On Wednesday, Concordia announced that the U.K. Competition and Markets Authority (CMA) is investigating new issues in relation to the U.K. pharmaceutical sector, and that Concordia International Corp.’s international segment and certain of its products are part of the inquiry.
“We are working to better understand the CMA’s position and we will continue to work constructively to resolve these matters,” the company said.
Maruoka says this is just one more reason to stay away from this stock.
“We note that the investigation is in its early stages and the company continues to work with the CMA,” the analyst notes. “However, we believe this is another piece of negative news flow from the company’s International business (which follows UK regulatory changes for generic drugs and a separate investigation into pricing). Because these processes can take time and the resolution is uncertain, we expect this investigation could create another lingering overhang for the stock. “…we do not foresee any near-term fundamental catalysts that could turn the page for Concordia. Given Concordia’s high debt load and eroding performance, we continue to see limited value in the equity of the company.
In a research update to clients Wednesday, Maruoka maintained his “Sell” rating and one-year price target of (U.S.) $0.50 on Concordia International, implying a return of negative 59.4 per cent at the time of publication.
Maruoka thinks Concordia will generate EBITDA of $314.7-million on reveneu of $606.9-million in fiscal 2017. He expects those numbers will fall to EBITDA of $294.7-million on a topline of $552.6-million the following year.
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