Mayne Pharma Group Ltd (ASX: MYX)

MYX Details

Witnessed weakness post reporting strongest sales: The company has continued to progress with the commercialisation of itraconazole globally for the treatment of certain fungal conditions and for the treatment for cancer. In the US, the company has successfully completed further pharmacokinetics studies to support the SUBA-Itraconazole anti-fungal NDA filing and they currently plan to commercialise this product through their sales in FY19, targeting infectious diseases. Over the medium and long-term, Mayne expects a further diversification and rebalancing of their portfolio across their core business segments with a greater contribution from Speciality Brands, Metrics Contract Services and from the rest of the world. Looking from the financial aspect, Mayne Pharma’s revenue has been $772.6m for 2017 which increased by 114% as compared to last year. Net Profit after Tax was $88.6m which is up by 137% as compared to prior year. Moreover, Basic Earnings per share were up by 30% on FY2016 and they generated a positive operating cash flow in second half of 2017 which amounted to $51.9m. All these significant changes were driven by a product acquisition in their Generic Products and Speciality Brand Businesses segment and a new product was launched which helped boost the revenue by 114% and EBIDTA by 133%, which is strongest in its history. The Teva Product acquisition has transformed the scale of the generic business which has diversified Mayne’s Pharma earnings across more products, therapeutic areas, dosage forms and in complex technologies. It was also seen that export sales grew by 2%. Recently, it was reported that Mayne will be selling up to 5m shares in the current trading to cover the financial obligations including $3m in taxation. Mayne Pharma development pipeline includes over 40 products which will target US markets leading to a sale greater than US $6.5 bn. Recently, Mayne launched their new range of Clozapine tablets which is currently manufactured by Teva, and which Mayne Pharma targets to manufacture on their own. In the next couple of years, Mayne anticipates launching 6 products in 2018 and 8 potential products in 2019.
 
Financial Performance Summary (Source: Company Reports)
 
However, the stock lost a lot of ground with the AGM update on continued weakness in the US generic drugs market with the on-going challenging deflationary scenario seen at the back of consolidation of wholesalers and retail pharmacy chains. This has indicated for a weaker half year results. The group indicated for revenue to the end of October 2017 down 12% to $151m versus the prior corresponding period impacted by buy-side contracting behaviour.
 
Stock Performance:  It has lost its share price to almost half of its value since the start of the year which was majorly caused by US retail market weakness owing to consolidation of wholesalers and retail pharmacy chains. However, the stock was otherwise up on December 15, 2017 at the back of a news from Teva Pharmaceutical on job cut. Given the scenario, we put an “Expensive” recommendation at the current price of $0.66, and will review it later based on its product pipeline’s potential.
 

Asaleo Care Ltd (ASX: AHY)

AHY Details

Downgrade to Guidance: Recently, Asaleo issued a revised guidance which was reduced due to underperformance of sales in the Feminine Care category at the back of Asaleo being locked in the fixed every Day Pricing in major retail accounts; and thus, the group chose to exit the Every Day Pricing agreement. Asaleo is still very flexible to price because of which management is confident that Libra Feminine Care brand will return to growth. Although the cost associated with energy and pulp has come into the picture, the Incontinence and Tissue segments continue to trade strongly with solid profit growth year to date. Overall, Asaleo performed well and reflected a strong EBIDTA base which included lower pulp and raw material pricing, and which was offset by adverse FX movements and increased energy cost. Their strategy remains unchanged and they continue to focus on product innovation and cost reduction. The group’s margin for first half of 2017 was 39.4% which was consistent with the first half of 2016; but the recent updates seem to have some bit of negative impact.
 

Revised Guidance (Source: Company Reports)
 
Stock Performance: Overall, the latest update has made the stock lose its favourable position. We give a “Hold” recommendation at a current price of $1.45

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