Concordia International Corp (CXR.TO)

Some of their issues are their drugs and their UK operations. Also has a high debt load. There have been rumours of a takeover, but the people are just walking away. Breaking news said the CEO had to sell 550,000 shares as part of a margin call. Until everything subsides and everything is washed out, he would tend to stay away. There are probably better risks/rewards elsewhere for people holding the stock.

Had owned at one point, but was stopped out at $86. They have a high ROE, and are very attractively valued right now. There are better opportunities in pharmaceuticals. He wouldn’t touch it at these levels.

Thinks they might have got started here in part, by clever UK guys who sold them the UK company. There are some other issues as well. He is going to continue to Hold but would not consider it as a Buy now.

We have a down trend. On a short term basis there is nothing yet that has changed this. It did not hold the low from late 2015. All the indicators are low, but it does not mean anything is going to show. You need a specific catalyst.

This may be a value opportunity, but it has kept dropping for the last several months, which highlights how challenging it can be when a company has a significant amount of debt on the balance sheet and investors lose confidence in the story. Because of the lack of confidence from investors, the seemingly unpredictability and the leverage, it makes it a highly speculative investment either way.

Has never owned this. This company grows by acquisition. They’ve had some problems in the past quarter when they cut their guidance going forward, and had to write down the value of some of their drugs. They also have a big debt load. There is poor visibility on their earnings. The CFO is leaving and there is an interim CFO stepping in. There is a lot of confusion as to what the company is going to look like going forward. If you own, she would recommend you cut your loss.

Their business model was based on buying older drugs and increasing the price. There has been an unprecedented pushback on reimbursement for drugs. They are just not able to raise their prices unless they are innovative drugs. You are getting more generics. They have unexpected competition on several products.

He lightened up, but bought back a little today. Their overseas business is doing well, but the US really surprised on the downside. What really bothered him more, was a CFO leaving. Thinks there is still some cash generation, and he likes the Amco product portfolio. These things take a little bit of time to work out, and there are still some questions, about the US drugs in particular. The debt really doesn’t come due until 2020-2021.

Just announced, resulting in a loss of about a 3^rd of their value today. Also the CFO resigned, which is never a good sign. A name he has been very leery about for a while. They bought a lot of old drugs, of which a fair number were actually generic, so it is difficult to push through pricing increases. People are really questioning the organic growth story. Also the BREXIT and the drop in the pound has not helped them in the short term.

This fell into some of the issues that Valeant (VRX-N) was facing in the US. Aggressive pricing for a lot of critical drugs. They did the right thing by diversifying out of the US marketplace and into Europe. Timing couldn’t have been worse with the timing of BREXIT. They are going through a strategic review process right now. The fact that it has been drawn out this long suggests there is a lack of buyers. This is a “wait and see” type of stock. Heavy debt.

Investors are very, very concerned about the company, but are concerned for the wrong reasons. They are concerned because it is being attacked, because there are no press releases, and because it is going down. He doesn’t think that because it is down is a good reason to Sell. The last quarter was a miss, but there is a valuable business there, and the company is up for sale, and is trading at 2X earnings. Certainly the company has to do an improved job in communications.

This is an example of a “me too” strategy within healthcare. Canada, in many ways, becomes the sort of the winner’s curse market, where if you can take a business public and you get the highest multiple in Canada, it comes to Canada and doesn’t always make sense. You have to look at how they drive growth. For them, a big source of their growth was cutting, spending, both headcount and R&D, and then cheap debt. They were able to use a lot of cheap debt to fuel acquisition growth, which fed earnings growth, which got the market excited. If you are not fundamentally creating value in businesses you are acquiring, it is not a sustainable strategy.

(Market Call Minute.) This would probably be a Buy, but only a part position right now.

The chart shows very good support at around $24, but you always have to look at the volatility. This one has been up to $100, so it has been a pretty big roller coaster. Not everybody has the stomach for this. You should expect some resistance at around $60. Not for the faint hearted.

This has a little of the Valeant Shadow, but there is a similar financial structure. Debt to cash flow is 5.5X. A lot of their expenses are in British pounds. They have a good product portfolio rolling out, probably 60 new products in the next 3 years. The AMCO acquisition looks like it is doing fairly well. Generating tons of free cash flow this year. It won’t take much to get the thing right. The cash flow starts to grow, you get a lot of free cash and you start to pay down debt.