products are reimbursed by government authorities and other third party payors, as well as the impact of obtaining or maintaining such reimbursement on the price of the Company’s products;


•	the Company's business priorities, long-term growth strategy and/or stabilization programs or initiatives;


•	changes in regulatory rules or practices in the U.S., United Kingdom or in other jurisdictions in which the Company sells products;


•	changes in prescription recommendations or behaviours by clinical commissioning groups or other healthcare groups in the U.S., United Kingdom, or in any other jurisdictions in which the Company sells its products;


•	the inclusion of the Company’s products on formularies or clinical commissioning groups providing guidance to prescribe the Company's products or the Company’s ability to achieve favourable formulary or clinical commissioning group status, as well as the impact on the price of the Company’s products in connection therewith;


•	the acquisition, in-licensing and/or launch of new products including, but not limited to, the acceptance and demand for new pharmaceutical products, and the impact of competitive products and prices;


•	the market size for the Company's products including, without limitation, its pipeline products;


•	the Company's intention to reduce its debt;


•	the Company's intention to realign its capital structure and the timing thereof;


•	the Company's filing with the Court and the preliminary interim order and Interim Order under the CBCA;


•	the CBCA process staying certain defaults under the Company's agreements, including its debt agreements;


•	the ability of the Company to operate its business and satisfy its obligations to service providers, employees, suppliers and contractors in the ordinary course during the CBCA Proceedings;


•	the Company's ability to complete the Recapitalization Transaction; and


•	the going concern nature of the Company.



Concordia Management's Discussion and Analysis	Page 31

With respect to the forward-looking statements contained in this MD&A, such statements are subject to certain risks, including those risks set forth below and in the Company's Annual Report on Form 20-F dated March 8, 2018, and the Company has made assumptions regarding, among other factors:


•	the ability of the Company to significantly reduce its debt and the terms of any such reduction;


•	the ability of the Company to realign its capital structure and the timing thereof;


•	the completion of the Recapitalization Transaction;


•	third parties respecting the court order under the CBCA process or not taking steps to violate such order;


•	the ability of the Company to maintain its listings on the NASDAQ and/or TSX, given the initial notification letter received from the NASDAQ, the current trading price of the Company's common shares and the Company's CBCA filing;


•	alternatives available to the Company to strengthen the Company’s capital structure;


•	the ability of the Company to create a financial foundation for the Company that will be able to support its long-term growth;


•	the ability of the Company to achieve the Company’s financial goals including with respect to the nature of any agreement with its lenders;


•	the ability of the Company to reduce the Company’s debt and interest payments;


•	the ability of the Company to operate in the ordinary course during the CBCA process, including with respect to satisfying obligations to service providers, suppliers, contractors and employees;


•	the CBCA process enabling the Company to stay defaults under its and its subsidiaries agreements, including debt agreements;


•	the ability of the Company to continue as a going concern, and its ability to continue to realize its assets and discharge its liabilities and commitments;


•	the ability of the Company to comply with its contractual obligations, including, without limitation, its obligations under debt arrangements;


•	the Company's future liquidity position, and access to capital, to fund ongoing operations and obligations (including debt obligations);


•	the ability of the Company to stabilize its business;


•	the ability of the Company to implement and successfully achieve its business priorities in order to stabilize the Company's business and financial condition;


•	the impact of the downgrade of the Company's corporate and debt ratings;


•	the ability of the Company to execute its long-term growth strategy and/or not being delayed in executing such strategy;


•	the successful licensing of products to third parties or to the Company, as applicable, to market and distribute such products on terms favourable to the Company;


•	the ability of the Company to maintain key partnerships, and licensing and partnering arrangements, now and in the future;


•	the ability of the Company to maintain its distribution networks and distribute its products effectively despite significant geographical expansion;


•	the general regulatory environment in which the Company operates, including the areas of taxation, environmental protection, consumer safety and health regulation;


•	the tax treatment of the Company and its subsidiaries and the materiality of legal and regulatory proceedings;


•	the timely receipt of any required regulatory approvals, including in respect of the Company's restructuring process;


•	the general economic, financial, market and political conditions impacting the industry and countries in which the Company operates;


•	the ability of the Company to sustain or increase profitability, fund its operations with existing capital, and/or raise additional capital to fund its operations or future acquisitions;


•	the ability of the Company to meet its financial forecasts and projections over the next twelve months and beyond;


•	the ability of the Company to acquire or in-license any necessary technology, products or businesses and effectively integrate such acquisitions or such in-licensed technology or products;


•	the development and clinical testing of products under development;


•	the ability of the Company to obtain necessary approvals for commercialization of the Company’s products from the U.S. Food and Drug Administration ("FDA"), the U.K. Medicines and Healthcare products Regulatory Agency, the EMA or other regulatory authorities;


•	future currency exchange and interest rates;


•	reliance on third party contract manufacturers to manufacture the Company’s products on favourable terms;


•	reliance on third party distributors to distribute the Company's products on favourable terms;


•	reliance on development partners to develop the Company's products;


•	the ability of the Company to generate sufficient cash flow from operations and to access existing and proposed credit facilities and the capital markets to meet its future obligations on acceptable terms;


•	potential competition to the Company’s pharmaceutical products, including competition created by pharmaceutical parallel trade;


•	the availability of raw materials and finished products necessary for the Company’s products;


•	the impact of increasing competition;


•	the impact of the entry of competitive products, including the timing of the entry of such products in the market place;


•	the ability of the Company to obtain and retain qualified staff, equipment and services in a timely and efficient manner (particularly in light of the Company's efforts to restructure its debt obligations);



Concordia Management's Discussion and Analysis	Page 32


•	the ability of the Company to maintain and enforce the protection afforded by any patents or other intellectual property rights;


•	the ability of the Company to conduct operations in a safe, efficient and effective manner;


•	the results of continuing and future safety and efficacy studies by industry and government agencies related to the Company’s products;


•	the ability of the Company to retain members of the senior management team, including but not limited to, the officers of the Company;


•	the ability of the Company to successfully market its products and services;


•	clinical commissioning groups and/or other healthcare groups in the markets in which the Company sells its products, including the United Kingdom and United States, not making adverse prescribing recommendations against the Company's products;

•

the impact of the United Kingdom's referendum through which voters supported a withdrawal from the European Union. A significant portion of the Company’s business is in the United Kingdom pharmaceutical industry and a significant portion of the Company's contract manufacturers are in mainland Europe. The United Kingdom’s exit from the European Union could result in a number of developments, including, without limitation, regulatory changes in the pharmaceutical industry, cross-border tariff and cost structure changes or loss of access to European Union global trade markets. Therefore, the United Kingdom’s exit from the European Union could have a material adverse effect on the Company’s business, financial condition and results of operations. In addition, the United Kingdom's exit from the European Union may result in a period of uncertainty while the terms of such exit are being negotiated;

•

a significant number of the Company’s products are vulnerable to price competition driven by pharmaceutical parallel trade ("PPT"). PPT refers to pharmaceutical products that are put on the market in one country by the owner of the intellectual property rights to such products, or with the consent of the owner, that are subsequently imported into another country by a third party for secondary sale without the consent or authorization of the intellectual property right owner. Many of the Company’s products are distributed in the European Union, where PPT is common and, as a result, some of the Company’s products may be subject to price competition caused by PPT, which could have a material adverse effect on the Company’s business, financial condition and results of operations. In addition, PPT may restrict the Company’s ability to ensure that patients receive products designed for their local preferences and needs and possibly to the satisfaction of applicable governmental regulations in the jurisdiction of import. Moreover, as a result of PPT, packaging, manuals and instructions may be provided in a foreign language and may lack domestic telephone numbers and other important contact information for patient support, which may result in a diminished experience for the patient and diminished product reputation, which could have a material adverse effect on the Company’s business, financial condition and results of operations;


•	the impact of the recently enacted UK Health Service Medical Supplies (Costs) Act on the Company's business, including, without limitation, on the pricing of the Company's products in the United Kingdom; and

•

the Company’s operating results, financial condition and financial forecasts may fluctuate from period to period for a number of reasons, including as a result of events or occurrences disclosed in the Company’s public filings (including, without limitation, under the heading "Risk Factors" in the Company's Annual Report on Form 20-F dated March 8, 2018). As a result, the Company believes that quarter-to-quarter comparisons of results from operations or financial forecasts, or any other similar period-to-period comparisons, should not be construed as reliable indicators of the Company’s future performance. The events or occurrences described in the Company’s public filings, including, without limitation, under the heading "Risk Factors" in the Company's Annual Report on Form 20-F dated March 8, 2018, may cause the Company’s operating results and/or financial forecasts to fluctuate and such events or occurrences could have a material adverse effect on the Company’s business, financial condition and results of operations. In any period, the Company’s results may be below the expectations of market analysts and investors, which could cause the trading price of the Company’s securities to decline.

Forward-looking statements contained in this MD&A are based on the key assumptions described herein. Readers are cautioned that such assumptions, although considered reasonable by the Company, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided in this MD&A as a result of numerous known and unknown risks and uncertainties and other factors. The Company cannot guarantee future results.

Risks related to forward-looking statements include those risks referenced herein and in the Company’s other filings with the Canadian Securities Administrators and the SEC. Some of the risks and other factors which could cause actual results to differ materially from those expressed in the forward-looking statements contained in this MD&A include, but are not limited to, the risk factors described herein and included under the heading "Risk Factors" in the Company’s Annual Report on Form 20-F dated March 8, 2018, which is available on SEDAR, online at www.sedar.com and on EDGAR, online at www.sec.gov, as applicable.

Forward-looking statements contained in this MD&A are based on Management’s current plans, expectations, estimates, projections, beliefs and opinions and the assumptions relating to those plans, expectations, estimates, projections, beliefs and opinions may change. Management has included the summary of assumptions and risks related to forward-looking statements included in this MD&A for the purpose of assisting the reader in understanding Management’s current views regarding those future outcomes. Readers are cautioned that this information may not be appropriate for other purposes. Readers are cautioned that the lists of assumptions and risk factors contained herein are not exhaustive.



