Concordia Healthcare to acquire Covis Pharma assets for $1.2 billion

Deal said to create diversified, scaled specialty pharmaceutical company and expand Concordia’s platform for future growth

Jeffrey Bouley
TORONTO—In what is said to be an “excellent fit with Concordia’s existing operations and product portfolio,” Concordia Healthcare Corp. announced March 9 that it had entered a definitive purchase agreement to acquire substantially all of the commercial assets of privately held Swiss companies Covis Pharma S.à.r.l and Covis Injectables S.à.r.l for $1.2 billion in cash. Concordia goes on to say that the deal “Creates diversified, scaled specialty pharmaceutical company and expands Concordia’s platform for future growth” with the addition of 18 branded and authorized generic products.
 
The “distinctive product portfolio,” as Concordia puts it,  includes branded pharmaceuticals, injectables and authorized generics that address serious medical conditions in such therapeutic areas as cardiovascular, central nervous system, oncology and acute-care markets.  Key products are Nilandron for the treatment of metastatic prostate cancer, Dibenzyline for the treatment of pheochromocytoma, Lanoxin for the treatment of mild-to-moderate heart failure and atrial fibrillation and Plaquenil for the treatment of lupus and rheumatoid arthritis.
 
In its fourth quarter of 2014, Covis expects to have revenue between $47 millions and $52 million related to the portfolio. Overall for 2014, Covis expects to have revenue between $140 million and $145 million, with a gross profit margin of approximately 90 percent.
 
“Covis’ strong commercial momentum will have an immediate and material impact on our top- and bottom-line financial results,” said Mark Thompson, CEO of Concordia. “In the longer-term, this transaction creates greater scale and diversification for Concordia, which should support the continued execution of our aggressive growth plans,” adding that Concordia believes it can integrate the portfolio it is acquiring into its existing business and leverage its existing infrastructure.
Through the elimination of redundant distribution and various expenses, Concordia expects to recognize immediate synergies of approximately $20 million.
 
Joseph Walewicz, an analyst with Laurentian Bank Securities—who was bullish about the deal and maintained a "Buy" rating in a note to investors—and Douglas Cooper, an analyst with Beacon Securities Ltd. interviewed by Bloomberg Business, made a point of noting that this deal pretty much doubles Concordia's size.
 
The acquisition is structured as an all-cash transaction with a purchase price of $1.2 billion for the portfolio being acquired. Concordia plans to pay for the acquisition through a mix of term loans, bonds and equity. The company is targeting leverage to be below 5x at the closing of the acquisition and expects net leverage to fall to approximately 3x by year-end 2016. The transaction is expected to be more than 50-percent accretive to Concordia’s adjusted earning per share in 2015. The acquisition is expected to close in the second quarter of 2015.
 
Concordia’s primary focus is on legacy pharmaceutical products, orphan drugs and medical devices for the treatment of people with diabetes. Concordia’s legacy pharmaceutical division, Concordia Pharmaceuticals Inc., consists of the ADHD treatment Kapvay (clonidine extended release tablets), head lice treatment Ulesfia (benzyl alcohol), asthma-related medication Orapred ODT (prednisolone sodium phosphate orally disintegrating tablets), irritable bowel syndrome treatment Donnatal (belladonna alkaloids, phenobarbital) and Zonegran (zonisamide) for treatment of partial seizures in adults with epilepsy. Concordia’s specialty healthcare distribution  division, Complete Medical Homecare, distributes medical supplies targeting diabetes and related conditions. Concordia’s orphan drugs division, Concordia Laboratories Inc., manufactures Photofrin, which is marketed by Pinnacle Biologics Inc. in the United States.
 
Covis Pharma S.à.r.l. and Covis Injectables S.à r.l., headquartered in Zug, Switzerland, are subsidiaries of Covis Pharma Holdings S.à r.l., a global specialty pharmaceutical company that will continue operating as a specialty pharmaceutical business following consummation of the transaction. 

Jeffrey Bouley

Subscribe to Newsletter
Subscribe to our eNewsletters

Stay connected with all of the latest from Drug Discovery News.

November 2022 Issue Front Cover

Latest Issue  

• Volume 18 • Issue 11 • November 2022

November 2022

November 2022