Mayne Pharma Group Ltd

MYX Details

Product acquisitions driving the performance: Mayne Pharma Group Ltd (ASX: MYX) witnessed a stock price surge of 13.12% on September 13, 2017, apparently at the back of improvement in sentiments towards the stock. For FY17, MYX reported a revenue growth of 114% yoy (year on year) to $572.6m, while posting 133% and 137% growth in underlying EBITDA at $206.5m and reported NPAT (Net profit after tax) at $88.6m, respectively. The performance is driven by product acquisitions in Generic Products and Speciality Brands businesses, new product launches and continuing strong growth in Metrics Contract Services. In Australia, the Company launched three in-licensed injectable products and Myxazole® clotrimazole/ hydrocortisone cream) and received Therapeutic Goods Administration approval for a new brand product Urorec® (Silodosin) capsules, indicated for relief of lower urinary tract symptoms associated with benign prostatic hyperplasia in adult men. Urorec was launched in August and is being marketed by Mayne Pharma’s specialty sales team.

Mayne Pharma’s development pipeline includes over 40 products targeting US markets with sales greater than US$6.5 billion. The Company has 19 products pending approval at the FDA with a total market value of more than US$1 billion. During the year, in the US, the Company added 14 products to its pipeline targeting markets with sales greater than US$1.8 billion. MYX filed five products with the FDA and received approval for four generic products during the year. However, given the company’s leverage (net debt of $277 million), ongoing pricing pressure in generic products and the retail channel,we maintain an “Expensive” recommendation on the stock at the current market price of $ 0.73


MYX Daily Chart (Source: Thomson Reuters)

Regis Healthcare Ltd

REG Details

Improved contributions from the Masonic Care acquisition: Regis Healthcare Ltd (ASX: REG) reported 18% yoy (year on year) growth in revenue and EBITDA at $565.5m, $123.6 million, respectively. Revenue was largely driven by increased contributions from the significant refurbishment program. However, NPAT (Net profit after tax) grew 8% yoy at $88.6 million. Importantly, contributions from the acquired Masonic Care Facilities, QLD reached EBITDA run rate during the 1H following a successful integration. Increased net RAD receipts achieved, with 48% of new residents choosing to pay a RAD over a DAP6 or a combination RAD/DAP payment and an average incoming RAD of $455.6k compared with $389.3k for FY16. The $70.5 million in Net RAD receipts was still significantly higher than the prior period result of $44.9m for FY16, reflecting improved contributions from the Masonic Care acquisition, RAD inflows at the recently opened development facilities and an increased average incoming RAD value across the portfolio.

Financial summary; (Source: Company reports)

In FY18, the company will have one off transaction related expenses resulting from the Presbyterian Care acquisition which will lower the earnings of circa ($3m-$4m) EBITDA and ($2.5m to $3.5m) NPAT. Further, net interest and depreciation expenses are expected to increase on FY17 as a result of investment in development. We maintain an “Expensive” recommendation on the stock at current market price of $ 3.39


REG Daily Chart (Source: Thomson Reuters) 

Nanosonics Ltd

NAN Details

Extension of Trophon relationship with GE Healthcare: Nanosonics Ltd.’s (ASX: NAN) stock slipped 2.2% on September 13, 2017 owing to volatility but has risen 12.8% in last one month (as at September 12, 2017). The group had recently bagged a new three-year Capital Reseller agreement with GE Healthcare which will come into effect at the end of the current GE Healthcare Distribution agreement. Under the agreement, GE Healthcare will be provided with Capital Reseller rights as part of its global ultrasound program. By virtue of this agreement, NAN expects to witness an increase in sales and profit for its Northern American business. The group now intends to invest in R&D for two new products over the next two years. For FY17, NAN has reported 58% yoy growth in total sales at $67.5 million, driven by a 42% increase in the global installed base of Trophon units to over 14,100 and a rapidly growing annuity revenue stream from consumables portfolio. Accordingly, gross profit increased 56% to $50.2 million compared with $32.2 million in the prior year, led by changes in the sales mix between distribution channels and product categories. The profit after tax jumped to $26.2 million from $0.1 million in FY16. The continued strong adoption of Trophon technology has resulted in the significant pre-tax profit of $13.9 million, with free cash flow for the year of $15.1 million and a balance of $63.0 million of cash and cash equivalents. Given the extension of Trophon relationship with GE, market expansion into Japan, product pipeline and financial position, we maintain a “Speculative Buy” recommendation on the stock at the current price of $ 2.66