Concordia Management's Discussion and Analysis	Page 33

Neither the Company nor any other person assumes responsibility for the accuracy or completeness of the forward-looking statements contained herein.

Such forward-looking statements are made as of the date of this MD&A and the Company disclaims any intention or obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

All of the forward-looking statements made in this MD&A are expressly qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, any forward-looking statement in this MD&A, and, accordingly, investors should not place undue reliance on any such forward-looking statement. New factors emerge from time to time and the importance of current factors may change from time to time and it is not possible for Management to predict all of such factors, or changes in such factors, or to assess in advance the impact of each such factors on the business of Concordia or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement contained in this MD&A.

Refer to the "Liquidity and Capital Realignment" and "Lending Arrangements and Debt" sections of this MD&A for a further discussion on the Company's financial position, liquidity and future outlook.

Trademarks

This MD&A includes trademarks that are protected under applicable intellectual property laws and are the property of Concordia or its affiliates or its licensors. Solely for convenience, the trademarks of Concordia, its affiliates and/or its licensors referred to in this MD&A may appear with or without the ® or TM symbol, but such references or the absence thereof are not intended to indicate, in any way, that the Company or its affiliates or licensors will not assert, to the fullest extent under applicable law, their respective rights to these trademarks. Any other trademarks used in this MD&A are the property of their respective owners.

Market and Industry Data

The market industry data contained in this MD&A is based upon information from independent industry and other publications and Concordia's Management's knowledge of, and experience in, the industry in which Concordia operates. None of the sources of market and industry data have provided any form of consultation, advice or counsel regarding any aspects of, or is in anyway whatsoever associated with, the matters described herein (including any related transactions). Market and industry data is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data at any particular point in time, the voluntary nature of the data gathering process or the limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy and completeness of this data are not guaranteed. Concordia has not in dependently verified any of the data from third party sources referred to in this MD&A and has not ascertained the underlying assumptions relied upon by such sources.



Concordia Management's Discussion and Analysis	Page 34

Exhibit 99.3

Unaudited Condensed Interim Consolidated Financial Statements of

Concordia International Corp.

March 31, 2018

Table of Contents



Unaudited Condensed Interim Consolidated Balance Sheets	3
Unaudited Condensed Interim Consolidated Statements of Loss	4
Unaudited Condensed Interim Consolidated Statements of Comprehensive Loss	5
Unaudited Condensed Interim Consolidated Statements of Changes in Deficit	6
Unaudited Condensed Interim Consolidated Statements of Cash Flows	7
Notes to Unaudited Condensed Interim Consolidated Financial Statements	8 - 36

[2]

Concordia International Corp.

Unaudited Condensed Interim Consolidated Balance Sheets

(Stated in thousands of U.S. Dollars, except where otherwise stated)



As at	Mar 31, 2018		Dec 31, 2017
Assets
Current
Cash and cash equivalents	343,834		327,030
Accounts receivable (Note 5)	148,082		146,028
Inventory (Note 6)	70,480		76,716
Prepaid expenses	8,806		6,415
Income taxes recoverable	726		872
Other current assets	9,660		10,547
	581,588		567,608
Intangible assets (Note 7)	1,482,762		1,503,878
Goodwill (Note 8)	253,689		244,957
Fixed assets	3,612		3,426
Deferred income tax assets	2,975		2,466
Total Assets	2,324,626		2,322,335

Liabilities
Current
Accounts payable and accrued liabilities (Note 9)	255,906		201,913
Provisions (Note 10)	32,221		34,096
Income taxes payable	50,184		50,311
Current portion of long-term debt (Note 13)	3,703,357		3,688,418
Current portion of purchase consideration payable (Note 18)	6,986		1,835
Cross currency swap liability (Note 12)	114,431		114,431
	4,163,085		4,091,004
Purchase consideration payable (Note 18)	1,822		6,549
Deferred income tax liabilities	136,610		135,119
Other liabilities	165		176
Total Liabilities	4,301,682		4,232,848

Shareholders' Deficit
Share capital (Note 14)	1,283,100		1,283,083
Contributed surplus	54,012		52,757
Accumulated other comprehensive loss	(306,866	)	(294,745	)
Deficit	(3,007,302	)	(2,951,608	)
Total Shareholders' Deficit	(1,977,056	)	(1,910,513	)
Total Liabilities and Shareholders' Deficit	2,324,626		2,322,335

Realignment of Capital Structure and Going Concern (Note 2)

Commitments and Contingencies (Note 16)

Subsequent Events (Note 24)

Approved and authorized for issue by the Board of Directors on May 8, 2018.



''Rochelle Fuhrmann''	''Francis (Frank) Perier, Jr.''
Director (Signed)	Director (Signed)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

[3]

Concordia International Corp.

Unaudited Condensed Interim Consolidated Statements of Loss

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Revenue (Note 10)	152,264		160,557
Cost of sales (Notes 6 & 22)	51,158		45,142
Gross profit	101,106		115,415

Operating expenses (Note 22)
General and administrative	12,178		13,748
Selling and marketing	9,798		9,752
Research and development	7,106		7,984
Acquisition related, restructuring and other	15,494		5,216
Share-based compensation	1,267		2,952
Amortization of intangible assets (Note 7)	65,607		56,717
Depreciation expense	470		488
Fair value (gain) loss	425		192
Total operating expenses	112,345		97,049

Operating income (loss)	(11,239	)	18,366

Other income and expense
Interest and accretion expense (Note 13)	80,122		92,541
Interest income	(706	)	(18,479	)
Fair value (gain) loss on derivative financial instruments	—		27,314
Foreign exchange (gain) loss	1,341		990
Unrealized foreign exchange (gain) loss (Note 12)	(41,006	)	(9,665	)
Loss before tax	(50,990	)	(74,335	)

Income taxes
Current	4,440		5,736
Deferred	264		(1,247	)
Net loss for the period	(55,694	)	(78,824	)

Loss per share (Note 15)
Basic loss per share	(1.09	)	(1.54	)
Diluted loss per share	(1.09	)	(1.54	)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

[4]

Concordia International Corp.

Unaudited Condensed Interim Consolidated Statements of Comprehensive Loss

(Stated in thousands of U.S. Dollars, except where otherwise stated)



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Net loss for the period	(55,694	)	(78,824	)

Other comprehensive income (loss), net of tax
Amounts that will be reclassified to net loss
Cumulative translation adjustment	10,569		22,097
Net investment hedge of GBP denominated loans (net of taxes of $3,531) (2017 - $1,330)	(22,690	)	(7,778	)
Cross currency derivative financial instruments (net of taxes) (Note 12)	—		61
Other comprehensive income (loss) for the period, net of tax	(12,121	)	14,380
Total comprehensive loss for the period	(67,815	)	(64,444	)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

[5]

Concordia International Corp.

Unaudited Condensed Interim Consolidated Statements of Changes in Deficit

(Stated in thousands of U.S. Dollars, except where otherwise stated)



	Share Capital
	Number of Shares	Amount	Contributed Surplus		Accumulated Other Comprehensive Loss		Deficit		Total Shareholders' Deficit
Balances, January 1, 2017	51,089,556	1,277,175	49,949		(343,824	)	(1,360,873	)	(377,573	)
Exercise of share based compensation	226	5	(5	)	—		—		—
Share based compensation expense	—	—	2,957		—		—		2,957
Net loss for the period	—	—	—		—		(78,824	)	(78,824	)
Net investment hedge of GBP denominated loans (net of taxes of $1,330)	—	—	—		(7,778	)	—		(7,778	)
Cross currency derivative financial instruments (net of taxes) (Note 12)	—	—	—		61		—		61
Cumulative translation adjustment	—	—	—		22,097		—		22,097
Balances, March 31, 2017	51,089,782	1,277,180	52,901		(329,444	)	(1,439,697	)	(439,060	)

Balances, January 1, 2018	51,282,901	1,283,083	52,757		(294,745	)	(2,951,608	)	(1,910,513	)
Exercise of share based compensation	673	17	(17	)	—		—		—
Share based compensation expense	—	—	1,272		—		—		1,272
Net loss for the period	—	—	—		—		(55,694	)	(55,694	)
Net investment hedge of GBP denominated loans (net of taxes of $3,531)	—	—	—		(22,690	)	—		(22,690	)
Cumulative translation adjustment	—	—	—		10,569		—		10,569
Balances, March 31, 2018	51,283,574	1,283,100	54,012		(306,866	)	(3,007,302	)	(1,977,056	)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

[6]

Concordia International Corp.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

(Stated in thousands of U.S. Dollars, except where otherwise stated)



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Cash flows from operating activities
Net loss for the period	(55,694	)	(78,824	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Interest and accretion expense (Note 13)	80,122		92,541
Interest income	(706	)	(18,479	)
Depreciation and amortization (Note 7)	66,077		57,205
Share based compensation expense	1,267		2,952
Non-cash inventory fair value adjustments (Note 6)	—		311
Fair value (gain) loss (Note 18)	425		192
Income tax expense (recovery)	4,704		4,489
Fair value (gain) loss on derivative financial instruments (Note 12)	—		27,314
Unrealized foreign exchange (gain) loss	(41,006	)	(9,665	)
Contingent consideration paid	—		(8,635	)
Income taxes paid	(6,722	)	(5,240	)
Income tax refunds	119		4,943
Other non-cash items	—		1,582
Changes in non-cash working capital (Note 23)	1,972		15,518
Net cash flows from operating activities	50,558		86,204
Cash flows used in investing activities
Purchase of fixed assets and development costs (Note 7)	(1,860	)	(484	)
Proceeds from sale of assets	3		—
Interest earned	274		167
Net cash flows used in investing activities	(1,583	)	(317	)
Cash flows used in financing activities
Repayment of long-term debt (Note 13)	(11,282	)	(10,778	)
Contingent consideration paid	—		(97,241	)
Interest paid (Note 13)	(27,577	)	(43,496	)
Net cash flows used in financing activities	(38,859	)	(151,515	)
Net change in cash and cash equivalents	10,116		(65,628	)
Effects of exchange rate changes on cash and cash equivalents	6,688		3,867
Cash and cash equivalents, beginning of period	327,030		397,917
Cash and cash equivalents, end of period	343,834		336,156

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.

