Mayne Pharma Faces Trump Headwinds

By Glenn Dyer | More Articles by Glenn Dyer

Mayne Pharma Group’s (MYX) share price fell more than 10% to $1.20 yesterday and for that you can partly blame President Donald Trump and his erratic talk about controlling drug prices.

Mayne Pharma held an investor day and the highlight was an earning downgrade which too the market by surprise.

The downgrade was buried on on page 107 of a 110-page update released for the investor day.

The company said in the investor update that tougher generic drug pricing was behind the revised guidance for the suite of drugs called the Teva portfolio.

The shares were trading around $1.36 just after midday (12.04pm) when the 110 page document was released and investors cottoned onto the buried ‘treasure’ and by 12.28pm they had fallen to $1.197. They ended the day down 10.04% at $1.205.

The news clarified underlying unease about the company’s prospects in the huge US generic drug market since the election of President Trump last November.

Remember also the company revealed last December that is subject to a US Department of Justice investigation into the marketing, pricing and sales of some of its generic drug products.

Mayne Pharma said yesterday that company sales guidance for its recently acquired $US652 million (around $A840 million) portfolio of generic drugs from Israeli generic drug giant, Teva would not be reached due to a “tougher generics pricing environment in 2H 17”.

Drugs pricing remains a big issue with many US investors and consumers, with President Trump reportedly telling the media that the US pharmaceutical industry was “getting away with murder.”

Trump has also claimed his administration will save “billions of dollars” by negotiating harder on what the government was prepared to pay for drug prices.

Mayne CEO, Scott Richards told the briefing that it was unclear what President Donald Trump’s next move on healthcare was given the lack of support for his “repeal and replace” plan for Obamacare.

He said any change was unlikely to fundamentally change the reimbursement mechanism as he listed US healthcare moves as a minor negative impact for the company.

In August of last year, Mayne Pharma completed its $652 million acquisition of drug products from Teva and Allergan to make it a major player in the US generic pharmaceutical drugs market. That saw the shares hit a high of $2.10. The Teva drugs purchase had a dramatic impact on its half year result, with interim profit soaring 278% to $72.7 million in the first half on a 138% surge in revenue to $294.8 million.

The company re-affirmed full-year profit guidance; with Bell Potter has forecast 2017 earnings to rocket from $37.4 million for full-year 2016 to $127.1 million.

At the time of the profit release, Mr Richard said the outlook for the group "continues to be positive with significant growth opportunities from recent acquisitions, new product launches, further business development activities and transaction-related revenue and cost synergies."

But no longer and the because the Teva generics portfolio now represents a significant part of Mayne Pharma’s business, the downgrade hit the share price hard.

Glenn Dyer

About Glenn Dyer

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.

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