NAN Daily Chart (Source: Thomson Reuters)

Sirtex Medical Ltd

SRX Details

Weakness in performance: Lately, Sirtex Medical Limited (ASX: SRX) appointed Helen Kurincic as a Non-Executive Director of Sirtex. For FY17, SRX had recorded a Net Loss After Tax of $26.3 million, compared to the previous corresponding period (pcp) Net Profit After Tax (NPAT) of $53.6 million. The group reported only 5% growth in global dose sales to 12,578 units and 0.8% product revenue growth to $234 million. Underlying EBITDA declined 17.3% to $61.5 million (down 5.6% in constant currency), representing an EBITDA/sales margin of 26.2%. The decline in underlying EBITDA was largely attributable to higher sales and marketing to support future growth and in preparation for the reporting of major clinical studies. Additionally, admin costs increased due to the class action legal fees. In turn, the underlying NPAT margin fell to 18.1% from 23.0% in FY16. Currently, SRX is focussing on underpenetrated market opportunity for SIR-Spheres Y-90 resin microspheres and plans to undertake measured expansion in those markets which have high growth potential.


Financial summary; (Source: Company reports)

In June, SRX commenced a $30 million on-market share buy-back; and at the end of the FY17 period, bought back $2.9 million worth of stocks (approximately 231,000 shares). Accordingly, the expected earnings accretion from the buy-back is expected to be skewed towards the FY18 period. Given the launch of its SIR-Spheres Y-90 resin microspheres in new markets, we maintain a “Hold” recommendation on the stock at the current price of $ 15.77


SRX Daily Chart (Source: Thomson Reuters) 

Mesoblast Ltd

MSB Details

Injecting more cash: Mesoblast Ltd (ASX: MSB) has completed an institutional entitlement offer for a fully underwritten capital raise of approximately A$50.7 million (US$40.0 million) and at June 30, 2017, the Company had cash reserves of US$45.8 million, and US$84.0 million on a pro-forma basis after adjusting for total net proceeds from the entitlement offer. Under the accelerated non-renounceable entitlement offer, new fully paid ordinary shares in Mesoblast (New Shares) were issued at a price of A$1.40 per New Share (Offer Price) on a 1 for 12 pro-rata basis. Proceeds from the offer will be used to fund the Company’s Phase 3 clinical programs, commercial manufacturing and ongoing operations.
In FY2017, MSB delivered cost savings of US$20.7 million (up 28%) in comparison with the prior financial year. Moreover, these savings enabled the Company to substantially offset the incremental costs of its Phase 3 clinical program in advanced chronic heart failure (CHF). Further, MSB’s cash reserves will be used to achieve significant outcomes in FY18 for the Phase 2b/3 trials in end stage CHF, acute graft versus host disease (aGVHD) and chronic low back pain (CLBP). Importantly, these value inflection points are expected to provide the Company with multiple commercialization options going forward, including the potential for accelerated market entry. Although, the stock has moved up 18.9% in the past one year, it is down 30.3% in the past three months (as on September 12, 2017), owing to recent profit booking and concerns over the success of clinical trials. However, given the ongoing progress and future commercialization opportunities, we give a “Hold” recommendation on the stock at the current market price of $ 1.37


MSB Daily Chart (Source: Thomson Reuters)

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