The share price of Mayne Pharma Group Ltd (ASX: MYX) has now fallen 23% since the release of a trading update on 14 May.
At the time of writing, the pharmaceutical company's share price is up 2% to 51.5 cents after closing at a 52-week low of 50.5 cents on Thursday. The last time Mayne Pharma's share price traded at these levels was in 2013.
Mayne Pharma's generic products division under pressure
In May, for the first four months of calendar year 2019 Mayne Pharma reported a 15% drop in revenue to $154.1 million, with gross profit margins falling from 55% to 51%. This resulted in reported gross profit declining 20% to $78.6 million.
The fall in both the top and bottom lines can be attributed to weakness in the company's generic products division, which reported a 32% drop in revenue to $88.9 million. The fall in generics which is the largest division was not offset by the rise in revenue from the company's other operating segments: specialty brands, contract services and Mayne Pharma International.
Management attributed the weak start to calendar year 2019 to difficult market dynamics that have arisen from customer consolidation and additional competition from new generic launches in the United States (US). These factors have resulted in "heightened levels" of price deflation and pressure on trading terms. As a result, sales for the first 4 months in dofetilide were down 84% on the prior corresponding period to US$3.7 million, and liothyronine sales fell 23% on the prior corresponding period to US$9.8 million.
What's the outlook for Mayne Pharma
Mayne Pharma intends to perform a detailed review of the carrying value of its generic acquisitions and developed intangible assets at balance sheet year-end to determine whether an impairment will be booked, in light of the market conditions in the US generic drugs market.
Investors should note that the company does expect a stronger FY20 due to the recent specialty brand launches of Tolsura and Lexette, growth in generic and proprietary dermatology and women's health portfolios, possible market supply disruptions, and a boost from the contract services business.
Shares in Mayne Pharma are down 41% over the last 12 months and have underperformed other ASX 200 healthcare stocks such as CSL Limited (ASX: CSL) and RESMED/IDR UNRESTR (ASX: RMD).
With the issues surrounding the company's generics division still weighing heavily on the stock, investors may want to consider these stocks until there is a material change in the company's circumstances.
