Mayne Pharma Pipeline Reveals Upside

This story features MAYNE PHARMA GROUP LIMITED. For more info SHARE ANALYSIS: MYX

-Rally to date belies further upside
-Robust Doryx sales
 

By Eva Brocklehurst

Mayne Pharma ((MYX)) shares may have rallied sharply this year – up 179% versus the relevant index growth of 20% – but there's more upside to be had, according to one broker. Moelis argues that valuation metrics are not stretched if you look at the price of growth. The broker retains a Buy rating and 90c price target.

Revenue and earnings are expected to benefit from the substantial portfolio of generic drugs which will materialise as regulatory approvals are granted. In the wake of the AGM, the broker notes research and development spending has increased to $11m in FY14 from $4m in FY12 and, with the trend set to continue, this means a higher revenue forecast will not flow fully through to the profit line.

Sales of the antibiotic, Doryx, were a pleasant surprise, given the adverse effect of generic competition on the 150mg dose. The launch of a 200mg tablet produced a strong response and this represented 60% of the Doryx prescriptions in September. Management expects Doryx sales to grow in FY14. This is counter to the usual expectations for branded products to lose market share against generics. Within the US generic products segment a further three abbreviated new drug applications have been filed with the US FDA since August. There is now 10 generics on the list. These target a US$800m market and this offers considerable growth potential. The one offset is the timing of launches. as there is a a backlog of applications before the FDA.

In Australia, Mayne Pharma is expected to double the number of marketed products over the next year growing franchises for SUBACAP, the anti-fungal treatment, and Kapanol, used for chronic and severe pain. Contract services are also expected to expand the fee-for-service business.

Moelis has set a 90c target price on MYX for a total forecast return of 22.4%.

Credit Suisse is the only FNArena database broker covering MYX and the broker's last update in September set a target price of 61c.

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