[7]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

1. Description of Business and General Information

Concordia International Corp. (the "Company", "Concordia", and together with its subsidiaries, the "Group") is an international specialty pharmaceutical company, owning or licensing, through its subsidiaries, a diversified portfolio of branded and generic prescription products. Concordia's business currently consist of two reportable segments, Concordia International and Concordia North America, as well as a Corporate cost centre.

The Concordia International segment operations are conducted through Concordia Investments (Jersey) Limited and certain of its subsidiaries ("Concordia International"). Concordia International is an international specialty pharmaceutical business, owning or licensing a diversified portfolio of branded and generic prescription products, which are sold to wholesalers, hospitals and pharmacies in over 90 countries.

The Concordia North America segment has a diversified product portfolio that focuses primarily on the United States pharmaceutical market. Concordia North America operations are conducted through Concordia Pharmaceuticals Inc., S.à R.L. ("CPI") and Concordia Laboratories Inc., S.à R.L. ("CLI"). CPI has a portfolio of branded products and authorized generic contracts. CLI owns Photofrin®, for the treatment of certain forms of rare cancer. CLI is currently focusing on the use of Photofrin® for the treatment of lung cancer in line with its approved indications.

Both the Concordia International and Concordia North America segments have products manufactured and sold through an out-sourced production and distribution network and marketed internationally through a combination of direct sales and local partnerships, except for Photofrin® distribution in the United States, which is completed by an affiliate of the Company. Manufacturing is outsourced to a network of contract manufacturers.

The Corporate cost centre consists of centralized costs incurred by the Company, as ultimate parent company of the Group.

Concordia's business does not experience a significant amount of seasonal variation in demand.

The Company’s shares are listed for trading on the Toronto Stock Exchange under the symbol "CXR" and are listed for trading on the NASDAQ Global Select Market® under the symbol "CXRX".

The registered and head office of the Company is located at 277 Lakeshore Rd. East, Suite 302, Oakville, Ontario, L6J 1H9.

These consolidated financial statements include trademarks that are protected under applicable intellectual property laws and are the property of Concordia or its affiliates or its licensors. Solely for convenience, the trademarks of Concordia, its affiliates and/or its licensors referred to in these financial statements may appear with or without the ® or ^TM symbol, but such references or the absence thereof are not intended to indicate, in any way, that the Company or its affiliates or licensors will not assert, to the fullest extent under applicable law, their respective rights to these trademarks. Any other trademarks used in these consolidated financial statements are the property of their respective owners.

[8]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

2. Realignment of Capital Structure and Going Concern

In 2017, the Company announced as part of its long-term strategy an objective to realign its capital structure, which includes an intention to significantly reduce the Company’s existing secured and unsecured debt obligations. On October 20, 2017, as part of the Company’s efforts to realign its capital structure, the Company and one of its wholly-owned direct subsidiaries commenced a court proceeding (the “CBCA Proceedings”) under the Canada Business Corporation Act ("CBCA"). The CBCA is a Canadian corporate statute that includes provisions that allow Canadian corporations to restructure certain debt obligations, and is not a bankruptcy or insolvency statute. The preliminary interim order issued by the Ontario Superior Court of Justice (the "Court") provides a stay of proceedings, which continues to be effective, against any third party that is party to, or a beneficiary of, any loan, note, commitment, contract or other agreement with the Company or any of its subsidiaries, including the Company's debtholders, from exercising any rights or remedy or any proceeding, including, without limitation, terminating, demanding, accelerating, setting-off, amending, declaring in default or taking any other action under or in connection with any loan, note, commitment, contract, or other agreement of the Company and its subsidiaries on the terms set out in the Court order.

In connection with the Company's efforts to realign its capital structure and as contemplated by the CBCA Proceedings, the Company has elected to not make scheduled payments on the following debt obligations: payments under its 7% unsecured senior notes (Note 13 (d)); payments under its 9.5% unsecured senior notes (Note 13 (c)); and payments under its unsecured extended equity bridge facility (Note 13 (b)). During the CBCA Proceedings, the Company has been, and intends to, continue to make scheduled ordinary course interest and principal payments under its secured debt facilities (Note 13 (a) and (e)), as applicable. The commencement of the CBCA Proceedings and non-payment of the scheduled payments noted above resulted in events of default under the Company's credit facilities and the Company's cross currency swap agreements ("Currency Swaps"), and therefore the outstanding debt and Cross Currency Swap Liability (as defined below) have been presented as current liabilities. Refer to Notes 13 and 12 for additional details associated with events of default applicable under certain of the Company's credit facilities and Currency Swaps, respectively.

Proposed Recapitalization Transaction

On May 2, 2018, the Company announced a proposed transaction to realign its capital structure (the “Recapitalization Transaction”). The details of the Recapitalization Transaction are further described in the subsequent events note (refer to Note 24), and in the Company's term sheet dated as of May 1, 2018, the support agreement between the Company, certain subsidiaries of the Company, and certain holders of the Company’s secured debt and unsecured debt dated as of May 1, 2018 (the "Support Agreement") and the subscription agreement between the Company, certain subsidiaries of the Company, and certain holders of the Company’s secured debt and unsecured debt dated as of May 1, 2018 (the "Subscription Agreement").

A management information circular outlining all the key terms of the Recapitalization Transaction is expected to be mailed to relevant stakeholders prior to the scheduled June 19, 2018 meeting date where secured and unsecured debtholders and shareholders will vote on the approval of, among other things, the Company's CBCA Plan (as defined in Note 24). The Company believes the Recapitalization Transaction, once completed, will realign the Company's capital structure, and significantly reduce the Company's outstanding debt.

Upon completion of the Recapitalization Transaction, the Company expects to have New Secured Debt (as defined in Note 24) of approximately $1.4 billion and cash on hand in excess of $200 million, after payment of related advisor fees and recapitalization transaction costs.

Going Concern

[9]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Code. The Company may not be able to restructure and reduce its debt obligations and this results in a material uncertainty that may cast significant doubt upon the Company’s ability to continue as a going concern.

These financial statements have been prepared on a going concern basis, which asserts the Company has the ability in the near term to continue to realize its assets and discharge its liabilities and commitments in a planned manner giving consideration to the above and expected possible outcomes. Conversely, if the going concern assumption is not appropriate, adjustments to the carrying amounts of the Company's assets, liabilities, revenues, expenses and balance sheet classifications may be necessary, and these adjustments could be material.

3. Significant Accounting Policies


(a)	Basis of Presentation

These condensed interim consolidated financial statements for the three month period ended March 31, 2018 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") applicable to the preparation of interim financial statements including IAS 34, "Interim Financial Reporting". The condensed interim consolidated financial statements have been prepared under the historical cost convention, except for certain financial instruments that are measured at fair values. These condensed interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with Concordia's annual consolidated financial statements as at and for the year ended December 31, 2017.

The condensed interim consolidated financial statements are prepared in accordance with the accounting policies as set out in the Company's annual consolidated financial statements as at December 31, 2017, prepared in accordance with IFRS, except for the adoption of new and amended accounting standards as set out below in (d). The presentation of these condensed interim consolidated financial statements is consistent with the presentation of the annual consolidated financial statements. Refer to Note 4 for a discussion of the change in estimate relating to the amortization of certain intangible assets.

The condensed interim consolidated financial statements are prepared on a going concern basis and have been presented in U.S. dollars, which is also the Company’s functional currency.


(b)	Comparative Financial Information

Certain prior period balances have been re-classified to conform with the current period financial statement presentation.


(c)	Recent Accounting Pronouncements

The International Accounting Standards Board ("IASB") has not issued any significant new accounting standards that impact the Company that are not already described in the Company's annual financial statements for the year ended December 31, 2017.


(i)	Recent accounting pronouncements not yet adopted

The following pronouncements that may be significant to the Company were issued by the IASB or the IFRS Interpretations Committee. Those pronouncements that are not applicable or do not have a significant impact to the Company have been excluded from the summary below.

[10]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

The following pronouncements have not yet been adopted by the Company and are being evaluated to determine the resultant impact, as summarized below:

Leases

IFRS 16, "Leases" ("IFRS 16"), sets out the principles for the recognition, measurement and disclosure of leases. IFRS 16 provides revised guidance on identifying a lease and for separating lease and non-lease components of a contract. IFRS 16 introduces a single accounting model for all lessees and requires a lessee to recognize right-of-use assets and lease liabilities for leases with terms of more than 12-months, unless the underlying asset is of low value. Under IFRS 16, lessor accounting for operating and finance leases will remain substantially unchanged. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted for entities that apply IFRS 15. The Company is currently evaluating the impact of adopting this standard on the consolidated financial statements, however it does not expect the standard to have a significant impact due to the limited volume and magnitude of leases entered into by the Company.

Uncertainty over Income Tax Treatments

On June 7, 2017, the IASB issued IFRIC 23, Uncertainty over Income Tax Treatments ("IFRIC 23"). IFRIC 23 clarifies the application of recognition and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over income tax treatments. The IFRIC 23 interpretation specifically addresses whether an entity considers uncertain tax treatments separately; the assumptions an entity makes about the examination of tax treatments by taxation authorities; how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and how an entity considers changes in facts and circumstances. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019, with earlier application permitted. The Company is currently evaluating the impact of adopting this standard on the consolidated financial statements.


