Concordia Healthcare said today it will acquire substantially all of the commercial assets of Covis Pharma and Covis Injectables for $1.2 billion cash, in a deal that expands the buyer’s portfolio of branded and generic drugs.
The Covis drugs being acquired consist of 18 branded drugs, authorized generic products, and injectables, in therapeutic areas that include cardiovascular, central nervous system, oncology, and acute care. Key Covis products include Nilandron® for metastatic prostate cancer; Dibenzyline for pheochromocytoma; Lanoxin® for mild-to-moderate heart failure and atrial fibrillation; and Plaquenil® for lupus and rheumatoid arthritis.
“Covis’ strong commercial momentum will have an immediate and material impact on our top and bottom line financial results,” Concordia CEO Mark Thompson said in a statement. “In the longer-term, this transaction creates greater scale and diversification for Concordia, which should support the continued execution of our aggressive growth plans.”
According to Concordia, the acquired Covis drugs all have stable revenue, strong margins, and free cash flow. Concordia said the acquired drugs generated revenue between $47 million and $52 million during the fourth quarter of 2014, and between $140 million and $145 million in revenue for all of last year, with a gross profit margin of approximately 90%.
That would almost double what Concordia generated in 2014 revenues. The company has issued guidance to investors stating that it expects to generate revenue of between $40 and $43 million for the fourth quarter of 2014; earnings before interest, taxes, depreciation, and amortization (EBIDTA) adjusted for one-time charges of between $23.5 million and $25 million; and adjusted earnings per share of between $0.66 and $0.70 per share.
For all of last year, Concordia expects to have generated revenue of between $119 million and $122 million; adjusted EBITDA of between $61.5 million and $63 million; and adjusted EPS between $1.79 and $1.83 per share.
Concordia said the Covis acquisition is expected to add to its adjusted EPS by more than 50% in 2015. The acquiring company also said it expects to generate an immediate $20 million in cost-cutting or “synergies” through the elimination of redundant distribution and general-and-administrative (G&A) expenses.
Concordia said it will fund the acquisition through a mix of term loans, bonds and equity. Concordia said it has entered into a commitment letter through which Royal Bank of Canada (RBC) agreed to provide credit facilities and bridge commitments of up to $1.6 billion to fully pay for the Covis assets and refinance all outstanding Concordia debt. The credit facilities are subject to a number of customary conditions.
The deal is set to close in the second quarter of 2015, subject to satisfaction of customary closing conditions that include regulatory approvals. The boards of Concordia and Covis have approved the acquisition.
Swiss-owned Covis is owned by an investor group controlled by affiliates of Cerberus Capital Management, with partners that include Princeton Biopharma Capital Partners and Bourne Partners.
The Covis drugs broaden Concordia’s product offerings, focused up till now on legacy pharmaceutical products, orphan drugs, and medical devices for people with diabetes. Concordia’s offerings include the ADHD-treatment Kapvay® (clonidine extended release tablets), head lice treatment Ulesfia® (benzyl alcohol) Lotion, 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 division, Concordia Laboratories, manufactures Photofrin, which is marketed in the U.S. by Pinnacle Biologics.