'Soft' Mayne Pharma Disappoints
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Generic drugs group, Mayne Pharma saw its shares dip yesterday in the wake of yet another poor trading update.
The company has been battered in the past year as its generics business, especially in the US has run into rough weather.
Shares at the annual meeting were told yesterday that the company is still feeling the impact of tough competition and lower prices in the American generic drugs market, but management expects that the release of new drugs and restructuring initiatives will boost the company’s financial performance.
However that can’t come too soon with CEO Scott Richards telling the meeting the company’s first half is expecting a “soft” outcome when the results are rolled out next February.
But the company is expecting a solid recovery in the June half year.
Revenue for the first four months of the financial year has fallen by 12% to $151 million because of lower prices in the US generic drugs market flowing from aggressive contracting behaviour by wholesaler and retailer buying alliances.
But, Mr Richards said, the downward pressure on pricing had not resulted in consumers paying less for medicines (meaning the price cutters were absorbing whatever extra revenues they were making from maintaining their selling prices).
Mayne Pharma's results had been affected by extraordinary stock obsolescence charges, the discounted sale of stock nearing expiry date, and the loss of exclusivity on Doryx 50mg and 200mg tablets
Mr Richards said Mayne Pharma was in a strong position to weather these challenging conditions, given its solid balance sheet, specialty brands and experienced team.
“We are working on a range of initiatives which we expect will vastly improve future performance, and which are already yielding improved trading results in October and the present month," Mr Richards told shareholders.
Net sales of generic products rose 25% in October compared to the monthly average in the current year’s first quarter and gross profit was up 50%.
The drug maker has expanded its dermatology sales team, restructured its supply chain, improved co-payment management for its branded products, sought new opportunities to gain market share in the generics business, and is set to launch new products.
“Together with normalised levels of product returns and stock obsolescence, these initiatives are expected to drive a very strong recovery in financial performance in the second half and beyond," Mr Richards said.
Mayne shares closed down 3.22% at 60.5 cents.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.