(ii)	Recent accounting pronouncements adopted

Revenue Recognition

IFRS 15, "Revenue from Contracts with Customers" ("IFRS 15"), provides a comprehensive five-step revenue recognition model for all contracts with customers. IFRS 15 replaced IAS 18, "Revenue" ("IAS 18") which covered contracts for goods and services and IAS 11 which covered construction contracts. The IFRS 15 revenue recognition model requires management to exercise significant judgment and make estimates that affect revenue recognition. The new standard is based on the principle that revenue is recognized when control of a good or service transfers to a customer. The standard was effective January 1, 2018 and has been adopted by the Company using the modified retrospective approach.

[11]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Management has assessed the effects of applying the new standard on the Company's financial statements and has identified the following areas that were affected:

•

Accounting for variable consideration - IFRS 15 requires that the Company recognize revenue as performance obligations are satisfied to the extent there will not be a significant reversal in the future when the uncertainty surrounding any components of variable consideration is subsequently resolved. This had the potential to impact revenue recognition associated with the chargebacks, returns, rebates, prompt pay and other price adjustments components of contracts with the Company's customers. The Company recognizes variable consideration at the inception of the revenue recognition process, which is consistent with the Company's accounting policy under IAS 18, and therefore no impact was noted.

•

Accounting for sales to distributors - IFRS 15 requires that the Company recognize revenue upon the transfer of control to the customer, which requires the Company to apply judgment based on the indicators provided in the standard, that had the potential to impact the timing of revenue recognition. Under certain of the Company's arrangements associated with sales to distributors, revenue is not recognized until the product is sold to the end customer, either because inventory is on consignment at the distributor, or because the final selling price is not determinable until the product is sold to the end customer. The Company has determined that the timing of revenue recognition for sales to distributors is not impacted on adoption of IFRS 15.

Financial Instruments

The final version of IFRS 9, "Financial Instruments" ("IFRS 9"), was issued by the IASB in July 2014 and replaced IAS 39, "Financial Instruments: Recognition and Measurement". IFRS 9 introduces a model for classification and measurement, a single, forward-looking “expected loss” impairment model and a substantially reformed approach to hedge accounting. The new single, principle-based approach for determining the classification of financial assets is driven by cash flow characteristics and the business model in which an asset is held. The new model also results in a single impairment model being applied to all financial instruments, which will require more timely recognition of expected credit losses. It also includes changes in respect of own credit risk in measuring liabilities elected to be measured at fair value, so that gains caused by the deterioration of an entity’s own credit risk on such liabilities are no longer recognized in profit or loss. IFRS 9 was effective as at January 1, 2018.

The Company has reviewed its financial assets and financial liabilities with respect to new guidance under IFRS 9. Accordingly, the Company has determined the new guidance does not affect the classification and measurement of its financial assets. Additionally, the Company has determined that there is no impact on the accounting for its financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and which are subject to fair value changes as a result of the entity's own credit risk.

The new impairment model for financial assets requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at fair value through other comprehensive income, contract assets under IFRS 15, lease receivables, loan commitments and certain financial guarantee contracts. The Company has determined that there is not a significant increase in the loss allowance for accounts receivable as a result of adopting IFRS 9.

The Company has adopted the standard on the effective date of January 1, 2018. The standard has been implemented following the specific transitional requirements listed in the standard related to classification and measurement, impairments and hedge accounting. This results in prospective application.

[12]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Financial Instruments Disclosures

IFRS 7, "Financial Instruments: Disclosures" ("IFRS 7"), has been amended by the IASB to require additional disclosures on transition from IAS 39 to IFRS 9. The amendment to IFRS 7 is effective for periods beginning on or after January 1, 2018. The Company has reflected the additional disclosures in these condensed interim consolidated financial statements for the three month period ended March 31, 2018.


(d)	Changes in Accounting Policies

A number of new or amended accounting standards became applicable for the current reporting period and the Company had to change its accounting policies as a result of adopting the following standards:


•	IFRS 9, "Financial Instruments"


•	IFRS 15, "Revenue from Contracts with Customers"

The new accounting policies as a result of adoption of IFRS 9 and IFRS 15 are described below. The new accounting policies have been applied from January 1, 2018, where they are different to those applied in prior periods. IFRS 9 and IFRS 15 were adopted without restating comparative information.


(i)	Revenue Recognition

Revenue is recorded as net revenue and is recognized in the consolidated statement of loss when a contractual promise to a customer (performance obligation) has been fulfilled by transferring control over the promised goods to the customer, generally at the point in time of shipment to or receipt of the products by the customer. The amount of revenue to be recognized is based on the consideration the Company expects to receive in exchange for its goods. If a contract contains more than one performance obligation, the consideration is allocated based on the standalone selling price of each performance obligation.

The consideration the Company receives in exchange for its goods may be fixed or variable. Variable consideration is only recognized to the extent it is highly probable that a significant reversal will not occur when the uncertainty surrounding any components of variable consideration is subsequently resolved. The most common and significant elements of variable consideration include chargebacks, returns, rebates, prompt pay and other price adjustments. Refer to Note 4 for further details relating to these elements of variable consideration.

Revenue represents the amounts receivable after providing for the elements of variable consideration, including the deduction of discounts, allowances given, provisions for chargebacks, other price adjustments and accruals for estimated future rebates and returns. Provisions for revenue deductions are adjusted to actual amount as discounts, allowances, chargebacks, price adjustments, rebates and returns are processed. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these sales deductions.

The Company operates in a number of different geographical segments, with different markets. Further detail by segment related to revenue recognition is described below:

Concordia North America segment

Revenue within the Concordia North America segment is primarily derived from two customer groups, those being wholesalers and Authorized Generic Partners (“AG Partners”). Revenue is recognized at the time of sale to the wholesaler and AG Partners as this is the point of transferring control over the promised goods to the customer, based on the following; 1) the wholesalers and AG Partners are responsible for setting their sales price to the final customer and collecting on their receivables; 2) the

[13]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Company can reliably measure the amount of revenue to be recognized (this includes the impact of gross to net adjustments, including expected returns, wholesaler and retail inventory levels, prescription data, current market trends, competitor activity and historical experience); 3) the wholesalers and AG Partners are responsible for managing their customers; and 4) costs associated with the sale have been incurred at the time the product is sold to the wholesaler and the AG Partner. Revenue related to Photofrin® is concentrated primarily within the United States and operates through distributors. The point of revenue recognition is at the time the distributors receive the product. Revenue is recognized at this time as the distributor has obtained control over the promised goods since they have no right of return, except for expired product (at which point they are entitled only to a replacement product), and full risk of ownership of the product has been transferred.

The Company also earns revenue from licensing and profit-sharing arrangements. Under these arrangements revenue is recognized as earned in accordance with the substance of the relevant agreement. Arrangements determined on a time basis are recognized on a straight-line basis over the period of the agreement. Arrangements that are based on production, sales and other measures are recognized at a point in time once the performance obligations are satisfied by reference to the underlying arrangement.

Royalty income is recognized over a period of time as the performance obligations are satisfied in accordance with royalty agreements.

Concordia International segment

The Concordia International segment is similar to the Concordia North America segment, as revenue is recognized at the time of sale to the wholesalers, hospitals and pharmacies, as this is the point of transferring control over the promised goods to the customer. The Concordia International segment is not subject to significant levels of gross to net adjustments. Revenue is recognized on either shipment or receipt by the customer depending on the contractual terms of the sales agreement.


(ii)	Trade Receivables

Trade receivables are initially recognized at their invoiced amounts. Provisions for doubtful trade receivables, recorded as allowance for doubtful accounts, are established using an expected credit loss model. The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. These provisions represent the difference between the trade receivables' carrying amount in the consolidated balance sheet and the estimated net collectible amount. Charges for doubtful trade receivables are recorded as bad debt expense within selling and marketing expenses in the consolidated statement of loss.

4. Critical Accounting Estimates and Judgments and Key Sources of Estimation Uncertainty

The preparation of the condensed interim consolidated financial statements requires management to make a number of judgments, estimates and assumptions regarding recognition and measurement of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed interim consolidated financial statements, the significant judgments made by management in applying the group policies and the key sources of estimation uncertainty were the same as those applied to the consolidated annual financial statements for the year ended December 31, 2017.

Change in estimate

During the first quarter of 2018, the Company assessed the use of the straight line amortization method for certain intangible assets within the Concordia International and Concordia North America segments and determined

[14]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

that, based on recent developments and historical patterns of commercial benefit, certain assets should be amortized based on a declining balance model to align with corresponding expected future cash flows. Specifically, the Company determined that this method of amortization better reflects the pattern in which acquired product rights and manufacturing processes future economic benefits are expected to be realized by the Company. Products rights and manufacturing process assets are now predominantly amortized using the declining balance model.

This change in estimate resulted in an increase in amortization expense for the three month period ended March 31, 2018 of approximately $18 million. The impact for the remainder of the year is estimated to be approximately $55 million.

5. Accounts Receivable



As at	Mar 31, 2018		Dec 31, 2017
Accounts receivable	150,493		148,805
Allowance for doubtful accounts	(2,411	)	(2,777	)
Total	148,082		146,028

An aging of accounts receivable balances past due is as follows:



As at	Mar 31, 2018	Dec 31, 2017
Past due 1 - 30 days	4,648	6,280
Past due 31 - 60 days	2,049	2,642
Past due 61 - 120 days	2,588	3,070
Past due more than 120 days	3,080	3,344
Total	12,365	15,336

Amounts past due represent accounts receivable past due based on the customer's contractual terms. The net amounts past due are approximately $12 million, which is equivalent to 8% of the net accounts receivable balance as at March 31, 2018. The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables.

6. Inventory



As at	Mar 31, 2018		Dec 31, 2017
Finished goods	62,757		65,852
Raw materials	19,581		23,842
Work in process	13,126		9,511
Obsolescence reserve	(24,984	)	(22,489	)
Total	70,480		76,716

Inventory costs charged to cost of sales during the three month period ended March 31, 2018 were $39,977, respectively (2017 - $37,626). The three month expense includes $nil (2017 - $311) of non-cash fair value adjustments related to inventories acquired through the acquisition of four generic products and their associated global rights. The Company increased its reserve for obsolete inventory by $2,495 during the three month period ended March 31, 2018.

