# MYX - Mayne Pharma Group



## Kuri (16 November 2009)

Has anybody seen this stock over the last week? I know it recently purchases Mayen Pharma in the US through an SPP  but that news is old. Anybody hazard a guess as to why it has jumped over 25% in a week? It is probably due for a speeding ticket soon. Do any chart readers see a halt in its rise? I see resistance at 45c but it is now at 55 centes and has got there with a couple of textbook corrections.

Looking forward to hearing some other thoughts.

Kuri


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## Country Lad (30 July 2013)

MYX has been giving buy signals on the way up and another one yesterday.  I've tightened stops with the choppy market and impending reporting season.

Cheers
Country Lad


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## Craton (30 July 2013)

Just an observation but better late than never eh. Ok, ok, I'm not funny....:bonk:


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## piggybank (9 November 2013)

Are you still in it Country Lad?


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## Country Lad (10 November 2013)

piggybank said:


> Are you still in it Country Lad?




Yes but only just.  Closed below my stop 28 Aug but then promptly stayed above it the next day before I sold and  kept going from there. Now at all time high so everybody is in profit

Cheers
Country Lad


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## piggybank (10 November 2013)

Country Lad said:


> Yes but only just.  Closed below my stop 28 Aug but then promptly stayed above it the next day before I sold and  kept going from there. Now at all time high so everybody is in profit
> 
> Cheers
> Country Lad
> ...




Hi Country Lad,

If I read it correctly, then you didn't have a stop loss locked in by your broker? The reason I ask is that I thought you were a strong advocate of using them

Regards
PB


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## Country Lad (10 November 2013)

piggybank said:


> Hi Country Lad,
> 
> If I read it correctly, then you didn't have a stop loss locked in by your broker? The reason I ask is that I thought you were a strong advocate of using them
> 
> ...




I treat “spekkies” and real companies differently and it all depends whether I am/will be watching the market.

For what I consider “spekkies”, if I am at the computer during the day when the stop is hit I will assess the market sentiment at that time and may continue to watch if I think it is a blip, but mostly I will sell straight away.  If I will not be at the computer, stops will have been set with the broker and if hit it is sold.

For those which are not “spekkies” (and MYX falls into this category), assuming I will be watching the market during the day or have access to internet after close, then no automatic stop has been set and I will assess at opening and decide based on the way it is trading and the market sentiment.  That is what happened to MYX that day.

If I am away from the market, then there will be a previously set stop which will be activated.

When I am in remote areas without internet for days or weeks on end, it is always interesting to see what I still own when I am back into reception areas.

Cheers
Country Lad


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## piggybank (10 November 2013)

Hi Country Lad,

Thanks for sharing some of your strategies - selling methodology with us. As you said it must be interesting to see what you own when you haven't had access to a computer for a while

Regards
PB


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## Wysiwyg (25 May 2016)

Mayne Pharma seeing growth with expected "very positive" outlook for 2HFY. T.A. signaled at $1.40 but didn't take it. Longer term trend is up but definitely not smooth.   Personal holding at $1.48.


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## Wysiwyg (26 May 2016)

All time high $1.54 broken. Our market has been bullish of late so bit of a decision point whether to hold or buy back at lower prices. :1zhelp:


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## Knobby22 (7 June 2016)

My personal holding is $1.49 Wysiwyg.

The new generic heart drug is approved and they have exclusivity for six months as the first company to offer an alternative-which is a funny rule but good. 12 more drugs on the way! Let's go for a ride


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## Wysiwyg (7 June 2016)

Knobby22 said:


> The new generic heart drug is approved and they have exclusivity for six months as the first company to offer an alternative-which is a funny rule but good. 12 more drugs on the way! Let's go for a ride



How did you go? I sold at $1.54 for another out too soon decision. A sell off down to $1.595 from high of $1.665 today obviously suggests that will do.. Might keep an eye on it for awhile.


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## Knobby22 (8 June 2016)

I tend to hold over 6 months. Once I am on a trend I stay on it till it changes. No reason for me to sell yet.


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## kid hustlr (30 June 2016)

am i reading this entitlement right that i can buy 1.91 shares for 1.28????


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## pixel (30 June 2016)

kid hustlr said:


> am i reading this entitlement right that i can buy 1.91 shares for 1.28????




Only if you were a holder on the Record Date, which is today.
Buying today won't make you eligible, and entitled holders can only buy a limited number of new $1.28 shares. Today's gap-up blitz may well include a lot of holders selling half of their current holdings in order to free up the cash to double-up on the Offer.


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## kid hustlr (30 June 2016)

pixel said:


> Only if you were a holder on the Record Date, which is today.
> Buying today won't make you eligible, and entitled holders can only buy a limited number of new $1.28 shares. Today's gap-up blitz may well include a lot of holders selling half of their current holdings in order to free up the cash to double-up on the Offer.




I hold - pure luck.

