Mayne Pharma Group Ltd shares sink on trading update

The Mayne Pharma Group Ltd (ASX:MYX) share price has sunk to a new 52-week low following a trading update. Here's what you need to know…

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The Mayne Pharma Group Ltd (ASX: MYX) share price has continued to sink lower and reached a new 52-week low of 83 cents this morning.

Although it has rebounded slightly since then, at the time of writing the pharmaceutical company's shares are down over 5% to 84.5 cents.

What happened?

This morning Mayne Pharma provided the market with a trading update. As you might have guessed it wasn't the most positive of updates.

According to the release, management expects full-year revenue of $581 million, underlying EBITDA of between $212 million and $216 million, and reported net profit after tax of between $92 million and $95 million.

Whilst this will represent stellar growth of more than 115% on the top line and 145% on the bottom line, the market appears to be more interested in its outlook.

As well as taking a non-cash charge of $25 million relating to intangible asset impairment and reassessment of the useful life of the acquired Teva portfolio assets to 15 years, management warned that its generic drugs segment faces competitive pricing pressure in the retail channel.

Although the company is attempting to combat this by diversifying its channels, pursuing new market share opportunities, and extracting significant cost savings, FY 2018 looks like it could be a tough year.

Should you buy the dip?

Whilst I'm sure in the long-term the Mayne Pharma share price will climb significantly higher from here, I think in the short to medium term it could still sink lower as competitive pressures weigh heavily on the company's results.

Because of this I would suggest investors hold off an investment despite how cheap it looks and consider industry peer CSL Limited (ASX: CSL) instead.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. 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.

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