The Mayne Pharma Group Ltd (ASX: MYX) share price will be one to watch on Friday after one of its global peers released disappointing quarterly earnings.
What happened?
Overnight the shares of global generic drugs giant Teva Pharmaceutical plunged 20% on the New York Stock Exchange following the release of a disappointing third-quarter update and weak guidance.
This brought Teva's year-to-date decline to a whopping 68.9%, compared to Mayne Pharma's 50% decline since the turn of the year.
According to Teva's release, its Generic Drugs segment posted a 37% decline in profit to US$619 million due largely to pricing pressures in the United States.
As a result, it has revised its earnings and free cash flow guidance for the year significantly with just one quarter left.
What does this mean for Mayne Pharma?
As Teva is the world's biggest seller of generics medicines, it is seen as a great way to judge conditions in the generic drugs market.
In FY 2017 almost three-quarters of Mayne Pharma's revenue was generated from its generic drugs portfolio. As conditions in the market have clearly not improved, nor does Teva appear to expect them to improve any time soon, there is a chance that Mayne Pharma's could be underperforming the market's expectations.
If this is the case then I wouldn't be surprised to see its shares continue their decline, unfortunately.
In light of this, I continue to believe investors ought to stay away from Mayne Pharma no matter how cheap it looks and focus on shares such as CSL Limited (ASX: CSL) instead.