I assume this is a no brainer then for me to take up given where the shares are trading.

Is it counter intuitive for a a share to rally like this given the cap raising is at a price discount to the current trading price - the market must really like whatever they've gone out and done?


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## Knobby22 (30 June 2016)

I hold also. 
The whisper is the big institutions were aware of the possible deal hence the previous price rise that got me on board.

I can see two reasons their are so many buyers:
1. The deal is good and creates a biotech powerhouse. The other previous announcements have been good too. Roger Corbett is Chairman and we know that he knows how to get things done.
2. The company will become one o the largest biotechs -3rd I believe, and the index funds will need to buy in.


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## Knobby22 (30 June 2016)

pixel said:


> Only if you were a holder on the Record Date, which is today.
> Buying today won't make you eligible, and entitled holders can only buy a limited number of new $1.28 shares. Today's gap-up blitz may well include a lot of holders selling half of their current holdings in order to free up the cash to double-up on the Offer.




Buying today would make you eligible, wouldn't it? I thought you get the shares and pay for them on settlement. 
That is why the buying is so frenzied. Today is the last day.


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## skc (30 June 2016)

Knobby22 said:


> Buying today would make you eligible, wouldn't it? I thought you get the shares and pay for them on settlement.
> That is why the buying is so frenzied. Today is the last day.




NO. Buying today will NOT allow you to participate in the cap raising. Record day is today... with T+2 settlement you needed to buy 2 business days ago.

Today's buying frenzy is caused by the fact that MYX is able to buy such a large important asset from a forced seller (Teva forced by regulators to divest). Teva deliberately chose a mid tier pharma to sell the assets to... so MYX kind of luck into it. 

It's transformational  - hopefully not Slater and Gordon style.


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## pixel (30 June 2016)

Knobby22 said:


> Buying today would make you eligible, wouldn't it? I thought you get the shares and pay for them on settlement.
> That is why the buying is so frenzied. Today is the last day.




Wrong, Knobby - sorry 
Due to the T+2  rule, you have to have bought at least 2 days BEFORE the record date. That makes the EX-Date yesterday, but as there was a trading halt, today is/was the first day on which holders could sell their MYX shares, yet retain the entitlement to those new cheapies.

 spot-on, skc. Ours crossed.


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## Knobby22 (30 June 2016)

pixel said:


> Wrong, Knobby - sorry
> Due to the T+2  rule, you have to have bought at least 2 days BEFORE the record date. That makes the EX-Date yesterday, but as there was a trading halt, today is/was the first day on which holders could sell their MYX shares, yet retain the entitlement to those new cheapies.
> 
> spot-on, skc. Ours crossed.




Wow, that makes the buying frenzie even better news. Very happy. Thanks pixel.


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## kid hustlr (30 June 2016)

skc said:


> NO. Buying today will NOT allow you to participate in the cap raising. Record day is today... with T+2 settlement you needed to buy 2 business days ago.
> 
> Today's buying frenzy is caused by the fact that MYX is able to buy such a large important asset from a forced seller (Teva forced by regulators to divest). Teva deliberately chose a mid tier pharma to sell the assets to... so MYX kind of luck into it.
> 
> It's transformational  - hopefully not Slater and Gordon style.




If I'm im entitled to the offer is free money for me though isnt it?

I can buy them at 1.28 through the offer and then sell them at market @ 1.91? 

arbitrage?

EDIT: 

Any chance I don't get my full allotment?


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## VSntchr (30 June 2016)

skc said:


> Teva deliberately chose a mid tier pharma to sell the assets to... so MYX kind of luck into it.



Presumably so they didn't give a close competitor a handball? 
Interesting stuff.


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## VSntchr (30 June 2016)

kid hustlr said:


> If I'm im entitled to the offer is free money for me though isnt it?
> 
> I can buy them at 1.28 through the offer and then sell them at market @ 1.91?
> 
> arbitrage?



Yes. But being entitled is a very big privilege in this case! One of the nice perks that the stock market throws up every now and then. Right place right time...


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## pixel (30 June 2016)

Knobby22 said:


> Wow, that makes the buying frenzie even better news. Very happy. Thanks pixel.




You don't see it very often that a cap raising is greeted by a gap-up rally.
At $1.28 per new share, today's rise gives holders a nice EoFY profit.

*However,* it is quite possible, highly likely even, that a good number of enthusiasts fell into the same trap and assumed that buying today would include the opportunity to top up much lower. Holders might have welcomed those enthusiasts and sold them some of their holdings in order to free up funds for the buy-in at $1.28. Bear in mind that not every investor has unlimited funds, or lax diversification rules, that they can increase a single holding by almost doubling it.


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## pixel (30 June 2016)

kid hustlr said:


> If I'm im entitled to the offer is free money for me though isnt it?
> 
> I can buy them at 1.28 through the offer and then sell them at market @ 1.91?
> 
> ...




