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Why the Mayne Pharma Group Ltd (ASX:MYX) share price has sunk lower today

The Mayne Pharma Group Ltd (ASX: MYX) share price has certainly had an eventful day.

At the time of writing the pharmaceutical company’s shares are down almost 6% to 98 cents, whereas in early trade its shares were up as much 5%.

What happened?

This morning Mayne Pharma is holding its annual general meeting. Ahead of the event the company released its annual general meeting speeches to the market which included an update for the first four months of FY 2019.

According to the release, Mayne Pharma has had a positive start to FY 2019. Group revenue at the end of October was up 21% on the prior corresponding period to $183 million. This was driven by growth in all four of its operating segments.

Pleasingly, the company’s gross profit has grown at even quicker rate. During the four months it achieved a 75% increase in gross profit compared to the prior corresponding period to $108 million.

Mayne Pharma saw its gross profit margin lift to 59% during the period thanks to a greater contribution from its high margin Specialty Brands segment, cost savings from bringing manufacturing in-house, favourable product sales mix in generics, and normalised levels of stock obsolescence and Doryx returns.

So why are its shares sinking lower?

Mayne Pharma has undoubtedly had a strong start to FY 2019. However, neither the CEO nor the chairman provided any comments on expectations for the full year.

As a result, I suspect that the lack of any guidance has spooked investors and sent some to the exits.

Should you buy the dip?

If the company can continue this form through to the second half of FY 2019 then I think Mayne Pharma’s shares could prove to be a great investment option.

However, it might be worth holding out until the release of its half year results early next year to see if this level of performance has been sustained.

In the meantime, I think CSL Limited (ASX: CSL) and Telix Pharmaceuticals Ltd (ASX: TLX) could be worth a closer look.

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Motley Fool contributor James Mickleboro owns shares of TELIXPHARM DEF SET. 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 Scott Phillips.

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