[15]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

7. Intangible Assets



	Acquired Product Rights and Manufacturing Processes		Intellectual Property		Distribution Contracts		Supplier Contracts		In-Process Research and Development	All Other Intangibles		Total
Balances, January 1, 2018	1,381,631		26,185		16,683		68,805		9,269	1,305		1,503,878
Additions	—		—		—		—		1,169	39		1,208
Amortization	(57,255	)	(410	)	(1,522	)	(6,229	)	—	(191	)	(65,607	)
Impact of foreign exchange	39,460		—		636		2,602		564	21		43,283
Balances, March 31, 2018	1,363,836		25,775		15,797		65,178		11,002	1,174		1,482,762

During the first quarter of 2018, the Company assessed the use of the straight line amortization method for certain intangible assets and determined that, based on recent developments and historical patterns of economic benefit, certain assets should be amortized based on a declining balance model to align with corresponding expected future cash flows. Refer to Note 4 for a discussion of the change in estimate relating to the amortization of certain intangible assets.

8. Goodwill



	Total
Balance, January 1, 2018	244,957
Impact of foreign exchange	8,732
Balance, March 31, 2018	253,689

9. Accounts Payable and Accrued Liabilities



As at	Mar 31, 2018	Dec 31, 2017
Trade payables	33,740	26,351
Accrued liabilities	63,035	68,994
Interest payable on long-term debt	159,131	106,568
Total	255,906	201,913

10. Provisions

The following table describes movements in the Company’s provisions balance by nature of provision:



	Chargebacks/Rebates/Co-pay		Returns		Inventory management		Prompt pay		Total
Balance, January 1, 2018	16,595		11,066		5,883		552		34,096
Additions	27,532		1,148		4,328		1,372		34,380
Utilization	(27,750	)	(3,062	)	(4,092	)	(1,351	)	(36,255	)
Balance, March 31, 2018	16,377		9,152		6,119		573		32,221

The closing balance relates to provisions made to estimate the liabilities arising from chargebacks, rebates, returns and other price adjustments recorded as a reduction of revenue. Payments are expected within 12 months

[16]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

from the balance sheet date. Invoices received for such charges and estimates are shown in the accounts payable when received. The provision is for the uninvoiced portion of the charges and estimates.

11. Income Taxes

There have been no material changes to tax matters in connection with reporting periods subsequent to the filing of the Company's consolidated annual financial statements for the year ended December 31, 2017. Refer to Note 12 in the Company’s consolidated annual financial statements for the year ended December 31, 2017 for a full description of the Company’s tax matters.

The Company is subject to income tax in numerous jurisdictions with varying tax rates. During the current period ended there was no material change to the statutory tax rates in the taxing jurisdictions where the majority of the Company’s income for tax purposes was earned or where its temporary differences or losses are expected to be realized or settled.

Although tax rates may not have changed materially, the impact of commercial decisions and market forces result in changes to the distribution of income for tax purposes amongst taxing jurisdictions that may result in a change of the tax rate applicable to such item of income or temporary difference.

The Company continues to believe the amount of unrealized tax benefits appropriately reflects the uncertainty of items that are or may in the future be under discussion, audit, dispute or appeal with a tax authority or which otherwise result in uncertainty in the determination of income for tax purposes. If appropriate, an unrealized tax benefit will be realized in the reporting period in which the Company determines that realization is not in doubt. Where the final determined outcome is different from the Company’s estimate, such difference will impact the Company’s income taxes in the reporting period during which such determination is made.

12. Cross Currency Swap Liability

The Company entered into the Currency Swaps as economic hedges of certain cash flows from its Concordia International segment denominated in Great British Pounds ("GBP") and long-term debt repayments denominated mainly in United States Dollars ("USD"). The Company determines for each derivative contract entered into whether hedge accounting will be applied at inception, which is based on the facts and circumstances of each contract.

Payments and contractual obligations under the Currency Swaps were with the same counterparty, however are settled on a gross basis. Therefore, the fair value of the pay and receive portions along with interest payable and receivable have been presented on a gross basis within the consolidated statement of loss and comprehensive loss and balance sheet.

On October 20, 2017, the Company was notified by the counterparty to the Currency Swaps that one or more events of default occurred under the Currency Swaps as a result of the Company obtaining a preliminary interim order from the Court pursuant to the arrangement provisions of the CBCA. As a result of the foregoing, the counterparty to the Currency Swaps designated October 23, 2017 as the early termination date with respect to all transactions under the Currency Swaps. The amount due on the date of termination on the Currency Swaps as asserted by the counterparty was $114,431 (the "Cross Currency Swap Liability"). Any demand for payment has been stayed by the preliminary interim order granted by the Court in the CBCA Proceedings. On May 2, 2018, in connection with the announcement of the Recapitalization Transaction, the Company agreed to the amount of the Cross Currency Swap Liability. The Cross Currency Swap Liability bears interest at a rate equal to the rate of interest due on the USD Term Loan (as defined below) and is payable with the same frequency and on the same date as such payments are made on the USD Term Loan, pursuant to the Concordia International Credit Agreement, subject to the terms of the termination agreement between the Company and the counterparty to the Currency Swaps. The Company has and continues to pay the foregoing interest associated with the Cross Currency Swap Liability pursuant to such termination agreement. The counterparty to the Cross Currency Swap Liability has entered into the Support Agreement with the Company in connection with the Recapitalization

[17]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Transaction, and pursuant to the Support Agreement will be entitled to the same treatment as the Company's Secured Debt as noted in Note 24.

During the three month period ended March 31, 2018, the Company incurred and recorded interest expense of $1,672 (2017 - $nil) related to the outstanding Cross Currency Swap Liability.

Unrealized foreign exchange (gain) loss

Unrealized foreign exchange gain for the three month period ended March 31, 2018 was $41,006 (2017 - $9,665). The primary component of the unrealized foreign exchange (gain) loss is the recognition of accumulated unrealized foreign exchange gains on certain inter-company loans associated with the Company's investment in the Concordia International segment. Prior to entering into the Currency Swaps, foreign exchange translation gains and losses on these inter-company loans were not included in the statement of loss given the loans formed part of the permanent investment in those subsidiaries. In entering into the Currency Swaps, certain inter-company loans became designated as hedged items, and subject to on-going repayment. Accordingly, the inter-company loans were no longer considered to be permanent investments in the related subsidiaries and changes in foreign exchange result in unrealized foreign exchange gains and losses recorded in the consolidated statement of loss. All such loans are eliminated on consolidation.

13. Long-term Debt



As at	Mar 31, 2018		Dec 31, 2017
Term Loan Facilities^(a)
- USD Term Loan	1,054,625		1,061,500
- GBP Term Loan	672,900		651,086
Bridge Facilities ^(b)	100,832		100,832
9.5% Senior Notes^(c)	790,000		790,000
7% Senior Notes ^(d)	735,000		735,000
9% Senior Secured Notes ^(e)	350,000		350,000
Total long-term debt	3,703,357		3,688,418
Less: current portion	(3,703,357	)	(3,688,418	)
Long-term portion	—		—

The commencement of the CBCA Proceedings during the fourth quarter of 2017 resulted in an event of default under the Concordia International Credit Agreement which includes the Term Loan (as defined below) facilities, the indentures governing the Company's 9% senior secured notes and 9.5% unsecured senior notes and the Currency Swaps. As a result of the foregoing events of default, a cross default was triggered under the indenture governing the 7% unsecured senior notes and the unsecured extended equity bridge facility, however any demand for payment of this debt has been stayed by the preliminary interim order granted by the Court in the CBCA Proceedings. The Company accelerated the accretion of the deferred financing fees associated with all of the Company's lending arrangements during the fourth quarter of 2017 and therefore there is no accretion expense related to deferred financing fees recorded during the first quarter of 2018.

During the CBCA Proceedings the Company has been and intends to continue to make scheduled, ordinary course interest and principal payments under its secured debt facilities, described in (a) and (e) below, and the Currency Swaps, as applicable. Conversely, during the CBCA Proceedings, the Company has not made scheduled payments on its unsecured debt facilities, described in (b), (c) and (d) below. Refer to Note 2 for a discussion on the stay of proceedings applicable to the Company's debt agreements.


(a)	On October 21, 2015 (the "Closing Date") the Company, through a wholly owned subsidiary, completed the acquisition of 100% of the outstanding shares of Amdipharm Mercury Limited (the "Concordia International Acquisition") from Cinven, a European private equity firm, and certain other sellers. To

[18]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

finance the Concordia International Acquisition, the Company entered into a credit agreement (the "Concordia International Credit Agreement") on October 21, 2015 pursuant to which a syndicate of lenders made available secured term loans in the aggregate amounts of $1.1 billion in one tranche (the "USD Term Loan") and £500 million in a separate tranche (the "GBP Term Loan", and together with the USD Term Loan, the "Term Loans"). All obligations of the Company under the Term Loans are guaranteed by all current and future material subsidiaries of the Company and include security of first priority interests in the assets of the Company and its material subsidiaries. The Term Loans contain a maturity date of October 21, 2021, have variable interest rates and require quarterly principal repayments. During the three month period ended March 31, 2018, the Company made principal payments of $6,875 and £3,125 on the USD Term Loan and GBP Term Loan, respectively. The Term Loans may require certain principal repayments calculated by reference to the Company’s excess cash flow as defined in the Concordia International Credit Agreement, calculated annually in respect of the prior year. No payments calculated by reference to the Company's excess cash flow were required to be made in 2018 with respect to 2017. In addition, any payments that would be due as a result of the excess cash flow calculation would be stayed by the CBCA preliminary interim order. Interest rates on the Term Loans are calculated based on LIBOR plus applicable margins, with a LIBOR floor of 1%. Interest expense on the Term Loans for the three month period ended March 31, 2018 was $34,273 (2017 - $23,489). Commencing in 2017 the quarterly principal repayments on the Term Loans increased from a rate of 0.25% to 0.625%, and in 2019 increase to 1.25%.