Entitlement is entitlement. As long as your cleared funds arrive in time, the company can't legally reduce your allotment. To make sure my money arrives in time, I usually transfer electronically, preferring BPay where possible.

*However,* if you want to sell at $1.91, you may be well advised to do so today, because there is no guarantee that the sp will remain this high until the day that you have your $1.28 shares in your CHESS account. That won't happen until 25 July.


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## skc (30 June 2016)

kid hustlr said:


> If I'm im entitled to the offer is free money for me though isnt it?
> 
> I can buy them at 1.28 through the offer and then sell them at market @ 1.91?
> 
> ...




Yes you can either short or sell your shares (to your entitlement amount) today and lock in the profits. It's not so much free money though... i.e. not something I can do now if I wasn't a holder at record day. 

It's a 1-for 1.725 rights entitlement and you won't be scaled back at this ratio. Some offers have top up provisions which would be scale back if too many people apply for them.


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## McLovin (30 June 2016)

skc said:


> It's a 1-for 1.725 rights entitlement and you won't be scaled back at this ratio. Some offers have top up provisions which would be scale back if too many people apply for them.




I had that with APN a few years ago. It was free money. The cheque I sent in was about $400k over my allotment, knowing it would get scaled back. Amazing how many people don't take up the entitlement even with the outcome so clearly in their favour.


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## skc (30 June 2016)

McLovin said:


> I had that with APN a few years ago. It was free money. The cheque I sent in was about $400k over my allotment, knowing it would get scaled back. Amazing how many people don't take up the entitlement even with the outcome so clearly in their favour.




Well not everyone has $400k!

I did that during the GFC with a few of these cap raisings. There was fear around the time so take up rates were lower for many raisings. And the companies really want to maximise the amounts of new funds they receive... AND they have record dates set after the announcement. It was free money. I used to go through company balance sheets / 4Cs just to see if they have a chance of raising capital... then I buy a minimum parcel and apply for truckloads if the opportunity presents itself...

These days, company tend to scale back most applications to some multiple of your existing holdings (e.g. no more than 50%, as in the case for MYX), or they say "placement of any short fall at absolute discretion of management) and then they place the shortfall to their mates.


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## pixel (30 June 2016)

McLovin said:


> I had that with APN a few years ago. It was free money. The cheque I sent in was about $400k over my allotment, knowing it would get scaled back. Amazing how many people don't take up the entitlement even with the outcome so clearly in their favour.




The recent CZZ Entitlement offer also included a top-up allowance of up to 50%.
I upped my payment accordingly and am pleased to find the new shares in my CHESS account. As the new shares were also participating in yesterday's dividend, the effective cost of just under $19 made it a no-brainer.


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## Wysiwyg (30 June 2016)

Knobby22 said:


> I tend to hold over 6 months. Once I am on a trend I stay on it till it changes. No reason for me to sell yet.



Nice little gap up hey.  Well done!


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## Knobby22 (25 July 2016)

Wysiwyg said:


> Nice little gap up hey.  Well done!




Got the rights shares today , now my 4th biggest holding. Every now and then you get lucky.


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## ROE (16 December 2016)

Come and grab a bargain today value investor -


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## Knobby22 (16 December 2016)

It's called catching a falling knife. Likely to get skewered.


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## ROE (16 December 2016)

- I got them 128 118 110 happy to catch more ... my style I catch knives with gloves


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## Knobby22 (16 December 2016)

ROE said:


> - I got them 128 118 110 happy to catch more ... my style I catch knives with gloves




Cool. Having a look, damn USA legal system specialises in this, look what happened to CSL and they were completely innocent. I am keeping a close look, might join you next week.


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## ROE (16 December 2016)

Text book value play really 
one off event if they are guilty wreck harvoc to the price but the damage to the business is temporary but when you get them cheap it a permanent and long term business value still in tact

So long term it will reverse back to the value of the business the one off event gone 

Right now they not event guilty it just news and circulation and uncertainty 
Yet the business nearly half at the time they acquire generic division from Teva as a force seller which is a stunting purchase 

That division already grab 50m in revenue a matter of weeks  since they done the deal 

Over reaction much?


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## luutzu (16 December 2016)

ROE said:


> Text book value play really
> one off event if they are guilty wreck harvoc to the price but the damage to the business is temporary but when you get them cheap it a permanent and long term business value still in tact
> 
> So long term it will reverse back to the value of the business the one off event gone
> ...





With some 1.5Billion shares out. At $1.20 that's a $1.8B company.

Sales last FY was $267m; NPAT $37.4M.

The multiple doesn't point to an obvious bargain.

Especially given the reported figures above is a doubling of its previous operations.

So maybe the future is a much bigger beast with much brighter future than previous norm... but it's not an obvious bargain. Though need a closer look, particularly given that this DOJ subpoena thing has been going on for some time now - today's seem a more formal get-your-azz to our office kinda invite.


