One of the worst performers on the ASX 200 on Wednesday was the Mayne Pharma Group Ltd (ASX: MYX) share price.
The pharmaceutical company's shares finished the day 8% lower at 80 cents.
Why did the Mayne Pharma share price plunge lower?
With no news out of the company, today's decline is likely to be attributable to a broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk.
According to the note, the broker has retained its underperform rating and slashed the price target on its shares to 93 cents.
While this price target is above its current share price, investors may be concerned with the contents of the note.
Yesterday Mayne Pharma announced the U.S. rights for SUBA-itraconazole in patients with Basal Cell Carcinoma Nevus Syndrome have returned to the company following a revision of its supply and license agreement with HedgePath Pharmaceuticals.
Under the terms of the revised agreement, Mayne Pharma will pay a 9% royalty on net sales of SUBA-itraconazole in the U.S. to HedgePath and has committed up to US$5 million to it to pursue further development programs in select cancer indications.
While the broker believes that this agreement provides Mayne Pharma with higher potential earnings, it also means that the company will incur higher research and development expenses.
Furthermore, it appears concerned that the later than expected launch could give its competitors an edge.
Should you buy the dip?
While I think Macquarie makes a fair point, I feel it is worth considering an investment in Mayne Pharma after its sharp share price decline in recent months. Especially given the improving trading conditions in the generic drugs market.
And if you're looking for other ideas in the industry, I would suggest you check out CSL Limited (ASX: CSL) or Telix Pharmaceuticals Ltd (ASX: TLX).
