Generic drug manufacturer, Mayne Pharma Group Limited (ASX: MYX) released their results for the first half of the 2019 financial year prior to market open today.
As compared to the previous corresponding period, Mayne Pharma reported a revenue increase of 13% to $274.4 million and gross profit grew 67% of $160.4 million. In addition, the Group’s underlying net profit after tax up 35% to $21.2 million and reported net profit after tax of $2.6 million. The stronger gross profit and margin improvement reflect greater contribution from its Specialty Brands division; operating at a higher margin profile, with cost savings generated from bringing manufacturing in-house (in addition to favourable product sales). More specifically, Mayne Pharma’s Specialty Brands Division (SBD) recorded a 213% increase in sales to $43.3 million and a 227% climb in gross profit to $37.8 million. This segment has benefited from strong sales growth of its Fabior, Sorilux, and Doryx products, and the expansion of its dermatology sales team and additional marketing investments. On a normalised basis segment sales were up 53%.
Although there was a 3% decline in sales to $175.9 million, the Group’s key Generic Products Division (GPD) delivered a 58% increase in gross profit to $100.3 million. Management noted that the key drivers of its improved gross profit include: the launch of liothyronine, the acquisition of fluorouracil, and normalised stock obsolescence, which offset weak Dofetilide sales after the approval of a number of competing products.
Additionally, The Metrics Contract Services (MCS) segment achieved a 14% increase in sales to $33.9 million and a 4% lift in gross profit to $16.5 million. This was mainly driven by investments at its Greenville site which have transformed manufacturing capacity and capability. What’s more, the company added two new commercial manufacturing clients during the half.
Finally, the Group’s Mayne Pharma International (MPI) segment delivered sales growth of 13% to $21.3 million and gross profit growth of 17% to $5.8 million. This resulted primarily from the growth in key products including Monurol and Urorec.
Moving forward, Chief Executive Scott Richards advised that its Generic Products Division is currently “facing emerging near-term competitive pressures on some key products as well as potential opportunities from market supply disruptions.” In light of this, it continues to transition its business towards more resilient therapeutic areas that are channel focused to create a sustainable multi-source business over the longer term.
Reflective of their share price movements through the Friday session, investors are cautious following the increased competitive pressures. Today’s movements (closing down 5%) continues the downward trend of the company’s share price over the last four months, after reaching a 52-week high of $1.43.