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## ROE (16 December 2016)

You forgot the acquisition it will pretty doubling in size with sales and growing .. that won't reflect in the current figure till next year report

60-70% earning will now coming from the US with higher rate and our lower dollar.

I stand to call it a bargain and put 30% of my portfolio money with today play

If our local billionaire keep buying as far as last week I am better off investing with them


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## Klogg (19 December 2016)

ROE said:


> You forgot the acquisition it will pretty doubling in size with sales and growing .. that won't reflect in the current figure till next year report
> 
> 60-70% earning will now coming from the US with higher rate and our lower dollar.
> 
> ...




After reading a little more about this, I can't help but agree. 6 different companies were accused of some form of price fixing (or similar activity), but that is notoriously difficult to prove. Add to that the fact that doxycycline is not a major revenue provider for MYX (from what I've read), and it really is a storm in a teacup.

What's even more interesting is the purchase of the portfolio of drugs from Allergan. Given the $40bn acquisition of Allergan Generics by Teva, the $US650mn odd sale is inconsequential to them. 
Further, given the FDA was essentially forcing them to sell off this part of the Allergan drug portfolio, it seems like the alignment of incentives ensured MYX got a good deal.

This gets more interesting as I dig... Thanks for the heads up ROE.


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## luutzu (19 December 2016)

ROE said:


> You forgot the acquisition it will pretty doubling in size with sales and growing .. that won't reflect in the current figure till next year report
> 
> 60-70% earning will now coming from the US with higher rate and our lower dollar.
> 
> ...




Ah see. I thought the big jump from previous years revenues were due to that new acquisition. So there's another major acquisition after the last financial year, hence the new share issued? 

Thanks.


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## ROE (19 December 2016)

luutzu said:


> Ah see. I thought the big jump from previous years revenues were due to that new acquisition. So there's another major acquisition after the last financial year, hence the new share issued?
> 
> Thanks.





Yes the Teva generic acquisition is the biggest one and about the size of Mayne. Teva is a forced seller so the price is decent and it EPS  Accretive from day one

Uncle Bruce took the full entitlement and bought more shares during the recent panic, at the time he said this is once in a lifetime opportunity and he knows his stuff, he been in business for a long time and don't make many false moves nor talk bull****.

He also give me high confident that he walks the talk about once in a lifetime opportunity as he bought more shares after the right issue not that he need any more, he is one of the largest shareholder.

When my uncle play game like that I love to go big with them


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## Knobby22 (19 December 2016)

Not as on the ball as you ROE, bought in at the open.


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## ROE (19 December 2016)

I don't invest in many stocks, those I do I take large position and on the ball with the business.

Corbett just bought more on Friday that should tell you the health of the business going forward notwithstanding the current volatility which is to be expected given the recent history.


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## JTLP (19 December 2016)

ROE said:


> I don't invest in many stocks, those I do I take large position and on the ball with the business.
> 
> Corbett just bought more on Friday that should tell you the health of the business going forward notwithstanding the current volatility which is to be expected given the recent history.




He didn't spend chump change either...he bought something like 199k worth. So a fairly decent investment. Time will tell.


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## Klogg (19 December 2016)

JTLP said:


> He didn't spend chump change either...he bought something like 199k worth. So a fairly decent investment. Time will tell.




He already owns 90m odd shares - $199k seems like spare change in comparison.

But it is still a strong display of confidence


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## JTLP (19 December 2016)

Klogg said:


> He already owns 90m odd shares - $199k seems like spare change in comparison.
> 
> But it is still a strong display of confidence




Ahh yes! But still, if you weren't really confident you'd throw $20k and be done with it. 

Heavy selling in to the close.


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## galumay (19 December 2016)

Got in today at $1.25, its just too good a business to let go at that sort of price. Love it when the market panics.


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## ROE (19 December 2016)

JTLP said:


> Ahh yes! But still, if you weren't really confident you'd throw $20k and be done with it.
> 
> Heavy selling in to the close.




Maybe he doesnt have the cash lying around as he just stump up millions not long ago for right issue
Graham Turner only throw in 300K or so during the FLT great panic around 4-5 bucks


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## ROE (19 December 2016)

galumay said:


> Got in today at $1.25, its just too good a business to let go at that sort of price. Love it when the market panics.




If they are on target around 11.4 EPS FY18 year, an absolute bargain  a couple weeks till first half is done  and we find out in Feb how well thing go with the Teva generic acquisition.

and the nature of this business I dont see they can fall too far from that projection, it not commodity business where thing just fall off the cliff. It be steady as you go


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## Klogg (20 December 2016)

ROE said:


> If they are on target around 11.4 EPS FY18 year, an absolute bargain  a couple weeks till first half is done  and we find out in Feb how well thing go with the Teva generic acquisition.
> 
> and the nature of this business I dont see they can fall too far from that projection, it not commodity business where thing just fall off the cliff. It be steady as you go




Just out of curiousity, where does that EPS figure come from?


