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Why the Mayne Pharma (ASX:MYX) share price is dropping 5% today

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The Mayne Pharma Group Ltd (ASX: MYX) share price is falling today after the specialty pharmaceutical company provided its slumping half-year results.

Despite the company launching new products and expanding its portfolio, Mayne Pharma’s revenue fell slightly, and losses increased. Shareholders are clearly disappointed today with the result, as the shares are down 5% to 29.5 cents a share.

What’s moving the Mayne Pharma share price?

It was very much a mixed bag of results for the pharmaceutical company. This was the case for all Mayne Pharma’s various operating divisions, including the Speciality Products Division (SPD), Metrics Contract Services (MCS), Generic Products Division (GPD), and Mayne Pharma International (MPI).

Specialty product sales were down 6% on the first half of FY20 but improved by 32% compared to the last half. The company’s generic product division suffered falling sales in the half. Gross profit for the GPD segment came in at US$27.5 million, a decline of 12% from last year. GPD performance was impacted by a continuation in price competitiveness across the portfolio.

On a more positive note, Mayne benefitted from an increase in its MPI segment. Sales increased by 10% compared to FY19, equating to $21.3 million. Gross profit for the segment also greatly improved to $6.9 million, an increase of 38% on the prior corresponding period (pcp). This improvement is a result of additional contract development projects and an increase in manufacturing revenues.

Mayne Pharma’s total revenue came in at A$209 million (down 8%) while underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) finished at $39.9 million (down 16%) for the half. Net loss after tax crumpled to a stark $181.3 million, compared to a loss of $18.2 million the prior year.

Impacts and accounting

Mayne Pharma’s CEO, Scott Richards, provided further details for the impacted results. A continued weakening of the US dollar and lingering challenges of COVID-19 are partly to blame for softer generic sales. Mr Richards further stated:

We continued to deliver substantial cost savings across the business with operating and gross development spend down $19m versus the pcp and have delivered a solid cashflow result that enabled net debt to be reduced by $40m. At the bottom line, the net loss after tax was impacted by a non-cash intangible asset impairment of the generic portfolio.

Mayne Pharma’s non-cash intangible impairments realised consisted of the following:

  • An increase of $2.6m for capitalised development costs
  • An increase of $3.3m for other intangible asset additions
  • A decrease of $23.4m for specific impairments
  • Notably, a decrease of $191.1m for CGU impairments
  • A decrease of $28.3m for amortisation
  • A decrease of $82.0m due to foreign currency translation with the AUD / USD exchange rate decreasing from 0.6877 on 30 June 2020to 0.7708at31 December 2020.

Mayne has several pharmaceutical products awaiting approvals from the FDA, TGA, etc. Management advised that future performance would depend on influential factors such as the US dollar, approvals, and competitors.

The Mayne Pharma share price has fallen 9.2% in the last 12 months. Placing the pharmaceutical company at a market capitalisation of $520 million.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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