Shares in beleaguered pharmaceutical company Mayne Pharma Group Ltd (ASX: MYX) are up over 4% in today's trade to 63 cents after bouncing off yesterday's 52-week low following a couple of positive announcements in the generics space in the U.S. overnight.
Teva & Mylan
Reuters has reported that billionaire businessman Len Blavatnik is considering buying a significant US$3 billion stake in troubled pharmaceutical company Teva, the largest generic drugmaker in the world.
Shares in the Israeli company surged almost 9% on the news but are still down approximately 11.5% from Wednesday's close after issuing another disastrous quarterly on Thursday.
Teva reported results roughly in line with analysts' expectations, however, it lowered its 2018 forecasts for revenue and EPS which led to a significant sell off in generic drugmakers.
Mayne had shown signs of recovery from its early October lows but was down almost 10% following Teva's announcement hitting new 52-week lows of 59.5 cents yesterday.
The other piece of positive news came after American pharmaceutical company Mylan, the second-largest generic drugmaker by revenue, released its quarterly results.
Despite Mylan posting results below Wall Street's consensus due to revenue declining 2.3%, it updated the lower end of its full year revenue forecast because of an earlier-than-expected approval of a blockbuster multiple sclerosis treatment. The revised outlook resulted in the stock rising 4.7%.
Foolish takeaway
Attention on Mayne Pharma will turn to the company's AGM on November 28 in Melbourne where it should provide a trading update for the first few months of the 2018 financial year.
The stock is down 59% over the last 12 months as it suffers from price deflation of generic drugs in the U.S. following the consolidation of major wholesalers. Ninety four per cent of the company's revenues are earned in the U.S. with 73% of total revenue belonging to its generics division.
At today's prices there is some reasonable long term value, however with the generics price deflation cycle yet to bottom there is a risk of further lows. Investors looking for exposure in the healthcare sector may want to focus on companies such as CSL Limited (ASX: CSL) and ResMed Inc. (CHESS) (ASX: RMD) instead.
