How did the Mayne Pharma Group perform in 1H FY2019?

Mayne Pharma Group Limited (ASX:MYX), a company from the health care sector which develops, manufactures and markets branded and generic pharmaceutical products globally, has announced its 1H FY2019 results.

During the period, the company’s revenue increased by 13% to $274 as compared to its prior corresponding period. The period reported an increase in EBITDA by 184% to $65.4 million on pcp. The underlying EBITDA increased by 16% to $81.2 million and underlying net profit after tax increased by 35% to $21.1 million. In spite of a significant one-off impact from the extension of trading terms with a major wholesaler, there was an increase in the net operating cash inflow by 11% as compared to 1H FY2018, which got impacted by a $35 million increase in working capital. The company had a net debt of $298.8 million with cash on hand worth $96.2 million.Â

During the period, the company acquired LEXETTE™¹ (halobetasol) foam and multi-source EFUDEX® (fluorouracil) cream which helped in strengthening the dermatology offering. The company received approval for its antifungal capsule ‘TOLSURA™ (SUBA®-itraconazole)’ and also established a new hospital-based field team for the promotion of the antifungal capsule. As a result of lower stock obsolescence and favorable product sales mix, the generic product profit went up by 58% as compared to its previous corresponding period.

The sales for the specialty brand got tripled. The gross profit of Specialty Brands was driven by FABIOR®, SORILUX® and the DORYX® franchise all contributing to the growth.

The company was able to take control of the SUBA-itraconazole BCCNS program from HedgePath Pharmaceuticals, Inc. The company remained focused on providing value to the prescribers and the patients regarding the dermatology, women's health and infectious disease by providing innovative offering of complementary proprietary and multi-source products in the therapeutic category.

The sales from the Metrics Contract Services (MCS) went up by 14% to $33.9 million on pcp. The gross profit under this segment went up by 4% to $16.5 million. MCS got benefitted from the investments made by the company in Greenville over the last three years for the transformation of the manufacturing capacity and capability.

In the Mayne Pharma International (MPI) segment, the sales were up by 13% to $21.3 million as compared to 1H FY2019, and the gross profit was up by 17% on prior corresponding period. The period under this segment reported a growth in the sales of specialty products - MONUROL® (fosfomycin trometamol) and UROREC® (silodosin) and growing sales of SUBA-itraconazole and morphine sulfate globally, which resulted in stronger sales and gross profit.

During the period, the company invested in the development of new brands and multi-source products, focusing on three critical therapeutic areas, i.e., dermatology, women’s health and infectious disease. In the long run, the company will be continuously working to strengthen the pipeline through internal R&D, strategic alliances and business development. At present, the company has eight dermatology programs in development which include phase III program (SUBA-itraconazole in BCCNS) and a phase II program (trifarotene in Congenital Ichthyosis) which are under the development phase. There are still four women’s health products in the pipeline which includes a multi-source NUVARING® which is pending with the FDA. NUVARING® is the largest contraceptive sold in the US with no generic equivalents as of now. The company has still 25 multi-source products in the pipeline for the US market with an expectation of sales over US$5 billion and another 14 products pending for FDA approval with a total market value above US$3 billion.

Outlook:

In the upcoming year, the company expects to get benefitted from the recent brand launches of LEXETTE and TOLSURA which will be driving stronger growth in the Specialty Brands segment. With the growing pipeline of committed contract service revenues as well as new product launches, there will be several potential first-to-market opportunities for the company. Based on these, the company expects to maintain a conservatively structured balance sheet in the upcoming period.

Stock performance:

In the last six months, the stock has generated a negative return of 18.78%. At present, the stock is trading at A$0.765 (AEST: 3:50 pm, 22 February 2019), down by 4.375% as compared to previous trading day’s closing price. The company has a market capitalization of A$1.27 billion with approximately 1.58 billion outstanding shares.

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