Concordia Announces First Quarter 2017 Results

• Concordia reported first quarter revenue of $160.6 million, gross profit of $115.4 million and net loss from continuing operations of $78.8 million

• The Company generated cash flow from operations of $86.2 million

• Adjusted EBITDA¹ in the first quarter was $84.2 million

• Company executing against its 2017 business stabilization objectives

• Development of long-term business strategy remains on track

• Announced on April 26 that David Price appointed as CFO

• Announced on May 4 that Itzhak Krinsky and Frank Perier, Jr. appointed to Board of Directors

OAKVILLE, ON, May 10, 2017 /PRNewswire/ - Concordia International Corp. (“Concordia” or the “Company”) (NASDAQ: CXRX) (TSX: CXR), an international specialty pharmaceutical company focused on generic and legacy pharmaceutical products, today announced its financial and operational results for the three months ended March 31, 2017. All financial references are in U.S. dollars unless otherwise noted.

“Concordia’s first quarter 2017 results demonstrate that the Company’s focus on near-term stabilization is beginning to have a positive impact on the business,” said Allan Oberman, Chief Executive Officer of Concordia. “While the first quarter is only the beginning of an ongoing process, I believe we are making important headway against our business stabilization objectives. To that end, we are excited about the recent announcements that David Price will be joining Concordia as Chief Financial Officer, and that Itzhak Krinsky and Frank Perier, Jr. have joined our Board of Directors. These individuals possess significant experience that we believe will help Concordia make progress against our stated goals over the remainder of the fiscal year, and beyond, as we focus on Concordia’s longer term growth.”

Consolidated First Quarter 2017 Financial Results and Recent Events

• Reported revenue of $160.6 million, compared to $228.5 million for the same period in 2016 and $170.4 million for the fourth quarter of 2016.

• Reported Adjusted EBITDA¹ of $84.2 million, compared to $140.8 million for the same period in 2016 and $80.5 million in the fourth quarter of 2016.

• Generated cash flows from operating activities of $86.2 million, compared to $91.9 million for the same period in 2016 and $95.2 million in the fourth quarter of 2016.

• As of March 31, 2017, the Company’s liquidity was substantially comprised of $336.2 million of cash and cash equivalents and $60 million under an undrawn revolving credit facility. The Company believes it has sufficient liquidity over the next 12 months to operate its business and meet its cash requirements based on current market conditions.

• Subsequent to quarter end, on April 26, 2017, Concordia announced the appointment of David Price as CFO effective May 15, 2017.

• Subsequent to quarter end, on May 4, 2017, Concordia announced the appointments of Itzhak Krinsky and Francis (Frank) Perier, Jr. to the Company’s Board of Directors.

• Subsequent to quarter end, the Company completed an exclusive authorized generic agreement with Actelion Pharmaceuticals, Ltd, a biopharmaceutical company headquartered in Switzerland, to market bosentan in the United Kingdom. Bosentan (Tracleer®) is a specialty product for the treatment of pulmonary arterial hypertension and digital ulcers. The agreement with Actelion grants Concordia the rights to distribute and promote a branded authorized generic version of bosentan (Stayveer®).

First Quarter 2017 Segmental Results

During the first quarter of 2017, the Company combined the North America and Orphan Drug segment to form a single Concordia North America segment. The Company has conformed comparative information.

The Concordia North America segment reported revenue of $41.8 million, a decline of $46.8 million over the same period in the prior year. The decline was primarily due to competitive pressures on the following products: Plaquenil®; Lanoxin®; Donnatal®; and Nilandron®. Revenue on a sequential basis did not change significantly from the fourth quarter of 2016.

The Concordia International segment reported revenue of $118.7 million, a decline of $21.2 million over the same period in the prior year. The decline was primarily due to the unfavourable movement in foreign exchange rates of approximately $19.1 million, as well as increased competition on the segment’s generic product portfolio. Revenue on a sequential basis decreased by $9.9 million over the fourth quarter of 2016. The decline was primarily due to additional competitive pressures on the segment’s generic product portfolio.

During the first quarter, the Company launched one new product in an IMS measured market that has a current estimated value of $30 million. The Company has an additional nine products that have already been approved or are awaiting regulatory approval in various countries. These products, if launched, are expected to compete in product areas that have an estimated current IMS measured market value anticipated to be in excess of $100 million. The Company expects these products will be launched in the next three years.

