Wilson's cut their price target to 17c. Ouch! They were not impressed after the AGM and business update.
What's impressing analysts?
DAVID ROGERS- Mayne Pharma cut to Underweight; target cut 69pc to $0.17: Wilsons
Mayne Pharma reveals turnaround plan as cost pressures weigh on revenue
Mayne Pharma warns that it won’t generate positive EBITDA until FY24. Picture: Tricia Watkinson
Shares in Mayne Pharma plunged more than 16 per cent as the pharmaceutical company warned shareholders it would not hit positive earnings until next financial year, as its dermatology unit faced a barrage of cost pressures.
The Adelaide-based business said it would also focus on “resetting the business for growth” for the remainder of the current financial year by driving improved profitability and cash flow as it looked to return to positive EBITDA the following year.
The update came as Mayne Pharma blamed a sluggish first four-months of the financial on its dermatology business, which it said had higher copay card costs and pricing pressures.
The bleak picture painted the company’s annual meeting on Wednesday sent shares to its lowest since March at 23c, down 16.4 per cent on the day, as it clawed back from a multi-year and intraday low of 20c. Shares are now 65 per cent in the past five years.
The company avoided a second strike on its remuneration report after 80 per cent of shareholders voted in favour.
Mayne Pharma said cash and earnings in the first half of the current financial year would be impacted by normalised trading patterns with suppliers and customers (particularly in dermatology), higher gross to net charges, as well as expenses tied to a direct to consumer campaign in the US for its oral birth control pill, Nextstellis and its impending launch in Australia.
For the four months to October 31, Mayne Pharma’s revenue from continuing operations was 29.5 per cent lower over the prior corresponding period to $59m. This was despite the company earnings $6.3m in revenue from its recently launched Nextstellis product.
Dermatology sales in the portfolio products segment swung from $15.9 over the same four months in 221 to a loss of $21.9m. This offset improvements in the retail generics category to see portfolio products revenue halve to $33.2m.
Recently installed chief executive Shawn Patrick O’Brien said the company would also look to return to profitability by broadening its portfolio with complementary products, grow its Australian based specialty and pharmaceutical and complete the commercialisation of Nextstellis.
Analysts at Wilsons said a “real shock” in Mayne Pharma’s trading update at its annual meeting was that the Dermatology franchise of the portfolio products segment had a gross to net discount greater than 100 per cent — meaning it cost the company more to dispense drugs at the revenue line with patient copay card values superseding net revenues for the product.
“Clarity on this aberration is necessary to understand if this is a one-off event or if there is a systematic change to the functioning of this business, which has historically traded at a relatively stable 70 per cent gross to net level,” Wilsons analysts said.
Analysts said the retail generics business within the portfolio products segment surprised with reported revenues 30 per cent ahead of Wilsons’s estimates, despite this typically being viewed as the weakest part of the business.
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