Drugmaker Concordia Drops to 2013 Low on U.K. Bill, Index Exitby and
New legislation introduced seeks to control cost of medicines
Concordia to be removed from S&P/TSX Composite at close Friday
Concordia International Corp., the drugmaker facing expulsion from the S&P/TSX Composite Index at the close, sank to the lowest in almost three years in Toronto after a bill was introduced in the U.K. House of Commons proposing controls on drug prices.
The Oakville, Ontario-based drugmaker sank as much as 28 percent and was down 19 percent to C$7.09 at 12:55 p.m. in Toronto, on track for the lowest close since December 2013. The stock has dropped 87 percent this year. The U.S.-traded shares reached a record intraday low in New York.
On Thursday, the U.K.’s Secretary of State for Health Jeremy Hunt introduced the Health Service Medical Supplies (Costs) bill designed to control “the cost of health service medicines and other medical supplies,” according to the parliamentary website.
“It is down because of the bill and fears that the bill will reduce pricing for their drugs, made worse by the fact that it is coming out of the TSX composite index today,” Jason Mann, chief investment officer and co-founder of EdgeHill Partners, said in a message. His firm manages about C$180 million ($136 million).
Concordia is to be removed from the Canadian equity benchmark S&P/TSX Composite Index at the close of Toronto trading Friday, according to a Sept. 9 statement from S&P Dow Jones Indices. The index overseer reviews the makeup of the S&P/TSX each quarter, with companies added and removed based on measures including market capitalization and liquidity.
Drugmakers across the industry have come under increased scrutiny from lawmakers and regulators in Canada and the U.S. over their pricing and business practices over the past year. Concordia, seen as a smaller peer of Valeant Pharmaceuticals International Inc., employed a similar growth-by-acquisition strategy.
The drugmaker surprised investors last month when it slashed its 2016 forecast, suspended its dividend and announced the departure of its chief financial officer amid disappointing second-quarter results. Shares at the time slumped to the lowest in more than two years and followed a 9.4 percent drop on June 24 after the U.K. voted to leave the European Union.
‘Supportive’ of Action
In a statement Friday, Concordia Chief Executive Officer Mark Thompson, 48, reiterated the company’s 2016 guidance and said the drugmaker was “supportive” of any action that gives patients greater access to safe and efficient drugs.
“We are monitoring the bill and evaluating its timing and its impact, if any, on our business,” Thompson said. “We anticipate that growth from our international segment, which includes the U.K. market, going forward will primarily come from new product launches.”
Concordia also said it believes the company has “access to sufficient financial resources to manage its liabilities.” The company has about $3.3 billion in debt, according to data compiled by Bloomberg.