(b)

On the Closing Date a syndicate of lenders also provided the Company with a senior unsecured equity bridge term loan facility of $135 million (the "Extended Bridge Loan") and a senior unsecured equity bridge term loan facility of $45 million, the latter of which was settled during the fourth quarter of 2017. All obligations of the Company under the Extended Bridge Loan, subject to certain customary exceptions, are guaranteed by all material subsidiaries of the Company. The Extended Bridge Loan has a seven year term to maturity and an interest rate of 9.5% for two years. As the Extended Bridge Loan was not repaid on October 21, 2017, the interest rate increased to 11.5%. Through to October 21, 2018, lenders holding the Extended Bridge Loan may make a proposal for an offering of new securities which may carry a weighted average effective yield that is up to 150 basis points greater than 11.5%. On or after October 21, 2018 the lenders holding the Extended Bridge Loan may request the exchange of the Extended Bridge Loan into bonds with a maturity date of October 21, 2022 and bearing interest of 11.5%. Interest expense that was accrued on the Extended Bridge Loan for the three month period ended March 31, 2018 was $3,552 (2017 - $3,193).

(c)

On the Closing Date, the Company issued at par $790 million 9.5% senior unsecured notes due October 21, 2022 (the "October 2015 Notes"). The October 2015 Notes require no payment of principal throughout their term. Interest on the October 2015 Notes is payable semi-annually on June 15th and December 15th of each year. Interest expense that was accrued on the October 2015 Notes for the three month period ended March 31, 2018 was $19,387 (2017 - $18,505).

(d)

In connection with the acquisition of a portfolio of products from Covis Pharma S.à R.L. and Covis Injectables S.à R.L. on April 21, 2015 (the "Covis Acquisition") the Company issued at par $735 million 7.00% senior unsecured notes due April 21, 2023 (the "Covis Notes"). The Covis Notes require no payment of principal throughout their term. Interest on the Covis Notes is payable semi-annually on April 15th and October 15th of each year. Interest expense that was accrued on the Covis Notes for the three month period ended March 31, 2018 was $12,792 (2017 - $12,792).

(e)

On October 13, 2016, the Company issued at par $350 million 9.00% senior secured first lien notes due April 1, 2022 (the "Secured Notes"). The Secured Notes require no payment of principal throughout their term. Interest on the Secured Notes is payable semi-annually on April 1st and October 1st of each year. Interest expense on the Secured Notes for the three month period ended March 31, 2018 was $7,972 (2017 - $7,767).

The fair value of long-term debt as at March 31, 2018 was $2.0 billion (December 31, 2017 - $1.9 billion).

The following table describes movements in the Company’s long-term debt balance:

[19]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)



Balance, January 1, 2018	3,688,418
Repayments	(11,282)
Impact of foreign exchange	26,221
Balance, March 31, 2018	3,703,357

Interest expense



	Three months ended
	Mar 31, 2018	Mar 31, 2017
Interest expense payable in cash	77,976	65,746
Interest expense on Currency Swaps (Note 12)	—	18,303
Interest expense on Cross Currency Swap Liability (Note 12)	1,672	—
Non-cash items:
Accretion of deferred financing fees	—	7,461
Other non-cash interest	474	1,031
Interest and accretion expense	80,122	92,541

14. Share Capital

The Company is authorized to issue an unlimited number of common shares.



	Number of Common Shares	$
Balances, January 1, 2018	51,282,901	1,283,083
Vesting of restricted share units	673	17
Balances, March 31, 2018	51,283,574	1,283,100

[20]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

15. Loss Per Share



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Net loss for the period attributable to shareholders	(55,694	)	(78,824	)

Weighted average number of common shares in issue	51,283,475		51,089,556
Adjustments for:
Dilutive stock options	—		1,732
Dilutive unvested shares	2,402,192		1,598,902
Weighted average number of fully diluted shares	53,685,667		52,690,190

Loss per share
Basic loss per share	(1.09	)	(1.54	)
Diluted loss per share	(1.09	)	(1.54	)

For the periods noted above, the computation of diluted loss per share is equal to the basic loss per share due to the anti-dilutive effect of the stock options and unvested shares.

16. Commitments and Contingencies

Lease Commitments

The Company has operating leases relating to rental commitments for its various office locations, an aircraft lease and computer and electronic equipment leases. The leases typically run for a period of a number of months up to five years.

The below table sets forth the Company’s obligations under operating leases:



	Minimum Lease Payments
2018	3,154
2019	3,725
2020	1,972
2021	1,229
2022	969
Thereafter	905
	11,954

On October 13, 2017, two subsidiaries of the Company, Concordia Pharmaceuticals (US), Inc. and Pinnacle Biologics, Inc. entered into an agreement with the Company’s former Chief Executive Officer to guaranty payments due under the officer’s employment agreement. The guaranteed amount due to the former Chief Executive Officer was paid subsequent to March 31, 2018. Refer to Note 24.

[21]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Guarantees

All directors and officers of the Company are indemnified by the Company for various items including, but not limited to, all costs to defend lawsuits or actions due to their association with the Company, subject to certain restrictions. The Company holds directors’ and officers’ liability insurance to mitigate the cost of any potential future lawsuits or actions.

In the normal course of business, the Company has entered into agreements that include indemnities in favour of third parties, such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and consultants, leasing contracts, license agreements, supply agreements, distribution agreements, information technology agreements and various product, service, data hosting and network access agreements. These indemnification arrangements may require the applicable Company entity to compensate counterparties for losses incurred by the counterparties as a result of breaches in representations, covenants and warranties provided by the particular Company entity or as a result of litigation or other third party claims or statutory sanctions that may be suffered by the counterparties as a consequence of the relevant transaction.

In connection with the acquisition of Zonegran®, the Company guaranteed the payment, performance and discharge of the purchaser's payment and indemnification obligations under the asset purchase agreement and each ancillary agreement entered into by the purchaser in connection therewith that contained payment or indemnification obligations. Pursuant to the asset purchase agreement entered into in connection with the Covis Acquisition (the "Covis Purchase Agreement") the Company guaranteed the purchaser's obligations under the Covis Purchase Agreement. Pursuant to the share purchase agreement entered into by the Company in connection with the Concordia International Acquisition, the Company guaranteed the obligations of the purchaser under the share purchase agreement and related transaction documents.

Litigation and Arbitration

[22]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

On October 25, 2016, the Company announced that the UK Competition and Markets Authority (CMA) commenced an investigation into various issues in relation to the UK pharmaceutical sector, and that the Concordia International segment was part of the inquiry. The CMA’s investigation includes matters that pre-date Concordia’s ownership of the Concordia International segment and relates to the Company’s pricing of three products. On May 31, 2017, the Company announced that the CMA notified the Company that it was continuing its investigation after an initial stop/go decision. On November 21, 2017, the Company announced that the CMA issued a statement of objections to the Company, and the former owners of the Concordia International segment, Hg Capital and Cinven, in relation to the pricing of one of the three products, liothyronine, in the United Kingdom between November 2007 and at least July 2017. A statement of objections is a formal statement by the CMA that it considers that a competition infringement may have occurred. On February 15, 2018, the Company announced that the CMA notified the Company that it was closing its investigation related to Fusidic Acid, also one of the three products under investigation. On April 20, 2018, the Company responded in detail to the statement of objections.

[23]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Donnatal®. On January 6, 2016, the Company commenced a lawsuit against the third party and its principal owner claiming damages from such conduct, and on April 29, 2016 and May 3, 2016 commenced proceedings against two listing services for the continued listing of the products in their database. In May 2016, the Company became aware that this non-FDA approved product was introduced into certain US regions. On October 4, 2016 and November 16, 2016, the Company dismissed its claims against the listing services on a without prejudice basis, respectively. On March 15, 2017, the court ruled on the third party's motion to dismiss the Company's claim, denying such motion in part and granting it in part. On March 29, 2017, the third party filed its answer and counter claim in response to the Company's claim. On August 16, 2017, this third party filed a motion to amend its counterclaim to add factual allegations detailing the scope of the Company's campaign to disparage its products and interfere with its contractual and business relationships. On November 8, 2017, the court granted the Company's motion for leave to file its second amended complaint, permitting the Company to include its direct false advertising claim. The Company continues to pursue this lawsuit vigorously. In a similar lawsuit commenced against Method Pharmaceuticals, LLC ("Method") and its principal owner, the Company received a favorable jury verdict on April 21, 2016 and was awarded damages in the amount of approximately $733. On March 2, 2017, the United States District Court - Western District of Virginia, Charlottesville Division, granted the Company's motion for enhanced damages in part, to amend the judgment against Method and its principal owner to reflect an award of damages in the total amount of approximately $2.2 million. On March 30, 2017, Method filed a motion to reconsider the order on enhanced damages. On April 13, 2017, the Company filed an opposition to Method's motion to reconsider. On July 19, 2017, the court denied Method's motion to reconsider and further awarded the Company an additional $15 in costs. On August 30, 2017, Method filed a notice of appearance with the United States Court of Appeals for the Fourth Circuit to appeal the enhanced damages award. On February 1, 2018, Method and its principal owner and the Company settled the enhanced damages award.

17. Financial Risk Management

The Company’s activities expose it to certain financial risks, including currency risk, interest rate risk, credit risk and liquidity risk.

The unaudited condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual consolidated financial statements, and therefore should be read in conjunction with the Company's annual consolidated financial statements as at and for the year ended December 31, 2017.

[24]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Currency Risk

The Company operates primarily in USD, GBP and European Euro ("EUR"). Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

The table below shows the extent to which the Company has net monetary assets (liabilities) in currencies other than the functional currency of the Company.



