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Mayne Pharma Group Ltd shares are on fire

The Mayne Pharma Group Ltd (ASX: MYX) share price may have been one of the worst performers on the market in 2017, but so far in 2018 it has proven to be one of the best.

At the time of writing the pharmaceutical company’s shares are up over 6% to 78 cents, bringing its year-to-date return to an impressive 13%.

Why are its shares higher?

As there has been no news out of Mayne Pharma since its annual general meeting in November, I believe this recent rally can be attributed to the strong share price gain made by global generic drugs giant Teva Pharmaceuticals recently.

As Teva is the world’s largest generic drugs company, its share price performance tends to influence those of the smaller players like Mayne Pharma.

Since the start of the year the Teva share price has risen 16% thanks partly to a broker upgrade from Japanese investment bank Mizuho Securities. Its analysts responded positively to Teva’s presentation at a J.P. Morgan conference and clearly believe the worst is behind the company now.

Which in turn appears to have shifted investor sentiment positively for Mayne Pharma, much to the delight of its long-suffering shareholders.

Should you invest?

Whilst I do believe Mayne Pharma looks dirt cheap even after its recent rally, I intend to hold off an investment until its next update.

There will come a time when pricing pressures in the generic drug market ease and profit growth accelerates once again for Mayne Pharma, but I can’t help but feel its shares are too high risk until proof of this recovery has been seen,

In light of this, I would sooner invest in healthcare peers CSL Limited (ASX: CSL) and ResMed Inc. (CHESS) (ASX: RMD). But I will be watching the company very closely through earnings season.

As well as CSL and ResMed, I think these top growth shares are in the buy zone today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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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