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## Klogg (20 December 2016)

A question for anyone who understands this one:

What does the acquisition of the portfolio give them exactly. Is it a license to distribute or manufacture the generic versions of various drugs? (Pharma is all new to me)

I ask because the presentation on the Teva acquisition (see link below) mentions using contract manufacturers (CMOs) to manufacture the product - in which case, Mayne are just the middlemen with a license?
http://www.asx.com.au/asxpdf/20160628/pdf/4385f8xclm0lmb.pdf

I get the impression I should have read Hempton's Valeant posts in more detail...


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## ROE (20 December 2016)

Klogg said:


> Just out of curiousity, where does that EPS figure come from?




http://www.afr.com/business/ma-the-mayne-game-for-aussie-drug-maker-20160722-gqbkrd

if you cant read the article here is the photo


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## ROE (20 December 2016)

Klogg said:


> A question for anyone who understands this one:
> 
> What does the acquisition of the portfolio give them exactly. Is it a license to distribute or manufacture the generic versions of various drugs? (Pharma is all new to me)
> 
> ...




It acquire 42 generic drug portfolio from Teva force to sell due to competition concern as part of teva takes over for Allergan. Looking at the increase revenue I say they own the drug and can manufacture, sale and distribute

This artcile high light how good management are at playing this game and they are veteran
http://www.afr.com/business/health/pharmaceuticals/how-mayne-pharmas-eagle-landed-20160630-gpvctb

I cant fault this business except the over hanging of DoJ and even then it tiny part of their business now and it focus on the period where Mayne sale of that drug were like 15-20m in revenue.

I am not sure what all the panic is about, I search far and wide and I cant find anything it is so crazy, I bought more today.

fast forward a year or two  it revenue projected to be 500m and up to a Billion


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## McLovin (20 December 2016)

Klogg said:


> A question for anyone who understands this one:
> 
> What does the acquisition of the portfolio give them exactly. Is it a license to distribute or manufacture the generic versions of various drugs? (Pharma is all new to me)
> 
> ...




There's no license required to manufacture a generic, as it's off patent. What I'm thinking they have bought is the FDA approval which even for a generic can run into the millions of dollars, especially proving and the supply chain and manufacturing know how and of course the established distribution network.


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## Klogg (20 December 2016)

McLovin said:


> There's no license required to manufacture a generic, as it's off patent. What I'm thinking they have bought is the FDA approval which even for a generic can run into the millions of dollars, especially proving and the supply chain and manufacturing know how and of course the established distribution network.




Thanks for the response. I believe you're correct:
http://www.fda.gov/Drugs/ResourcesF...afely/UnderstandingGenericDrugs/ucm506040.htm
http://www.fda.gov/Drugs/NewsEvents/ucm508150.htm

The links go through the approval process. Without the purchase, they would have had to file with the FDA to get approval... it all seems rather onerous.

EDIT:
And in a very pretty PDF format:
http://www.fda.gov/downloads/Drugs/...afely/UnderstandingGenericDrugs/UCM510852.pdf


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## Klogg (20 December 2016)

ROE said:


> I cant fault this business except the over hanging of DoJ and even then it tiny part of their business now and it focus on the period where Mayne sale of that drug were like 15-20m in revenue.




To be honest, this is what is attracting me to the company. Usually when these accusations start flying around, there's very little tangible evidence (i.e. it's all verbal), but the gross profit margins are more than healthy.

Once price collusion starts happening in an industry, it's very hard to get rid of (there were 6 companies accused...). Sure, the DOJ might end up taking them to court and even end up in a fine, but this is a small problem.

I think Bruce Greenwald gives an example of this in one of his books - relating to the fuel additives sector. Can't remember the details off the top of my head though.


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## McLovin (20 December 2016)

Klogg said:


> Thanks for the response. I believe you're correct:
> http://www.fda.gov/Drugs/ResourcesF...afely/UnderstandingGenericDrugs/ucm506040.htm
> http://www.fda.gov/Drugs/NewsEvents/ucm508150.htm
> 
> ...




A lot of the cost also depends on what you're trying to approve as well. MYX have said that the portfolio is of hard to source APIs and complex supply chains. I guess if you're selling paracetamol or ibuprofen the margins are lower because the barriers are much less restrictive.


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## Klogg (3 January 2017)

McLovin said:


> A lot of the cost also depends on what you're trying to approve as well. MYX have said that the portfolio is of hard to source APIs and complex supply chains. I guess if you're selling paracetamol or ibuprofen the margins are lower because the barriers are much less restrictive.




So after a fair bit of reading around the generics supply chain, it turns out the biggest hurdle is FDA approval. And they go through everything from manufacturing process, quality control, API sourcing and so on. This takes many years on average (depending on the complexity of manufacturing the product), so the longer the FDA approval, the more valuable the right to manufacture.

