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Mayne's 1H17 result almost triple prior period

Glenn Freeman  |  24 Feb 2017Text size  Decrease  Increase  |  

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Mayne Pharma (ASX: MYX) has reported $56.6 million in underlying net profit after tax (NPAT) for the first half of fiscal 2017 (1H17)--almost triple the $20.4 million result of 1H16, when it posted a similar first-half on first-half improvement.

The specialty pharmaceutical company's underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $108.5 million for the half was also more than double the $40.3-million result reported in the previous corresponding period.

Mayne's largest contributor to group revenue, its Generic Products Division, generated $222.6 million in sales revenue during 1H17, a four-fold increase on the previous corresponding period.

The $650-million acquisition of the Teva product portfolio in August 2016--underpinned by controlled substances hydrocodone, oxycodone and methamphetamine, along with dofetilide and butalbital--was a key driver.

This "contributed significantly to growth, with sales and margins ... tracking ahead of revenue and margin assumptions," according to Mayne CEO Scott Richards.

Since deal completion, the Teva portfolio has exceeded management's gross profit margin guidance by 50 per cent, generating US$100 million in revenue.

He said Metrics Contract Services and Mayne Pharma International--accounting for 10 per cent and 6 per cent of group revenue, respectively--also delivered solid growth relative to 1H16.

Metrics comprises a generic drug development division, a manufacturing operation and a well-established fee-for-service contract development business. Mayne Pharma International is its generic and branded product development, marketing and distribution division.

Mayne's Specialty Brands Division turned around its second quarter 2017 performance significantly, having suffered "temporary headwinds in the first quarter," according to Richards.

Specialty Brands' revenue of US$20.2 million was down 36 per cent for the half, relative to 1H16, but new product format launches increased 2Q revenue 68 per cent quarter on quarter, and the division "is well-positioned for growth in the second half," he said.

The results were broadly in line with Morningstar's expectations, said senior equity analyst Chris Kallos.

"There was a slightly higher result within the Generic Products Division. They delivered $38 million revenue from dofetilide, and we had forecast $24 million," he said.

However, this was "net neutral to our overall expectations," Kallos said, with this offsetting the weaker first-quarter result in the Specialty Products division.

Outlook

Management anticipates the Teva portfolio will continue to strengthen the generic division through 2H17: "We expect monthly revenue and earnings ... to increase over the remainder of the financial year as we pursue new accounts and expand revenue from other non-retail channels (government, hospitals)."

Across the group, management expects "significant growth opportunities" will continue to flow from recent acquisitions, new product launches, distribution revenue, and cost reductions.

The company remains confident it will achieve the fiscal 2017 revenue and earnings guidance, provided after the Teva acquisition in August.

Management also anticipates 1H17 product launches in the Specialty Brands division will make "material contributions to this segment over the remainder of the financial year".

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Glenn Freeman is Morningstar's senior editor.

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