As at	Mar 31, 2018	Dec 31, 2017
(Amounts in USD)
GBP	142,524	114,865
EUR	12,048	11,403
Indian Rupees	14,537	14,866
Swedish Krona	8,998	8,040
Australian Dollars	5,557	4,038
South African Rand	4,448	4,781
Papua New Guinea Kina	2,977	3,179
Canadian Dollars	1,217	447
Other	8,675	10,856
Total	200,981	172,475

Interest Rate Risk

The long-term debt which bears interest at floating rates is subject to interest rate cash flow risk resulting from market fluctuations in interest rates. Contingent consideration payable and certain long-term debt bear interest at a fixed rate of interest, and as such are subject to interest rate price risk resulting from changes in fair value from market fluctuations in interest rates. A 1% appreciation (depreciation) in the interest rate would result in the following:



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Impact of a 1% increase in interest rates for contingent purchase consideration payable on net loss	63		137
Impact of a 1% decrease in interest rates for contingent purchase consideration payable on net loss	(66	)	(146	)
Impact of a 1% increase in interest rates above LIBOR floor for long-term debt on net loss	(4,331	)	(4,255	)

Credit Risk

The Company’s investment policies are designed to mitigate the possibility of deterioration of principal, enhance the Company’s ability to meet its liquidity needs and provide high returns within those parameters. Management monitors the collectability of accounts receivable and estimates an allowance for doubtful accounts. As at March 31, 2018, the allowance for doubtful accounts was $2,411 (December 31, 2017 – $2,777).

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk primarily consist of accounts receivable.

The Company evaluates the recoverability of its accounts receivable on an on-going basis. As of March 31, 2018 the Company’s three largest U.S. wholesale customers account for approximately 26% or $39 million of net

[25]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

trade receivables and 18% or $27 million of total revenue. The Company does not consider there to be additional concentration risk within the Concordia International segment.

Liquidity Risk

The Company has a planning and budgeting process in place to determine funds required to support the Company's normal operating requirements on an ongoing basis. Since inception, the Company has financed its cash requirements primarily through issuances of securities, short-term borrowings and issuances of long-term debt. The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing.

Refer to Note 2 for a further discussion on the Company's realignment of its capital structure and related liquidity considerations.

The following tables summarize the Company’s significant contractual undiscounted cash flows as at March 31, 2018:



As at	Mar 31, 2018
Financial Instruments	< 3 months	3 to 6 months	6 months to 1 year	1 to 2 years	2 to 5 years	Thereafter	Total
Trade payables and accrued liabilities	96,775	—	—	—	—	—	96,775
Provisions	23,682	4,944	3,595	—	—	—	32,221
Long-term debt ^(a)	3,703,357	—	—	—	—	—	3,703,357
Interest on long-term debt ^(b)	159,131	—	—	—	—	—	159,131
Purchase consideration payable	6,986	—	—	—	3,770	—	10,756
Cross currency swap liability	114,431	—	—	—	—	—	114,431
	4,104,362	4,944	3,595	—	3,770	—	4,116,671

(a) Long-term debt cash flows include an estimate of the minimum required annual excess cash flow sweep (refer to Note 13 (a)). No payments of excess cash flow are expected to be made in 2018. In addition, any payments that would be due as a result of the excess cash flow calculation would be stayed by the CBCA preliminary interim order. Refer to Notes 2 and 13 for details on long-term debt classification as at March 31, 2018 and the CBCA Proceedings.

(b) The contractual interest amount as at March 31, 2018 reflects the accrued interest payable on long-term debt.

18. Financial Instruments – Fair Value Estimation

Accounting classifications and fair values

The fair value of a financial asset or liability is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. For the financial assets and liabilities of the Company, the fair values have been estimated as described below:



Cash and cash equivalents	- approximates to the carrying amount;
Long-term debt	- based on quoted price, or by reference to observable quoted prices for similar long-term debt;
Receivables and payables	- approximates to the carrying amount

The following table presents the fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy:

[26]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)



As at	Mar 31, 2018
	Level 1	Level 2	Level 3	Total
Financial liabilities measured at fair value through profit or loss
Purchase consideration	—	6,986	1,822	8,808
	—	6,986	1,822	8,808

As at	Dec 31, 2017
	Level 1	Level 2	Level 3	Total
Financial liabilities measured at fair value through profit or loss
Purchase consideration	—	6,986	1,398	8,384
	—	6,986	1,398	8,384

The current portion of purchase consideration as at March 31, 2018 is $6,986 (December 31, 2017 - $1,835).

Measurement of fair values



Purchase Consideration	Valuation Technique	Fair Value Hierarchy	Discount Rate	Purchase Consideration as at Mar 31, 2018
Pinnacle earn-out	Discounted cash flows	Level 3	19%	1,822
Pinnacle annual payments	Present value	Level 2	19%	6,986
Total purchase consideration				8,808
Less: current portion				(6,986	)
Long-term portion				1,822

There were no changes in valuation techniques used in measuring Level 2 and Level 3 fair values associated with purchase consideration and derivative financial instruments, during the period.

There were no transfers between Level 2 and Level 3 during the period.

During the three month period ended March 31, 2018 interest expense and changes in fair value of $425 (2017 - $718) related to purchase consideration was recognized in the consolidated statements of loss. The annual payments are expected to be addressed as part of the Recapitalization Transaction.

19. Capital Management

The Company’s capital management objectives are to safeguard its ability to provide returns for shareholders and benefits for other stakeholders, by ensuring it has sufficient cash resources to fund its activities, to pursue its commercialization efforts and to maintain its ongoing operations. The Company includes long-term debt and shareholders’ deficit in the definition of capital.

The below table sets forth the Company’s capital structure:



As at	Mar 31, 2018		Dec 31, 2017
Long-term debt (Note 13)	3,703,357		3,688,418
Shareholders' Deficit	(1,977,056	)	(1,910,513	)
	1,726,301		1,777,905

[27]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

20. Segmented Reporting

Operating Segments

The Company has two reportable operating segments: Concordia International and Concordia North America, as well as a Corporate cost centre. A brief description of each is as follows:

Concordia International

Concordia North America

Corporate

The following tables set forth operating income (loss), goodwill, total assets and total liabilities by reportable operating segment for the three month period ended March 31, 2018 and 2017.

[28]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)



	Concordia International		Concordia North America		Corporate		Three months ended March 31, 2018

Revenue	112,950		39,314		—		152,264
Cost of sales	41,673		9,485		—		51,158
Gross profit	71,277		29,829		—		101,106

Operating expenses
General and administrative	6,849		1,332		3,997		12,178
Selling and marketing	6,866		2,932		—		9,798
Research and development	5,814		1,292		—		7,106
Acquisition related, restructuring and other	5,472		(98	)	10,120		15,494
Share based compensation	—		—		1,267		1,267
Amortization of intangible assets	47,116		18,475		16		65,607
Depreciation expense	388		23		59		470
Fair value (gain) loss	—		425		—		425
Total operating expenses	72,505		24,381		15,459		112,345

Operating income (loss)	(1,228	)	5,448		(15,459	)	(11,239	)



	Concordia International	Concordia North America		Corporate		Three months ended March 31, 2017

Revenue	118,729	41,828		—		160,557
Cost of sales	37,501	7,641		—		45,142
Gross profit	81,228	34,187		—		115,415

Operating expenses
General and administrative	6,562	1,548		5,638		13,748
Selling and marketing	5,989	3,763		—		9,752
Research and development	5,747	2,237		—		7,984
Acquisition related, restructuring and other	3,731	6		1,479		5,216
Share based compensation	—	2		2,950		2,952
Amortization of intangible assets	27,161	29,544		12		56,717
Depreciation expense	401	26		61		488
Fair value (gain) loss	178	(582	)	596		192
Total operating expenses	49,769	36,544		10,736		97,049

Operating income (loss)	31,459	(2,357	)	(10,736	)	18,366

[29]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Income (loss) before tax includes the total operating income (loss) above plus other income and expense which do not form part of any reportable operating segment.



	Concordia International	Concordia North America	Corporate	Total
As at				Mar 31, 2018
Goodwill	225,723	27,966	—	253,689

Total assets	1,718,604	522,538	83,484	2,324,626

Total liabilities	374,041	50,322	3,877,319	4,301,682

As at				Dec 31, 2017
Goodwill	216,991	27,966	—	244,957

Total assets	1,670,351	543,530	108,454	2,322,335

Total liabilities	373,166	48,895	3,810,787	4,232,848

Geographic Information

The Company has major operations in Barbados, Canada, Ireland, Jersey, the United States and the United Kingdom. The following table sets forth revenue by geographic location based on contracted entity (excluding inter-company transactions):



For the three month period ended					Mar 31, 2018
	Barbados	United States	United Kingdom & Jersey	Ireland	All other countries	Total
Revenue	38,476	838	72,387	3,951	36,612	152,264

For the three month period ended					Mar 31, 2017
	Barbados	United States	United Kingdom & Jersey	Ireland	All other countries	Total
Revenue	38,938	2,890	86,564	3,230	28,935	160,557

Product Revenue by Category

Concordia International



	Three months ended
	Mar 31, 2018	Mar 31, 2017
Branded	53,085	47,149
Generics	59,865	71,580
Total	112,950	118,729

[30]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Concordia North America



	Three months ended
	Mar 31, 2018	Mar 31, 2017
Branded	32,299	30,647
Authorised Generics and other	7,015	11,181
Total	39,314	41,828

The following table sets forth assets and liabilities by geographic location (excluding inter-company balances and investments in subsidiaries):



As at	Mar 31, 2018
	Barbados	Canada	United States	United Kingdom & Jersey	Ireland	All other countries ⁽¹⁾	Total

Current assets	84,186	83,126	9,219	262,829	97,469	44,759	581,588
Non-current assets	414,717	358	14,416	1,163,897	66,369	83,281	1,743,038
Total assets	498,903	83,484	23,635	1,426,726	163,838	128,040	2,324,626

Current liabilities	46,746	3,877,319	767	200,789	33,602	3,862	4,163,085
Non-current liabilities	2,809	—	—	114,374	—	21,414	138,597
Total liabilities	49,555	3,877,319	767	315,163	33,602	25,276	4,301,682

As at	Dec 31, 2017
	Barbados	Canada	United States	United Kingdom & Jersey	Ireland	All other countries ⁽¹⁾	Total

Current assets	86,342	108,021	10,323	213,441	105,320	44,161	567,608
Non-current assets	433,083	433	13,782	1,153,633	69,890	83,906	1,754,727
Total assets	519,425	108,454	24,105	1,367,074	175,210	128,067	2,322,335

Current liabilities	38,800	3,810,787	2,526	201,629	33,206	4,056	4,091,004
Non-current liabilities	7,569	—	—	112,207	—	22,068	141,844
Total liabilities	46,369	3,810,787	2,526	313,836	33,206	26,124	4,232,848

Notes:

(1) All other countries is comprised primarily of Australia, India, Netherlands and Sweden.

