Why Are Mayne Pharma Shares Bleeding?

  • Nov 29, 2018 AEDT
  • Team Kalkine
Why Are Mayne Pharma Shares Bleeding?

Mayne Pharma’s stock are on fire in the early trade today despite the company announcing the positive start to the financial year 2019.

Chief Executive Officer of Mayne Pharma Group Limited (ASX: MYX), Scott Richards unleashed the trading update at the company’s Annual General Meeting held on Thursday, 29 November 2018. Mr. Richards said that the group’s revenue for four-month year to date ended October 2018 has gone up by 21% to $183 million compared to the previous corresponding period.

On gross profit front, the business has delivered a strong growth of 75% on pcp to generate a gross profit of $108 million with corresponding gross profit margin of 59%. This substantial improvement in the financial performance of the company is reportedly driven by the greater contribution from Specialty Brands at the back of cost savings underpinned by in-house manufacturing. Moreover, Foreign Exchange tailwinds driven by the strengthening of USD forex rate has made positive impact on the profits and earnings level of Mayne Pharma’s business majorly based in the US.

Notwithstanding the performance growth of Fiscal 2019 year to date, Mayne shares nosedived 10.385% to trade at $0.932 on 29 November 2018 (1:16 PM AEST).

Negative market sentiments seems to be driven by the decline in operating cashflow in the first four months of FY19. In the address to shareholders, Mr. Richards told that Mayne’s operating cashflow year to date is down 10% on pcp largely driven by the one-off trading terms impact and working capital build for the generic Efudex acquisition.

Mr. Richards further stated that the group expects to witness an increase of approximately 15% in depreciation and amortization in Fiscal 2019 in connection with completion of capex expansion program in Greenville and Salisbury, among others.

Moreover, sales of Mayne’s sinus control agent, Dofetilide was hit by the market share loss with four new competitors in the market. It is reported that Dofetilide year to date sales were down 65% on pcp to US$7 million driven by pricing pressure, market share loss and shelf stock adjustments.

These results have reflected the softer growth in the first four months compared to previous years in USD terms, however the company expects a strong growth over the remainder of the financial year on the back of favourable trends across all key performance metrics.

However, Mayne’s committed business outlook which is the next six months of signed work orders is up 50% in dollar terms, said CEO Mr. Richards.

The company is ramping up its operations and approval processes to make some major launch in 2019. It is expected that Mayne’s corticosteroid drug, Lexette™ and itraconazole capsules for the treatment of certain fungal infections, Tolsura™, will be launched in early 2019. Mr. Richards stated the addressable market for Tolsura will be approximately US$200 million per annum while Lexette will form part of the US$600 million topical corticosteroid market. For each of these earnings’ accretive products, the company expects to invest US$4 million in operating expenses across FY19.


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