Funnily enough, this isn't the only thing that provides significant margins in the manufacture of these products. It turns out distribution is also very valuable - likely because of the customer relationships and goodwill required to become one. Look at the Doryx GP margins before they in-housed the distribution. It went from mid 60's to mid 90's...
This means big upside from potentially bringing in distribution for other drugs where possible, (i.e. without interrupting sales) - and it also explains the single client exposure (~23% of revenues from two clients). If you look at the stats for 2015 US generics wholesale, Amerisource Bergen, Cardinal Health and McKesson made up 85% of total distributed drugs (in the generics space).

Also somewhat related to the above, is the fact that Mayne have decided to continue down the Paragraph IV path and attempt to get generics approved for drugs that are still patented (much like Tikosyn [dofetilide] - anti-arrythmic medication). They realise where the value is (FDA approval and 180days of exclusivity) and that they're not shy to have some earnings volatility for greater long-term returns.


Now that my rant above it done - I was wondering if anyone had thoughts on the below. Any responses are greatly appreciated:

1) Estimation of future legal costs: There are many 'one-offs' related to legal costs and I'm trying to put a longer-term value on this expense. In FY16 alone, there were costs related to settlement w/ Forest Labs, DOJ proceedings and in FY15 Tikosyn related legal expenses

2) Changes in earn-outs: Similar to the above. Not as much of a problem as these tail-off after FY17. Further, the US$19m payout from Forest Labs negates all earn-outs (not discounting cash flows for time value).

3) Marketing/Distribution: How does one ballpark this when only some products have marketing/distribution expenses, whilst others are incorporated in Cost of Sales that 3rd parties charge Mayne? Still thinking about this one, but any input is valuable.

4) R&D and related Amort.: Perhaps most important for future prospects - how to deal with future R&D cashflows. Given the steady rise in revenues, a crude % of revenue metric isn't really useful (I'll still try my luck). Further, amortisation varies depending on the asset life (46 projects currently capitalised).


And one final tidbit for anyone interested - the growth rates assumed for value-in-use calculations are very, very interesting. GPD at 42% growth rate for the next three years (I would have thought the acquisition would impact the next 1-2years only) - wow.

EDIT: A good read on Paragraph IV certs:
http://www.ipwatchdog.com/2013/04/0...ly-of-the-hatch-waxman-beast-part-1/id=38384/


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## mcgrath111 (16 January 2017)

Pulled from a 2015 broker report, so a bit outdated - but made me chuckle. 
"The benefits of MYX controlling its distribution in this market are already showing with the company recently confirming Oxycodone is now the number one generic franchise2 . Methamphetamine was also highlighted as a key driver of growth"
No suprise Oxy's & meth are the top sellers, given America's prescription pill epidemic.


----------



## Klogg (16 January 2017)

mcgrath111 said:


> Pulled from a 2015 broker report, so a bit outdated - but made me chuckle.
> "The benefits of MYX controlling its distribution in this market are already showing with the company recently confirming Oxycodone is now the number one generic franchise2 . Methamphetamine was also highlighted as a key driver of growth"
> No suprise Oxy's & meth are the top sellers, given America's prescription pill epidemic.




The margins in distribution in the US are not what you'd expect (or not what I expected). Three distributors control over 85% of volumes and make great margins, compared to distributors in other sectors.

Take a look at the Doryx margins once they took sales, marketing and distribution in house (thanks to the Midlothian purchase a while back). 
Keep in mind that the Doryx sales team expense is added to the marketing line item on the P&L, so gross margins aren't 100% reflective of actual margins (although the sales team sells more than just Doryx, so it's hard to allocate costs exactly). Nevertheless, the margin improvement is impressive


----------



## mcgrath111 (16 January 2017)

Klogg said:


> The margins in distribution in the US are not what you'd expect (or not what I expected). Three distributors control over 85% of volumes and make great margins, compared to distributors in other sectors.
> 
> Take a look at the Doryx margins once they took sales, marketing and distribution in house (thanks to the Midlothian purchase a while back).
> Keep in mind that the Doryx sales team expense is added to the marketing line item on the P&L, so gross margins aren't 100% reflective of actual margins (although the sales team sells more than just Doryx, so it's hard to allocate costs exactly). Nevertheless, the margin improvement is impressive




I wasn't aware of that, thanks for the insight Klogg - I'll have a look at Doryx.

I just thought it was ironic, that the examples they used we're essentially crack. Especially oxy, that stuff's addictive as hell!

EDIT: It actually goes on to talk about Doryx & the price rises "Doryx had a 9% price rise in October while Tikosyn (Dofetilide) recently had a ~15% price rise"


----------



## Klogg (16 January 2017)

mcgrath111 said:


> I wasn't aware of that, thanks for the insight Klogg - I'll have a look at Doryx.
> 
> I just thought it was ironic, that the examples they used we're essentially crack. Especially oxy, that stuff's addictive as hell!
> 
> EDIT: It actually goes on to talk about Doryx & the price rises "Doryx had a 9% price rise in October while Tikosyn (Dofetilide) recently had a ~15% price rise"




Out of curiousity - which broker report was this in?


