Why the Mayne Pharma Group Ltd share price is at a 52-week low

The Mayne Pharma Group Ltd (ASX: MYX) share price hit a 52-week low today as investors jump ship after new U.S. President Donald Trump promised to clamp down on the over-the-top drug pricing charging of pharmaceutical companies in the US.

In an unfortunate piece of timing, Mayne Pharma agreed to buy an extensive portfolio of drugs for US$652 million from Teva Pharmaceuticals and Allergan plc in June 2016 just months before the combative Trump won a shock election victory.

Since the U.S. election Mayne Pharma shares have lost around 35% of their value and the risk that the government may move to renegotiate the rates at which reimburses pharmaceuticals for drugs is one I covered back in January 2017, when Trump claimed the U.S. drugs retailers were “getting away with murder” over price charging.

Even before the election of Trump, Mayne Pharma had conceded that it was subject to a subpoena in June 2016 from the competition division of the U.S. Department of Justice “seeking information relating to the marketing, pricing, and sales of select generic products”. This admission being a red flag that the regulatory environment was set to toughen in the U.S for drugs sellers.

Indeed, on May 1 2017 Mayne Pharma downgraded its full year sales guidance due to a “tougher generics drugs pricing environment in 2H 17”.

It now seems investors are now waking up to the fact that President Trump probably has cause for complaint and political support over the accusations of outrageous pricing.

That’s why I’ve suggested investors avoid Mayne Pharma shares over the last six months in order to let the dust settle, as there’s plenty of risk the Trump administration backs up its tough talk with action in this space.

If Mayne Pharma shares are a bit risky for your liking, why not consider our favourite dividend pick to buy this June.....

Attention investors: The Motley Fool's dividend expert Andrew Page has just released his #1 dividend stock for 2017. Chances are you've never heard of this little company, yet it's a fast-growing consumer favourite - with the shares up 155% in just the last five years! Even better, it's throwing off loads of cold, hard cash. As we speak, these shares are trading on 4.2% dividend yield, fully franked (6.0% gross). Making it a 'best bet' for growth AND income... No credit card required.

Simply click here to discover the name, code and a full investment analysis in our brand-new FREE report, "The Motley Fool's Top Dividend Stock for 2017."

Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.