the short term bottom may be around 65c but I'm sure it will re test as it always does.
sentiment is horrendous, which means short term traders will be circling as there is blood in the water and they can feed off the panic.
i would personally not recommend buying yet because regardless of TA, there is one major headwind that is insurmountable for profits and thus the SP: industry wide price deflation in generics, and it has only just begun.
I, for one, didn't see it coming. Im not sure anyone did - the company board, any posters on HC, analysts. Maybe the shorters, but how on earth they did ill never know.
The problem is that price deflation has only just emerged, and all reports i read suggest it has further to run, which means fy18 is likely to be lower than fy17 and that aint gonna please shareholders one iota, hence another leg down is entirely possible. i know the other business segments are performing well, but generics god makes up the vast majority of revenue, so any further margin compression will likely more than offset gains in other segments. this may be excaberated by the drop in revenue cf fy2017 due to loss of market exclusivity for dofetilide and the continued drop in revenue from loss of patent protection over the 50 and 200mg dory products.
Im sure myx will bounce back eventually, but it is a little ridiculous to try and see the recovery when the bodies are still littered in the streets. I suspect fy18 will be flat at best, and then fy19 may see a turnaround, but risks remain.
e.g. a company in UK dropped almost 40% the other day because an dr reddy an indian generic co was deemed not to be infringing patent by supreme court in USA with its copycat drug for alcohol addiction; indian generic pharma co's are a worry given their aggressive discounting and the fact that Trump and the FDA are considering broader approvals for indian generics to enter the market as an easy way to drive down healthcare costs; generic companies are a relatively soft target especially because of their high margins, lack of innovative R&D and poor public perception due to recent unethical pricing etc.
My other recent reflection was that the myx portfolio isn't really a major beneficiary of tailwinds such as the ageing population, because most of its products are for things such as oral contraception, acne and infections. I guess the generic dofetilide for arrhythmia will benefit and the opioid analgesics will benefit from rising arthritis/ cancer/ etc. I guess the doryx formulations for infections may benefit a little, but the loss of share due to coming off patent will far more than offset any overall market growth for doryx.
The DOJ matter lurks in the background too. I previously trusted the management when they stated the issue would not affect earnings and they were not concerned, but my trust levels have diminished so I'm pricing this risk in more than previously. Its not a massive factor, but it could be enough to drive another leg down in the SP if there was an unfavourable penalty/ court decision.
Im going to hold my remaining MYX for now, because if I cut my losses for the sake of peace of mind and i will inevitably miss the first leg back up of the recovery. It is entirely possible that MYX could maintain margins and improve profits at the next half yearly report and this would put a rocket under the SP if its still floating around 65-75c then. they certainly have a large number of pending FDA approvals and pipeline products which have a total addressable market in the US alone of 6.5 billion, so if they could capture just 5% of those markets its another 300mill in revenue. this means that while the 1st half fy18 report is unlikely to be a good one (strong h1 for fy17 as a comparator, less contribution from new products, further price deflation, ongoing capex for the 2 new facilities without the increased manufacturing revenue from them, no transfer of teva manufacturing yet for a dozen products until facilities finished), the 2nd half report could be the turnaround (more product launches in h1 driving full period revenue growth in h2, plateauing of price deflation, plateauing of dofetilide & doryx market share losses, growth will be compared against the weak h2 fy17, benefits of having completed manufacturing facilities, etc etc).
Interesting times ahead. We will need to watch the other global generics players very carefully for hints in terms of pricing trends, etc as well as the FDa and trump administration for any new announcements.
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