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Mayne Pharma Group half-year update points to 20% revenue rise

The growth of pharmaceutical company Mayne Pharma Group Ltd (ASX: MYX) continues as it gives the market an update on its expected preliminary 2014 first-half results. Thanks to acquisitions, more products and increased market penetration, it is now expecting half-year total revenue to be $68 million to $71 million, a 20% improvement compared to the 2013 second-half period.

Underlying EBITDA between $18.6 million – $19.1 million is projected to be up by more than 45%. The full half-year results will be released on 26 February, so then we will see the audited net profit after tax.

Acquisitions

The company acquired the US-based Libertas Pharma in July 2013, which followed the acquisition of Metrics in October 2012. According to the company, Metrics gave it direct access to the US pharmaceutical market, the world’s largest single market. This will be a key driver for increasing its US retail generics business, which it sees as a growing market due to age demographics and increased life expectancy.

Drug development

The number of products under development has increased substantially, from only one in early 2012 to 20 today. In the November AGM, the company reported that it had 13 products pending approval in Australia with the Therapeutic Goods Administration (TGA).

Its research and development (R&D) investment rose from $4 million in FY2012 to $11 million in FY2013. Investors can appreciate that R&D is the lifeblood of a growing pharmaceuticals company and the product pipeline has to be wide and full of products.

Financials

Since 2010, NPAT before abnormals has progressively improved, rising from $3.25 million to $6.2 million in 2013. Long-term debt rose to $39.2 million in 2013, but net gearing was a manageable 22.9%, so it’s financially firm, and the increased revenue due to the acquisitions will improve cash flows.

The share market has taken these improvements on board, raising the share price from about $0.35 in January 2013 to $0.79 now. Its PE is 51.6, so investors are expecting much more growth to come.

Foolish takeaway

In general, the pharmaceuticals industry has been on the rise since early 2012. Industry peers like CSL Limited (ASX: CSL), Sirtex Medical Limited (ASX: SRX) have climbed in share price greatly since then, and both hit new all-time highs recently.

Understanding what drug products a company is currently selling and what they have in development is crucial to getting a picture of where the company is going. Mayne Pharma is doing a great job expanding its product line, but clinical studies and approvals also take time, so the time frame for their commercialisation is also important.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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