Mayne Pharma Group Ltd (ASX: MYX) has far and away been one of the most outstanding performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) this year. With its share price climbing by over 4% today, it has now gained a staggering 44% in 2016 much to the delight of shareholders.
The majority of these gains stem from the positive market reaction to the pharmaceutical company's US$652 million acquisition of a portfolio of drugs from industry giant Teva Pharmaceuticals. Investors were unsurprisingly bullish with the deal that saw Mayne Pharma acquire 37 FDA-approved and five FDA-filed products for less than 6x forecast FY 2017 EBITDA.
I believe this bold move has transformed the company into a real pharmaceutical force and gives it incredibly strong growth prospects.
The reason for today's gain is an announcement out of the company this morning related to a lawsuit against US-based Forest Laboratories that had been dragging on for almost three years.
In December 2013 Mayne Pharma filed a patent infringement lawsuit against Forest over its Namenda XR product. Today management announced a settlement agreement with Forest which will see Mayne Pharma record additional income of approximately US$19.5 million in FY 2017.
With its shares rising as much as they have, many investors will no doubt be wondering if they have missed out. Thankfully I don't believe they have. I personally believe there is a long-term investment opportunity here for patient investors.
At 34x estimated FY 2016 earnings Mayne Pharma's shares may be a touch expensive, but I do believe its future growth potential justifies paying a premium over the market and healthcare sector averages.
Right now I would put it up there alongside CSL Limited (ASX: CSL) as being one of the best investment options in the sector even after its incredible rise this year.