[31]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

21. Directors and key management compensation

Compensation, consisting of salaries, performance and retention bonuses, other benefits, severance and director fees to key management personnel and directors for the three month period ended March 31, 2018 amounted to $1,946 (2017 – $1,315).

Share based compensation expense recorded for key management and directors, for the three month period ended March 31, 2018 amounted to $494 (2017 – $1,883).

22. Nature of expenses

The nature of expenses included in cost of sales and operating expenses are as follows:



	Three months ended
	Mar 31, 2018	Mar 31, 2017
Production, manufacturing and distribution costs	51,158	45,142
Salaries, bonus and benefits	13,661	11,941
Sales and marketing expenses	6,227	6,588
Research and development expenses	4,791	5,967
Share-based compensation	1,267	2,952
Amortization and depreciation	66,077	57,205
Fair value (gain) loss	425	192
Professional fees including restructuring costs	16,291	7,981
Travel expenses	774	695
Rent and facilities	796	659
Other expenses	2,036	2,869
Total	163,503	142,191

Acquisition related, restructuring and other costs during the three month period ended March 31, 2018 were primarily comprised of $8,261 of costs associated with the Company's realignment of its capital structure. Refer to Notes 2 and 24.

23. Non-cash working capital

Changes in non-cash working capital is comprised of:



	Three months ended
	Mar 31, 2018		Mar 31, 2017
Accounts receivable	(2,843	)	18,430
Inventory	6,830		1,160
Prepaid expenses and other current assets	(1,662	)	2,029
Trade payables and accrued liabilities	1,210		(4,131	)
Provisions	(1,552	)	(1,959	)
Other liabilities	(11	)	(11	)
Changes in non-cash working capital	1,972		15,518

[32]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

24. Subsequent Events

Management and Board of Directors Changes

On May 2, 2018, the Company announced that it appointed Graeme Duncan as its new Interim Chief Executive Officer, and also announced the departure of Allan Oberman, the Company's former Chief Executive Officer and Board member. The Company paid approximately $7.7 million in severance to the former Chief Executive Officer.

Capital realignment

On May 2, 2018, the Company announced a proposed Recapitalization Transaction, as described in Note 2, that includes a plan to raise new equity capital of $586.5 million, and to reduce the Company’s total outstanding debt by approximately $2.4 billion. Additionally, as part of the Recapitalization Transaction, the Company confirmed the termination amount of the Currency Swaps of $114,431.

In connection with the proposed Recapitalization Transaction, the Company entered into a Support Agreement with certain holders of the Company’s existing secured debt (the "Secured Debt") and certain holders of the Company’s existing unsecured debt (the "Unsecured Debt") that are subject to confidentiality agreements with Concordia and which hold in the aggregate approximately $1.6 billion in principal amount, or approximately 72%, of the Company’s Secured Debt and approximately $1.0 billion in principal amount, or approximately 64% of the Company’s Unsecured Debt (the “Initial Consenting Debtholders”). The Initial Consenting Debtholders are comprised of an ad hoc committee of holders of Secured Debt and an ad hoc committee of holders of Unsecured Debt. Pursuant to the Support Agreement, the Initial Consenting Debtholders have, among other things, agreed to support the Recapitalization Transaction and vote in favour of the plan of arrangement (the "CBCA Plan") in Concordia’s CBCA Proceedings under which the Recapitalization Transaction is expected to be implemented.

In addition, on May 2, 2018 Concordia obtained an interim order (the "Interim Order") issued by the Court in the CBCA Proceedings authorizing, among other things, the holding of the following meetings (the "Meetings") scheduled for June 19, 2018: (i) a meeting of holders of the Secured Debt (the “Secured Debtholders”); (ii) a meeting of holders of the Unsecured Debt (the “Unsecured Debtholders”); and (iii) a meeting of holders of the Company’s common shares (the “Shareholders”), in each case to consider and vote upon, among other things, the CBCA Plan to implement the Recapitalization Transaction.

The Recapitalization Transaction contemplates the following key terms and conditions:

Secured Debt

•

The Company’s Secured Debt in the aggregate principal amount of approximately $2.2 billion, plus accrued and unpaid interest, will be exchanged for (i) cash in an amount equal to any outstanding accrued and unpaid interest (at contractual non-default rates) in respect of the Secured Debt, (ii) cash in the amount of $500 million (the “Secured Creditor Cash Pool”), (iii) any Additional Cash Amount (as defined below) and (iv) new secured debt ("New Secured Debt") comprised of new senior secured term loans (“New Senior Secured Term Loans”) and new senior secured notes (“New Senior Secured Notes”). The Company expects the aggregate principal amount of the New Secured Debt to be issued to Secured Debtholders pursuant to the Recapitalization Transaction to be approximately $1.4 billion;

•

[33]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Debtholders receiving New Senior Secured Term Loans having the right to elect to receive their New Senior Secured Term Loans denominated in U.S. dollars or Euros, provided that any such elections may be subject to certain re-allocations pursuant to the terms of the Recapitalization Transaction;

•

Unsecured Debt

•

Unsecured Debtholders as of the Record Date who vote in favour of the CBCA Plan on or prior to the Early Consent Date, as it may be extended by Concordia (the “Early Consenting Unsecured Debtholders”) will be entitled to receive on implementation of the Recapitalization Transaction pursuant to the CBCA Plan early consent consideration in the form of new common shares of Concordia equal to their pro rata share (calculated based on the principal amount of Unsecured Debt held by such Early Consenting Unsecured Debtholder as at the Record Date and voted in favour of the CBCA Plan, divided by the aggregate principal amount of Unsecured Debt outstanding as at the Record Date) of a pool of common shares (the “Unsecured Early Consent Share Pool”) representing approximately 4% of the outstanding common shares of Concordia immediately following implementation of the Recapitalization Transaction pursuant to the CBCA Plan (the “Unsecured Debtholder Early Consent Shares”) as additional consideration in exchange for their Unsecured Debt; and


•	If less than 100% of Unsecured Debt is voted in favour of the CBCA Plan by Early Consenting Unsecured Debtholders, any shares remaining in the Unsecured Early Consent Share Pool not issued as Unsecured Debtholder Early Consent Shares (the “Reallocated Unsecured Shares”) will be issued to all holders of Unsecured Debt on a pro rata basis as additional consideration for their Unsecured Debt.

Private Placement

•

[34]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

concurrently with the execution of the Support Agreement (the “Private Placement Parties”) pursuant to a private placement (the “Private Placement”);


•	The proceeds of the Private Placement will be used towards paying the Secured Creditor Cash Pool and the Secured Debtholder Early Consent Cash Consideration to be paid as part of the consideration for the exchange of the Secured Debt;

•

Existing Shares and Equity Claims

•

Upon completion of the Recapitalization Transaction, existing Shareholders will retain their existing common shares of Concordia, subject to a share consolidation of one common share in exchange for 300 existing common shares to be implemented as part of the Recapitalization Transaction (the “Share Consolidation”) and the dilution resulting from the issuance of common shares pursuant to the Recapitalization Transaction, such that the existing Shareholders will own approximately 0.35% of the outstanding common shares of Concordia immediately following implementation of the Recapitalization Transaction; and

•

All other equity interests in Concordia, including all options, warrants, rights or similar instruments, will be cancelled on implementation of the Recapitalization Transaction pursuant to the CBCA Plan, and all equity claims, other than existing equity class action claims against Concordia ("Existing Equity Class Action Claims"), will be released pursuant to the CBCA Plan, provided that any recovery in respect of any Existing Equity Class Action Claims will be limited to recovery as against any applicable insurance policies maintained by the Company.

Share Dilution

•

Subject to the satisfaction or waiver of applicable conditions, the Recapitalization Transaction is expected to be completed by July 31, 2018.

In connection with the Recapitalization Transaction, it is anticipated that Concordia will continue from the Business Corporations Act (Ontario) to the CBCA.

Alternative Implementation Process

[35]

Concordia International Corp.

Notes to Unaudited Condensed Interim Consolidated Financial Statements

(Stated in thousands of U.S. Dollars, except per share amounts and where otherwise stated)

Proceedings. Contemporaneous solicitation of votes in respect of a Chapter 11 Process ensures that the Company has the future ability to also complete the Recapitalization Transaction under such an alternative implementation process if the Company elects to do so in the future, subject to certain conditions and consent requirements as provided for in the Support Agreement. In addition, in accordance with the terms of the Interim Order, a vote cast in favour of the CBCA Plan at the Meetings may also be counted in favour of implementing a plan of arrangement on substantially similar terms in any insolvency proceedings under the Companies’ Creditors Arrangement Act (Canada) that may be commenced by the Company, to the extent such proceedings are consented to by the majority Private Placement Parties and the majority initial consenting debtholders.

[36]

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Form 6-K Concordia International For: Mar 31

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