Concordia reports $1.3B loss after taking $1.1B write-off on pressured generics

Concordia International reported a $1.3B loss 2016 loss after taking $1.1B write-off on generics.

Like its Canadian peer and model, Valeant, 2016 was an ugly year for Concordia International. The Ontario-based drugmaker today reported a $1.3 billion loss—$25.76 per share—on $816 million in revenue after taking a $1.1 billion impairment charge, mostly on products that are no longer paying off so well.

Concordia reported its fourth-quarter revenue of $170.4 million was down 13% in the U.S and off 8.1% overall.

New CEO Allan Oberman said headwinds—which includes inquiries in the U.S. and the U.K.—“have necessitated a reassessment of our business model” for Concordia, a model that oft been said to mimic that of Valeant Pharmaceuticals because of its price hikes, rampant M&A and large debt load.

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He then laid out a five-point plan he said would get the drugmaker back on track. That includes tightening up its financial and management operations, expanding its product portfolio and developing a comprehensive long-term growth strategy with a consultant.

The big reveal on the new strategy won’t come until H2 2017 but analysts were told it could involve refinancing and the sale of assets. Analysts also were assured Concordia has enough cash and liquidity to service its debt for the next 12 months.

The drugmaker declined to give guidance but did indicate that its 2017 might be a lot like other generic-centric drugmakers with single digit price declines that could impact revenues and earnings next year.

Investors didn’t appear impressed by the news, pushing the drugmaker’s stock down more than 10% shortly after the call.

Part of that may be because the company acknowledged it still faces a lot of unknowns, with potential impacts from investigation in the U.S. and the U.K. In the U.S. Concordia’s name has come up in regard to an FTC probe into generic drug pricing in regards to a deal with Par Pharmaceutical, now owned by Endo, over a version of Concordia's Kapvay.

Then this month, the U.K.’s Competition and Markets Authority said it was investigating agreements between Concordia and Actavis which they say delayed competition for hydrocortisone tablets, a drug that it said Actavis then upped the price on by 12,000% Actavis is now owned by Teva but the business in the U.K. was divested to Indian drugmaker Intas.

Related: U.K. competition authority targets 'illegal' deals between Actavis, Concordia

Oberman said that the company does not believe it violated any regulations or laws.

Concordia’s $1.1 billion impairment charge included $562.1 million taken in Q4, which consisted of $306.9 million to tied its North America product portfolio and $255.2 million tied to international sales. In addition to pricing pressures, Concordia also saw CVS kick two of its products off its formulary, along with products from serial price-hike offender Valeant Pharmaceuticals, for being among 10 that CVS called "hyperinflationary drugs."

Concordia is not the only generics drugmaker to take a huge write-off on the value of generic drugs, which have been under tightening price pressure in the U.S.  Endo, another struggling company that is often compared with the long-troubled Valeant, late last month reported it was writing down $3.5 billion, mostly on its generic drug portfolio.

Endo, like Valeant and Concordia, also has a new CEO that is trying to remake the company focused more on drug development than on a strategy of simply buying products with debt and trying to cover those costs by pumping up prices.  

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