Concordia Healthcare enters into definitive agreement to acquire Donnatal

Mar 20 2014

Concordia Healthcare Corp. (Concordia or the Company) (TSX: CXR) (OTCQX: CHEHF), announced today that it has entered into a definitive agreement to acquire Donnatal^®, an adjunctive therapy in the treatment of irritable bowel syndrome ("IBS") and acute enterocolitis, from a privately held specialty pharmaceutical company carrying on business as Revive Pharmaceuticals ("Revive Pharmaceuticals").

"The acquisition of Donnatal^® represents an important advancement in the execution of Concordia's legacy product strategy, providing substantial and sustainable revenue going forward," said Mark Thompson, CEO of Concordia. "In addition, we believe that Donnatal will have a significant and positive impact on Concordia's net earnings and EBITDA."

Donnatal^® comes in two formulations: immediate release Donnatal^® Tablets, and immediate release Donnatal^® Elixir, a fast acting liquid.  For over forty years, Donnatal^® has delivered gentle, symptomatic relief from the symptoms of IBS.  In addition to the drug, Concordia is acquiring the sales and marketing infrastructure related to the product.

The International Foundation for Functional Gastrointestinal Disorders reports that irritable bowel syndrome affects between 25 and 45 million people in the United States (10 to 15 percent of the population) with a greater incidence in women.  According to the National Institutes of Health, as many as 30 percent of Americans suffer from IBS at some time in their lives. It is not associated with hospitalization and surgery, but it can severely compromise a person's quality of life.

IBS is second only to the common cold as a cause of absenteeism from work. IBS is one of the top 10 reasons for physician visits and the second most frequently encountered diagnosis in clinical practice, accounting for more physician visits than any symptoms other than those for respiratory tract infections.

The Company has agreed to acquire Donnatal® for US$200 million in cash and an aggregate of 4,605,833 common shares of Concordia. The common shares issuable have an aggregate value of approximately US$65.3 million based on the closing trading price of the Company's common shares on the Toronto Stock Exchange on March 18, 2014, and represent approximately 16.19% of the Company's outstanding common shares on a non-diluted basis (approximately 14.99% on a fully-diluted basis) after giving effect to the acquisition. Revive Pharmaceuticals will also be entitled to have a representative nominated to the board of directors of the Company provided that it maintains a certain shareholding level in the Company. Completion of the acquisition is subject to customary closing conditions (including approval of the TSX), and acceptable financing. Management anticipates that the deal will close in the second quarter of 2014. Management plans to pay for the cash component of the acquisition through a combination of available cash and debt financing. Accordingly, the Company has entered into a commitment letter with GE Capital, Healthcare Financial Services and its affiliated entities ("GE"). Pursuant to the commitment letter, GE has agreed to provide a secured credit facility having a principal amount of up to US$195 million, consisting of a $170 million term loan and a $25 million operating line (the "Credit Facility").The Credit Facility will be secured by the assets of the Company and the assets of its subsidiaries. The Credit Facility is subject to a number of customary conditions, including entering into definitive documentation.

"Donnatal^® is a medication that I have been prescribing for decades.  It remains an effective treatment and provides value for the management of symptoms of irritable bowel syndrome," said Dr. David A. Peura, MD, Emeritus Professor of Medicine at University of Virginia, former President and Chairman of the Board of Governors of the American Gastroenterological Association ("AGA") and recipient of the 2011 Julius Friedenwald Medal, the highest honor awarded by the AGA.

During 2013, Donnatal^® generated revenues of approximately US$49.8 million.

Torreya Partners and GMP Securities are acting as financial advisors to Concordia. Lazard Middle Market is acting as Revive Pharmaceutical's financial advisor.

Source: Concordia Healthcare Corp.