Concordia International Corp (CXR.TO), a Canadian specialty pharmaceutical company, is discussing alternatives to a leveraged buyout that include divesting a minority stake to a private equity firm, people familiar with the matter said on Monday.
The sale would raise cash to ease the burden of Concordia’s US$3 billion in debt as it faces curbs on drug pricing from governments and companies. The latest round of talks comes after negotiations about selling the company outright failed to produce a deal that would be acceptable to its board, the sources said.
Concordia, based in Oakville, Ontario, is now speaking to private equity firms about the possibility of selling a significant equity stake, among other options for improving Concordia’s balance sheet, the people said. A deal could come as early as this month, they added.
The sources asked not to be identified because the deliberations are confidential. Concordia did not immediately respond to a request for comment. The company said earlier on Monday that its review of strategic alternatives was ongoing and included “various capital markets financing options,” but it did not provide more details.
An infusion of capital would help strengthen Concordia’s balance sheet at a time when the company has lowered revenue guidance for the year and its stock price has slumped more than 90 percent.
Concordia has a market capitalization of just over US$300 million, down from around US$5 billion at its peak last year.
Other specialty pharmaceutical companies, such as Valeant Pharmaceuticals International Inc (VRX.TO) and Endo International Plc (ENDP.O), are also seeking ways to trim debt after cutting revenue guidance.
In early August, CVS Health Corp (CVS.N), which negotiates drug prices on behalf of insurance companies and employers, stopped reimbursing patients for two Concordia drugs, calling their pricing strategies inflationary.
Concordia responded at the time that CVS’s formulary cuts were not material to its business.
Also in August, Concordia suspended its dividend and announced the departure of its chief financial officer, Adrian de Saldanha. He was replaced by Executive Vice President Edward Borkowski.
Concordia markets dozens of drugs for conditions ranging from malaria to heart disease. Its portfolio includes off-patent drugs and products that remain under patent.
In October 2015, Concordia acquired Amdipharm Mercury Ltd, an international pharmaceutical company, from European private equity firm Cinven for US$3.5 billion in cash, stock and milestone payments.
Concordia said on Monday it had exercised an option to defer until February 1 half of the anticipated 144 million pound (US$185 million) earn-out obligation due to Cinven and other parties in that deal.
(Reporting by Carl O’Donnell in New York and John Tilak in Toronto; Additional reporting by Lauren Hirsch in New York; Editing by Richard Chang)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Srdjan Zivulovic