It makes sense that Concordia International (TSX:CXR, Nasdaq:CXRX) would want to make changes at the top, but the timing of the announcement, just weeks before the company’s Q3 results, is concerning, says Laurentian Bank Securities analyst Joseph Walewicz.
On Friday, Concordia announced that CEO Mark Thompson would step down after the company finds a suitable successor. Shares of the company have fallen sharply and steadily for most of 2016.
“Mark was our founder and successfully built Concordia into an international specialty pharmaceutical company. Under his leadership, Concordia today has a robust product pipeline and a platform that reaches patients in over 100 countries. He and the board agreed that this would be the ideal time for a leadership change at the company, and the board thanks him for his significant contribution over the years,” said Jordan Kupinsky, lead independent director. “This is an important juncture for Concordia,” continued Mr. Kupinsky. “We recently closed a very successful $350-million (U.S.) debt offering and completed a strategic review of the business. With a portfolio of more than 200 products, a platform for continued international expansion, a strong commercial footprint and opportunities for organic growth, we look forward to building on our past successes.”
Walewicz says “substantial leverage and near term challenges” could present challenges in bringing on a new CEO, and says the upcoming quarter could be worse than initially expected.
“We expect the company to report Q3 results the week of November 7th,” he says. “Last quarter Concordia reduced 2016 financial guidance to reflect: (1) GBP weakness, (2) generic competition for Nilandron, and (3) competitive pressures with relating to Donnatal and Plaquenil. While the company reiterated guidance in September, the GBP has fallen even further and it is possible that guidance is once again revised downwards.”
In a research update to clients today, Walewicz maintained his “Reduce” rating and one-year price target of (U.S.) $3.50 on Concordia International. Shares of the company on the Nasdaq today closed down 5.6 per cent to $4.23.