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## mcgrath111 (16 January 2017)

Klogg said:


> Out of curiousity - which broker report was this in?



Old Old Bell Porter from Dec 2015 : https://www.bellpotter.com.au/media/159962/mayne pharma (myx) - bell potter 21 december 2015.pdf

Although I like looking back to see where the company has come from, so I still find brief insights such as the one above insightful.


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## mcgrath111 (18 January 2017)

Entered in today, with the slight decline experienced in the market - my target was met.
Not sure how trump action will play out, although my gut feeling is that the negative sentiment has been priced in; and a backflip by trump would not be surprising.  
First week in and youre going to piss off big pharma? (*Realise its not in the league of pfizer etc. But ya get my drift)


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## Klogg (19 January 2017)

mcgrath111 said:


> Entered in today, with the slight decline experienced in the market - my target was met.
> Not sure how trump action will play out, although my gut feeling is that the negative sentiment has been priced in; and a backflip by trump would not be surprising.
> First week in and youre going to piss off big pharma? (*Realise its not in the league of pfizer etc. But ya get my drift)




FWIW - what can they possibly do to cut pharma prices? Sure, the government itself can deal directly with the pharma companies instead of distributors, but that just cuts out the distributor. That would impact Mayne to some degree, but not hugely.
Short of handing out ANDAs to all who apply (or shorten the timeframe for approval) I can't see another way out.

IIRC, Trump's statement was about pharma companies who don't manufacture in the US but sell into that market. Mayne doesn't fall in this category.


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## luutzu (19 January 2017)

Klogg said:


> FWIW - what can they possibly do to cut pharma prices? Sure, the government itself can deal directly with the pharma companies instead of distributors, but that just cuts out the distributor. That would impact Mayne to some degree, but not hugely.
> Short of handing out ANDAs to all who apply (or shorten the timeframe for approval) I can't see another way out.
> 
> IIRC, Trump's statement was about pharma companies who don't manufacture in the US but sell into that market. Mayne doesn't fall in this category.




Probably best not to take what any politician says seriously, particularly when it comes to helping the consumers and workers and all that.

I wish that werne't the case but these interesting time of ours, politicians don't run or control anything.

Have you seen how Bernie Sanders' latest attempt to pass a Bill permitting the importation of drugs from Canada? For half the price, Americans can just buy those drugs of the same brand, same dosage, same manufacturer, probably made at the same plant in their own US of A.

but the bill got rejected, by both sides, because... well because it's consumer safety man. Can't really trust drugs from Canada... fish and seafood from Asia, no worries; the same drugs from Canada... danger!


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## McLovin (20 January 2017)

Klogg said:


> FWIW - what can they possibly do to cut pharma prices? Sure, the government itself can deal directly with the pharma companies instead of distributors, but that just cuts out the distributor. That would impact Mayne to some degree, but not hugely.
> Short of handing out ANDAs to all who apply (or shorten the timeframe for approval) I can't see another way out.
> 
> IIRC, Trump's statement was about pharma companies who don't manufacture in the US but sell into that market. Mayne doesn't fall in this category.




I don't think there is any chance of Trump doing anything meaningful wrt healthcare. Are the rank and file Republicans going to suddenly stop believing in free market economics and start passing legislation that limits pricing power? He's talking about dismantling Obamacare, so to have the government intervening and regulating drug prices would be a total back flip.

And remember his supporters don't want the government involved in health care. (irony intended)


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## JTLP (8 March 2017)

Big tweet about lowering drug prices and Bruce selling 600k shares hasn't done MYX any favours over the last few days.


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## Klogg (9 March 2017)

JTLP said:


> Big tweet about lowering drug prices and Bruce selling 600k shares hasn't done MYX any favours over the last few days.




What confuses me is the price at which he sold those shares does not correspond with the share price on those dates.

Per share value of $1.43ish from memory, but the highest price on 07/03 and 08/03 was $1.38.

Small details, just interesting.


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## skc (9 March 2017)

Klogg said:


> What confuses me is the price at which he sold those shares does not correspond with the share price on those dates.
> 
> Per share value of $1.43ish from memory, but the highest price on 07/03 and 08/03 was $1.38.
> 
> Small details, just interesting.




Probably just the difference between transaction and settlement dates.


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## Klogg (9 March 2017)

skc said:


> Probably just the difference between transaction and settlement dates.




Of course. Thanks


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## JTLP (1 May 2017)

What's not to like about the investor presentation today? Haven't had time to read


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## skc (1 May 2017)

JTLP said:


> What's not to like about the investor presentation today? Haven't had time to read




Hidden on page 107 of the 110 page presentation was this. 



> Tougher generics pricing environment in 2H17 which is expected to result in FY17 Teva portfolio generic sales below original guidance




It's almost like a reward for any traders who made the effort of reading the announcement.

