The specialty drug-maker exceeded analysts' expectations on an adjusted basis, despite posting a full-year loss of $133.98 million.

Revenues for the year ending June 30 fell 7 per cent to $530.3 million, from $572.6 million in 2017, and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 20 per cent to $165.3 million.

Mayne Pharma (ASX: MYX) management said performance was substantially stronger in the second half, with revenue and EBITDA up 18 per cent and 35 per cent in this period. Adjusted net profit after tax also climbed 171 per cent in the first half.

Morningstar equities analysts Chris Kallos described the result as "better than expected", exceeding both his and the broader market expectations.

"[Mayne Pharma] had a tough 2017 with massive vertical international between end retail groups and distributors creating a major wave of price deflation which really hit their bottom line," Kallos says.

pharmaceutical medical

It was a year of two-halves for the pharmaceutical business.

"At the same time, the supposedly 'game changing' and 'highly defensive' portfolio of generic drugs they bought from Teva Pharmaceuticals was diminished following the passage of the Generic Drug User Fee Amendment Act in the US – accelerating the speed at which the FDA [United States' Federal Drug Administration] approved new generics."

However, he believes Mayne is turning a corner, with momentum continuing in the second half.

Within its generic products division, he says: "it appears price deflation is not getting better but it's not getting worse."

Kallos also praised its launch of six new products in the last half-year, noting "they still have a good run on them."

He anticipates Mayne's upcoming product line, a generic version of contraceptive ring NuvaRing, is among several in front of the FDA.

Mayne's specialty brand division is also performing well, nudged along by an increased sales force. "They've gone wider and deeper, getting more clinicians on board and more scripts written," Kallos says.

The key near-term headwinds for Mayne are its primary product Dofetilide, which will come out of patent in October. "We expect generic Dofetilide products to hit the market soon after, putting downward pressure on price," Kallos says.

No dividend has been declared for fiscal 2018. Mayne's share price was trading at $1.11 at 3pm, a slight premium Morningstar's $1.05 fair value estimate.

 

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Emma Rapaport is a reporter for Morningstar Australia.

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