KCLarkin Posted October 9, 2015 Share Posted October 9, 2015 Dual-listed: CXR.to / CXRX Canadian specialty pharma roll-up that has dropped 50% in the past month. Considered a mini-Valeant but some important differences. Selling seems to be caused by weak hands: - Recent $850M equity raise in US at $65 USD - Retail investors coat-tailing Jason Donville - Hedge funds getting margin calls - Short sellers - Momentum investors If you believe in cash earnings, this is very attractive here (my estimates are very fuzzy due to recent acquisitions, debt raise, and equity raise). Share price: $38 USD EV: $5.5B USD 2015E pro-forma EBITDA: $520 M USD 2015E pro-forma EV/EBITDA: 10.6 Debt/Ebitda: 6.5 2016E Cash P/E: 5 I made this a 1% position today. The company provided an update on the acquisition today, which seems to have caused a big jump in the share price: http://concordiarx.com/concordia-provides-update-on-amco-acquisition/ Apologies for the short description. I wrote a better one but lost it due to a session timeout. For a detailed description, see Donville's recent letter: http://www.donvillekent.com/pdf/DKAM-Newsletter-October2015.pdf -- Disclosure: I don't own this. I didn't like the debt, business model, or management. Link to comment Share on other sites More sharing options...
Liberty Posted October 9, 2015 Share Posted October 9, 2015 I keep hearing about that one but never really took the time to do a deep dive (since the kid was born I haven't as much time for new ideas, mostly just keeping up with my old ones, with a few exceptions). KCLarkin, or anyone else familiar with the business, can you share your thoughts on: Management's quality (operations, capital allocation, shareholder-friendly, integrity). What's their model to create value when they buy something? What are they doing differently from the average specialty pharma? Despite the recent 50% drop, the stock is still up 600% in less than 2 years. Was it that undervalued to begin with, or did they really create that much value in such a short period of time? I'm just trying to get the 10,000 feet overview. Thanks in advance. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 9, 2015 Author Share Posted October 9, 2015 I haven't done any in-depth work on this yet, hence the 1% position. Frankly, the rapid rise last year scared me off. I've heard that they had a hard time selling the IPO, so it was undervalued to begin with. Here is another letter, from Venator Capital. He is pretty skeptical about CSU and the other Canadian roll-ups, so I was surprised that he owned CXRX. http://venator.ca/uploads/SEPTEMBER_2015.pdf Link to comment Share on other sites More sharing options...
kab60 Posted October 11, 2015 Share Posted October 11, 2015 Looks interesting. Anyone have a more thorough writeup? Link to comment Share on other sites More sharing options...
kab60 Posted October 11, 2015 Share Posted October 11, 2015 Difficult to know whether this is a serious issue-I wouldn't think so: http://business.financialpost.com/news/fp-street/investors-take-losses-on-concordia-healthcare-but-will-they-invoke-material-out-clause Link to comment Share on other sites More sharing options...
KCLarkin Posted October 14, 2015 Author Share Posted October 14, 2015 Goldman Said Struggling With Concordia Debt Amid Pharma Rout http://www.bloomberg.com/news/articles/2015-10-14/goldman-said-struggling-to-sell-concordia-debt-amid-pharma-rout Not sure how material this is, given the committed debt financing. It looks like Marc Cohodes, a famous short seller, has taken a short position. The shorts travel in packs, so this could really get hammered. I need to do more work on this one. Link to comment Share on other sites More sharing options...
Yours Truly Posted October 14, 2015 Share Posted October 14, 2015 Goldman Said Struggling With Concordia Debt Amid Pharma Rout http://www.bloomberg.com/news/articles/2015-10-14/goldman-said-struggling-to-sell-concordia-debt-amid-pharma-rout Not sure how material this is, given the committed debt financing. It looks like Marc Cohodes, a famous short seller, has taken a short position. The shorts travel in packs, so this could really get hammered. I need to do more work on this one. Where do you see that he has taken a short position ? The problem here is the CEO went overboard with trying to raise capital in the US where they could have easily raised that in Canada. I'm not sure what the rationale is and he's recently cancelled an interview with BNN which also add some mystery to the story. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 14, 2015 Author Share Posted October 14, 2015 Where do you see that he has taken a short position ? I don't know for sure, but he has 3 recent tweets including this one: Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 14, 2015 Share Posted October 14, 2015 I agree, this is an acute problem of an innocent? firm learning about the sharks on wall street. I calculated that net cash flow after interest expense is 350 million at the current price it's yielding initial 18-19% return on purchase price. Only red flag is high level of debt. They are stretching no doubt. Prices don't even need to be raised as per the pharma fears. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 15, 2015 Author Share Posted October 15, 2015 Concordia Provides Update On AMCo Financing And Capital Structure Post AMCo Acquisition http://concordiarx.com/concordia-provides-update-on-amco-financing-and-capital-structure-post-amco-acquisition/ Upon closing of the AMCo transaction, we also plan to provide preliminary guidance for 2016 to provide shareholders with greater clarity on our combined business and dispel some of the misinformation currently in the market. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 15, 2015 Author Share Posted October 15, 2015 FWIW, GMP research report: http://www.investorvillage.com/uploads/8056/files/CXR-151013.pdf Link to comment Share on other sites More sharing options...
