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Mayne Pharma share price crashes 13% lower on market update

The Mayne Pharma Group Ltd (ASX: MYX) share price has crashed lower in morning trade following the release of a market update.

At the time of writing the pharmaceutical company’s shares are down 13% to 57.5 cents.

What was in its market update?

This morning Mayne Pharma released a market update which included its unaudited financial performance for the 10 months ended April 30.

According to the release, the company’s growth has slowed in the second half due largely to the challenging trading conditions being experienced by its key Generic Products segment.

When the pharmaceutical company released its half year results earlier this year, it revealed revenue growth of 13% and gross profit growth of 67%.

Whereas during the first four months of the second half the company has seen its revenue slide 15% and gross profit decline 20% compared to the prior corresponding period.

This means that for the 10 months to April 30, Mayne Pharma’s revenue is up 1% and gross profit has increased 23% on the prior corresponding period.

As I mentioned above, the main drag on its performance has been its key Generic Products segment. Although it wasn’t the strongest performer in the first half and posted a 3% decline in revenue to $175.9 million, its performance in the second half has taken a big dive.

Segment revenue has fallen 32% during the first four months of the second half to $88.9 million. This has ultimately offset the solid growth being exhibited by its Speciality Brands and Contract Services segments.

Mayne Pharma’s CEO, Scott Richards said: “As foreshadowed at our half year results in February, our generic business has faced a challenging start to calendar 2019 driven by competitive pressure on our key products including liothyronine and dofetilide. We have also faced typical wholesaler destocking in the retail channel in the first calendar quarter, one-off failure-to-supply penalties emanating principally from products supplied by third party manufacturers, together with shelf stock adjustments resulting from price changes on some products. Pleasingly, all other segments have demonstrated good growth in the first four months of the half with Specialty Brands up 53%, Metrics Contract Services up 21% and Mayne Pharma International up 8% on the prior corresponding period (pcp).”

In light of this, the company will be performing a detailed review of the carrying value of its generic acquired and development intangible assets at the end of the financial year.

One positive, though, is that Mr Richards “expects the 4QFY19 to be stronger driven by a rebound in Generic Products, combined with ongoing growth in Specialty Brands, Metrics Contract Services and Mayne Pharma International.”

He also expects a strong performance in FY 2020 “driven by recent specialty brand launches of TOLSURA and LEXETTE, growth of the generic and proprietary dermatology and women’s health portfolios, improved retail generic performance and delivery on the pipeline of committed Metrics Contract Services business.”

Elsewhere in the industry today, the shares CSL Limited (ASX: CSL) and Telix Pharmaceuticals Ltd (ASX: TLX) are trading lower.

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James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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