The Mayne Pharma Group Ltd (ASX: MYX) share price is heading in the right direction again during trade on Friday following the release of its half-year results.
At one stage its shares were up as much as 11.5% to 78 cents. They have since given back some of these gains and sit 6.5% higher at 74.5 cents at the time of writing.
Here are key takeaways from the half-year release:
- Half-year revenue fell 17% on the prior corresponding period to $243.3 million.
- Generic drugs sales were down 19% to $180.9 million.
- Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) down 36% to $70.2 million. Reported EBITDA down 82% to $23 million.
- Reported net loss after tax of $174.2 million.
- Positive operating cash flow of $48 million.
- Outlook: Stronger second-half expected due to a stabilising generic drugs market and new product launches.
Although on the face of it this looks like a bit of a disaster from Mayne Pharma, I do think there are several positives that could give shareholders reason to be optimistic on the future.
The first one is of course the stabilising generic drugs market. According to research by Barclays, the generic drugs market has suffered from price deflation of 13% year-on-year as of the end of December. But month-on-month prices have inflated 3%. This could arguably be a sign that the worst is now over for the company.
Another reason to be a little more optimistic is the company's improved performance in the second-quarter of the first-half. Sales in the second-quarter from the company's key Generic Products Division (GPD) rose 30% on the first-quarter. Pleasingly, this momentum has carried over into January, with GPD sales up 13% on the average monthly sales generated during the second-quarter.
Also, it is worth noting that the reported net loss after tax of $174.2 million was driven largely by asset impairments and negative impacts from U.S. tax reforms. The company made a $184 million non-cash (pre-tax) charge of $184 million on intangible assets related to the acquired Teva portfolio. And a one-off charge to income tax expense of $14 million was made to reflect the restatement of deferred tax assets and liabilities.
Should you invest?
Whilst I think Mayne Pharma could now be over the worst of its problems and in a position to return to growth in FY 2019, it remains a high-risk investment.
As a result, investors may be better off sticking with industry peer CSL Limited (ASX: CSL) for now, and waiting for Mayne Pharma's next update to see if things have continued to improve.