KCLarkin Posted October 21, 2015 Author Share Posted October 21, 2015 Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 21, 2015 Share Posted October 21, 2015 I am entranced as well...Valeant sympathy decrease? Huge debt? I mean, every way I crunch the numbers the company will do $325 million per year in free after tax, after interest payment (at 7.5%!) cash flow. The equity was trading today even under $1 billion. That's a 30+% initial yield on purchase price, assumes zero growth or price increases going forward AND only 10% of the business is in the USA. Having said that, I don't like the CEO's empire building. Reckless. I see him in a photo with a gold watch, LinkedIn profile in front of the Nasdaq, massively overpaid for the acquisition. $4 billion+ when 2 years ago it was bought out by the private equity firm that sold it to Concordia for maybe $1.2 billion. This is real debt slavery. The sensitivity to sales and profits are razor thin so things will be volatile to say the least. I worry the company might go bankrupt before it can succeed. Like a very giant margin call. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 21, 2015 Author Share Posted October 21, 2015 CEO on BNN: http://www.bnn.ca/Video/player.aspx?vid=731668 Link to comment Share on other sites More sharing options...
Yours Truly Posted October 21, 2015 Share Posted October 21, 2015 - Mostly guilty by association - High debt - Negative sentiment - Likely the end of acquisitions for a while - The plus side is there is no accusations of fraud - The deal has closed - Adequate FCF I guess we will have to wait next week until we can see Thompson's estimates for the combined company going forward. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 21, 2015 Author Share Posted October 21, 2015 Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 21, 2015 Share Posted October 21, 2015 - Mostly guilty by association - High debt - Negative sentiment - Likely the end of acquisitions for a while - The plus side is there is no accusations of fraud - The deal has closed - Adequate FCF I guess we will have to wait next week until we can see Thompson's estimates for the combined company going forward. Unless he updates the estimates from the proxy, the pro-forma estimates are already there. Perhaps he will go into more detail and more current information? Link to comment Share on other sites More sharing options...
Zorrofan Posted November 14, 2015 Share Posted November 14, 2015 - Mostly guilty by association - High debt - Negative sentiment - Likely the end of acquisitions for a while - The plus side is there is no accusations of fraud - The deal has closed - Adequate FCF I guess we will have to wait next week until we can see Thompson's estimates for the combined company going forward. Unless he updates the estimates from the proxy, the pro-forma estimates are already there. Perhaps he will go into more detail and more current information? Market seems to like latest quarterly results, up strongly on a down day....... cheers Zorro Link to comment Share on other sites More sharing options...
SwimmingNaked Posted December 4, 2015 Share Posted December 4, 2015 Did anyone make notes on last quarters conference call? Doesn't seem like there's a transcript anywhere... Link to comment Share on other sites More sharing options...
PSV_Cannibal Posted March 29, 2016 Share Posted March 29, 2016 The stock tanked again today (after a few days of tanking) due to a short report by Veritas. Has anyone here read it? If so, would you be so kind as to share it? Link to comment Share on other sites More sharing options...
kab60 Posted March 29, 2016 Share Posted March 29, 2016 I'd like to see it as well. I read a pretty troubling comment (I believe on SA, but I can't find it and didn't check up on it) that selling of one of the best selling drugs in the Covis portfolio Concordia acquired recently went down a whole lot due to generic competion. Their portfolio is pretty big, but I don't believe management guided anything about it, so either they were clueless (troubling), there might be other nasty surprises or it was just a one-off. Either way, I've started looking a bit more on Knight Therapeuticals, as a possible way to play this and espescially Valeant, since the CEO seems like an astute value investor, has a lot of skin and the game and VRX troubles might make it possible for him to do some good deals later on. I'd just prefer to not pay above book. Link to comment Share on other sites More sharing options...
netnet Posted May 6, 2016 Share Posted May 6, 2016 It looks as if they are trying to do a buyout, which is interesting, as they have a lot of debt now. How they would finance another huge slug of debt is beyond me, although their cash flows are strong. By the way, this one falls into the category of stub stocks that Greenblatt talks about, which is really what LBO's are. If say they do have a buyout at 25% higher than today, say 40.50, everybody who a bought the stock at 40 and above got screwed. (anytime over the last one and half years.) --The perils of investing. Link to comment Share on other sites More sharing options...
Guest 50centdollars Posted August 12, 2016 Share Posted August 12, 2016 Is this toast? CFO gone, dividend gone, guidance slashed. http://www.bnn.ca/concordia-international-shares-sink-after-slashing-forecasts-1.544739 Link to comment Share on other sites More sharing options...
Liberty Posted August 12, 2016 Share Posted August 12, 2016 VRX redux. Link to comment Share on other sites More sharing options...
PSV_Cannibal Posted August 14, 2016 Share Posted August 14, 2016 After yesterday's conference call, I now believe VRX is by far the better risk-return. At least VRX has a branded consumable component, whereas with CXRX, none of the products seem to have moats. Link to comment Share on other sites More sharing options...
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