An insight into this pharma stock – Mayne Pharma Group Ltd (ASX: MYX)

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Australian Economy

Company Overview: Mayne Pharma Group Ltd.’s (ASX: MYX), offerings include product development, analytical development, contract manufacturing, formulation development, logistics, and others. Mayne Pharma offers products in the dosage forms of powders, liquids, tablets, capsules, and creams. Mayne Pharma Group Limited (ASX: MYX)  was trading at a market price of $0.865 at trade open on July 06, 2018; and saw a daily price change of -$0.010 or a percentage change of -1.136% on July 5, 2018.

Financial and operational performance: For 1HFY18, the company reported EBITDA of A$ 23 million and adjusted EBITDA of A$70 million. Driven by assets impairment, the company reported a net loss after tax of A$174 million, based on abnormal Doryx returns and stock obsolescence, restatement of deferred tax assets and liabilities following the US tax rate change and restructuring expenses. Operating cash flow has been positive A$48 million following the significant working capital injection in the prior corresponding period (pcp), and with decent adjusted gross profit. The group has seen a significant improvement in trading during 2Q of FY18.

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MYX 1HFY18 financial results in millions, Source: Company Reports

On the other hand, competitor disruptions are creating opportunities and US generic market appears to be stabilizing a bit now. Both Mayne Pharma International and Metrics contract services delivered margin growth along with solid revenue. Expanding sales reps to 120 by end of December by the specialty brand franchise is expected to drive some growth. The company continues to invest in research and development to advance and expand product pipeline and has added 2 products to US pipeline, and filed 3 products with FDA. Monurol granules have been approved and launched in Australia and favorable phase IIb study results for SUBA – Itraconazole in BCCNS have been reported.

A stronger second half driven by stabilizing generic market, the expanded dermatology sales team, new product launches, contract service committed business pipeline and cost benefits from the organizational restructure has been indicated by the group.

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MYX financials for 2017, Source: Company Reports

Industry Dynamics: The research from Barclay’s shows 13% deflation year on year and an increase of 3% month-on-month in December 2017. Mayne Pharma price deflation depicted low single digits in 1H FY18 versus low double digits in 2H FY17. US generic market is expected to grow at mid-single digits CAGR to 2020 driven by aging population and increasing incidence of chronic disease, increased demand for generics to lower healthcare costs and brand loss of exclusivity of US $70 billion over the next 5 years.

Product and new facility launch: Mayne Pharma has officially announced the solid oral-dose manufacturing facility opening in the US – the 126,000 square-foot, facility, built up from the ground and custom-designed to meet or exceed the standards of major drug regulatory authorities. It also quadruples the group’s capacity to manufacture oral solid-dose pharmaceuticals in the US and introduces new capability to manufacture modified-released bead/pellet products and significant capacity to manufacture potent compounds.

Mayne Pharma launched two new products manufactured at Greenville doxycycline hyclate immediate-release capsules and completed the technology transfer of disopyramide capsules from a Teva site to Grenville.

While the stock has risen about 20% over last three months, the shortcomings in terms of financials and intense competition prevail. Thus, it would be a watch in the near to medium term.


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