Pharmaceutical company Mayne Pharma Group Ltd (ASX: MYX) reported half-year revenue down 15% and reported net profit down more than half as the company copes with a change in business that may turn into an opportunity in financial year 2015.
Here are the key half-year results:
- Revenue $59.5 million, down 15%
- Earnings before interest, tax, depreciation and amortisation (EBITDA) $14.6 million, down 23%
- Net profit after tax (NPAT) reported NPAT $4 million, down 53%
- Earnings per share 0.66 cents per share, down 54.5%
- Dividend per share no interim dividend declared
Half-year highlights:
— The reason for the drop in revenue comes from the reduction of sales in the acne medicine Doryx, which is produced by Ireland-based pharmaceutical Actavis. Doryx represented a substantial proportion of Mayne's revenue, but its manufacturing was cut back by Actavis due to lower demand.
— Mayne Pharma entered a deal to acquire the Doryx brand and associated assets from Actavis for US$50 million. After the acquisition and an initial transition period, Mayne Pharma will take up production of Doryx and continue distribution in the US and abroad.
According to Mayne Pharma CEO Scott Richards, " We are very excited about building this franchise under our ownership and delivering long-term value to Mayne Pharma. Following a transition period of approximately two months, Mayne Pharma will launch this product through its new US Specialty Brands Division and control the entire supply chain from manufacture, packaging and distribution, through to sales and marketing."
— The acquisition is expected to transform the business in terms of earnings and cash flow. Mayne anticipates Doryx will contribute an average US$2.7 million EBITDA per month from July 2015.
Mayne Pharma may be an opportunity for Foolish investors when revenues are down as a new acquisition could revitalise the pharmaceutical's business. Shares in Mayne Pharma went as low as $0.55 in early December. After the acquisition in early February, the stock has rallied from $0.67 to $0.92 currently.
This expansion into the huge US drug market could lead to further business growth. Australian healthcare companies like Sirtex Medical Limited (ASX: SRX), Cochlear Limited (ASX: COH) and ResMed Inc (CHESS) (ASX: RMD) have successfully grown their US businesses to become a large portion of their companies. Mayne could be a promising stock to buy while it is in transition.