In addition, the Company has eight products under active development that it anticipates will launch in the next three to five years. These products, if launched, are expected to compete in product areas that have an estimated current IMS-measured market value expected to be in excess of $1 billion. Concordia anticipates that these eight products will include several potential first-to-market or early-to-market opportunities for difficult to make products

Finally, Concordia has identified up to 21 additional products for future development with its network of external partners. If launched, these products are anticipated to compete in estimated current IMS measured markets that are expected to be worth hundreds of millions more.

Financial Results

Consolidated Operating Results

Total revenues during the first quarter of 2017 were $160.6 million, a decrease of $68.0 million over the same period in 2016. This decrease is primarily due to the impact of increased generic competition and foreign exchange. On a sequential basis, revenue decreased by $10.0 million. This decrease was primarily a result of increased competition on the generic product portfolio within the Concordia International segment.

Gross profit for the three months ended March 31, 2017 decreased by $44.4 million or 28%, compared to the corresponding period in 2016 primarily due to the impact of the factors described above. The gross profit percentage increased by 2% primarily due to the first quarter of 2016 including $18.6 million related to a non-cash inventory fair value adjustment included in cost of sales as a result of the Concordia International segment acquisition. Excluding the impact of these non-cash inventory adjustments, the gross profit percentage decreased by 6% primarily due to a change in the mix of product sales within both the Concordia North America segment and Concordia International segment.

General and administrative expenses reflect costs related to salaries and benefits, professional and consulting fees, ongoing public company costs, travel, facility leases and other administrative expenditures. General and administrative expenses for the three months ended March 31, 2017 decreased by 11% compared to the corresponding period in 2016 as a result of cost saving initiatives being undertaken by the Company, the timing of certain costs which are likely to be incurred in future periods, as well as favourable movements in foreign exchange rates.

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 three months ended March 31, 2017 decreased by $3.6 million or 27% compared to 2016. These costs have decreased primarily due to the termination of the previous higher cost Donnatal® contract sales force, which has been replaced by a co-promotion agreement with RedHill Biopharma Ltd., as well as the favourable foreign exchange impact of selling and marketing costs incurred within the Concordia International segment.

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 three months ended March 31, 2017 decreased by $883 thousand, or 10%, compared to the corresponding period in 2016. This decrease is due to cost saving initiatives undertaken by the Company to move certain external costs previously incurred within the Concordia North America segment to the Company’s centre of excellence in Mumbai, India.

The current income tax expense recorded for the three months ended March 31, 2017 decreased by $2.7 million, compared to the corresponding period in 2016. Income taxes were lower primarily related to the Concordia International segment due to lower taxable income and favourable movements in foreign exchange rates.

The net loss from continuing operations for the three months ended March 31, 2017 was $78.8 million, and earnings per share loss was $1.54 per share. Significant components comprising the net loss are fair value gains and losses on derivative contracts of $27.3 million, and the deduction of other significant cash and non-cash expenses which include, but are not limited to, interest and accretion expense of $92.3 million offset by operating income of $18.4 million.

Adjusted EBITDA¹ for the three months ended March 31, 2017 decreased by $56.6 million or 40% compared to the corresponding period in 2016. This decline was primarily due to a decline in operating results from the Concordia North America segment combined with the impact of unfavourable movements in foreign exchange rates impacting the Concordia International segment. Adjusted EBITDA by segment was $26.6 million from Concordia North America and $63.2 million from Concordia International. In addition, the Company incurred $5.6 million corporate costs related to the Corporate Head Office.

As of March 31, 2017, the Company had cash of $336.2 million and, subject to compliance with certain incurrence covenants under the Company’s debt agreements, currently has up to $60 million available to it under a revolving credit facility before it is subject to financial maintenance covenants under its credit agreement.

As at March 31, 2017 and May 9, 2017 the Company had 51,089,782 common shares issued and outstanding.

Conference Call Notification

The Company will hold a conference call on Wednesday, May 10, 2017, at 8:30 a.m. ET, hosted by senior management. A question-and-answer session will follow the corporate update.

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

http://event.on24.com/r.htm?e=1408461&s=1&k=4EB3012BD9D2C45F3C29CBBB53714775

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

About Concordia

Concordia is a diverse, international specialty pharmaceutical company focused on generic and legacy pharmaceutical products. The Company has an international footprint with sales in more than 90 countries, and has a diversified portfolio of more than 200 established, off-patent products. Concordia also markets Photofrin® for the treatment of certain rare forms of cancer.

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 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 for analyses of 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 earnings per share (“Adjusted EPS”) to provide a supplemental measure of operating performance and thus highlight trends in the core business that may not otherwise be apparent when relying solely on IFRS financial measures. Management also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers.

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