Pharmaceutical company Mayne Pharma Group Ltd (ASX: MYX) is a quickly becoming a new star in the healthcare industry. It produces generic and branded drugs for ailments like pain, infections and acne, but it may have slipped by investors. Here's why it could be the best value healthcare stock that nobody is talking about:
It's part of the massive global healthcare trend
All long-term investors should have at least some exposure to the massive global healthcare trend which will last well into the next decade. According to the '2014 Global Healthcare Outlook' report by Deloitte, global healthcare spending is expected to grow at 5.3% per year between 2014 and 2017.
This is likely to benefit most companies exposed to healthcare, from the big players like ResMed Inc. (CHESS) (ASX: RMD), to the emerging stars like Global Health Limited (ASX: GLH).
It's not a dodgy biotech stock
Mayne Pharma's focus on products with proven merit and demand means the company has quickly established its market presence and established earnings. This significantly reduces risk compared to some of the cash-burning biotech stocks with big promise, but also big uncertainty and big dilution risk as they fund research with new share issues.
It has fast growing earnings and a huge profit margin
For the full year FY14 Mayne Pharma reported a 72% jump in revenue and a 92% increase in gross profit to $75.1 million. The growth was driven to a certain extent by acquisition earnings, but also new product launches and increased sales of existing products.
Most exciting is the company's massive 52.4% gross profit, a jump from 46.7% in FY13.
It's reinvesting in R&D
Mayne Pharma invested around 15% of sales revenue in R&D in 2014, and has numerous new products in the pipeline for release. There are currently 17 products pending FDA approval in the U.S. and 16 products pending approval from Australia's TGA, though the company acknowledges that the timelines for approval are uncertain. R&D remains a continued focus going forward which will help to drive growth.
It's not ridiculously overpriced
Although shares have risen strongly over the last 12 months, in my view it still doesn't account for the long-term growth potential. At a current share price of $0.79 Mayne Pharma sells for 21 times 2014 earnings. With the potential for new approvals, a big product development pipeline and long-term volume growth, Mayne Pharma could be the best value healthcare stock that investors are yet to discover.