Is is worth 10% fall? Why is it not marked price-sensitive? Why isn't there a actual proper trading update? I don't know....


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## McLovin (1 May 2017)

skc said:


> Hidden on page 107 of the 110 page presentation was this.
> 
> 
> 
> ...




And why does the second bullet point seem to contradict the first??

Tougher pricing, but increased gross profit margin...

Drug input prices would be pretty stable over the short run I would have thought.


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## JTLP (1 May 2017)

skc said:


> Hidden on page 107 of the 110 page presentation was this.
> 
> 
> 
> ...




Thanks SKC. Bit of an effort to get to!


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## skc (1 May 2017)

McLovin said:


> And why does the second bullet point seem to contradict the first??
> 
> Tougher pricing, but increased gross profit margin...
> 
> Drug input prices would be pretty stable over the short run I would have thought.




That's why the market appears to react to the first bullet and not the second one.


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## Klogg (1 May 2017)

McLovin said:


> And why does the second bullet point seem to contradict the first??
> 
> Tougher pricing, but increased gross profit margin...
> 
> Drug input prices would be pretty stable over the short run I would have thought.




Because their initial forecast on Gross Profit was very low. They even mentioned this at the HY media announcement:
"Revenue since completion of the Teva portfolio acquisition on the 3 August 2016 was US$100.5m and the gross profit margin exceeded our guidance of 50%"

Further, the US$100.5m revenue from 03/08/16 to 31/12/16, on an annualised basis, is already less than their forecast full year sales figure. ($219m vs $237m). Given EBITDA is 'broadly in line', then sales are not actually falling - rather they're just flat.

Other business units growing at double digit rates seems to be ignored. Given SBD has insane gross profit margins, this is a little odd.


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## Klogg (1 May 2017)

If anyone is considering purchasing this company or just interested in it, I highly suggest you listen to the investor day presentation.

The audio is extremely interesting. A few points:
- They have another Paragraph IV generic about to go to market, with a market size 20% larger than dofetilide (which has given 17% of GPD revenue)

- They're targeting 1.5bn in revenue in 5 years, whilst maintaining profit margins (WTF?!). In the GPD division they believe they can achieve double digit revenue CAGR, whilst maintaining margins.

- Fabior and Sorilux sales are impressive, especially given they are '40-100% more profitable' than Doryx MPC

- 19 products awaiting FDA approval

- US$12m of savings identified in the Teva acquisition, targeted by FY19. To put that into perspective, that's roughly a 6% margin increase

- Dofetilide market share since Dec-16 has not dropped off yet, even though 180day market exclusivity has expired (another generic entrant will come in soon though, surely)


And specifically on the Teva portfolio sales numbers (at around 45minutes)
- There has been price deflation of about 10-15% due to increased buying power. They expect it to be temporary [i.e. 6-12months] (given what they're saying above, I'm not sure what to believe). 
Side note: imagine what the margins would have been if there were no price deflation...


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## Klogg (2 May 2017)

Klogg said:


> And specifically on the Teva portfolio sales numbers (at around 45minutes)
> - There has been price deflation of about 10-15% due to increased buying power. They expect it to be temporary [i.e. 6-12months] (given what they're saying above, I'm not sure what to believe).
> Side note: imagine what the margins would have been if there were no price deflation...




On this point, also consider looking back at each of MYX acquisitions (Metrics, Libertas, GSK foams, Doryx, Teva) - they've really nailed each and everyone one of them to date.
Had there been no price deflation in the generics market, I dare say that the Teva portfolio would have 60%+ margins once they're done.


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## JTLP (17 May 2017)

Mayne is on the nose a fair bit recently, even with their statement around margins. Nearing 52 week lows, is the US pressure still there or something else?


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## Klogg (18 May 2017)

JTLP said:


> Mayne is on the nose a fair bit recently, even with their statement around margins. Nearing 52 week lows, is the US pressure still there or something else?



The entire pharma industry is on the nose at the moment. Concerns of 10%ish deflation in the generics space would crunch margins for some, including distributors.


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## Klogg (18 May 2017)

Klogg said:


> The entire pharma industry is on the nose at the moment. Concerns of 10%ish deflation in the generics space would crunch margins for some, including distributors.




Should also mention - just because they confirmed margins in the Teva portfolio, there's nothing stating that margins on other generics aren't getting crunched.

I still see this as cheap relative to future cash flows, but I could be wrong.


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## peter2 (25 June 2017)

A chart from my reversal watch-list. Please, don't get too excited. The trends are all down and they're not going to change anytime soon. However the recent price action has been bullish. Someone has started to nibble at these low prices. For me price must stay above 1.00. If it goes below, then MYX goes into my dead-man-walking watch list.


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## JTLP (26 June 2017)

MYX got mentioned as a tax loss seller in the paper, and perhaps that was a reason for a bit of strength recently. I hold, but wouldn't expect too much once July hits tbh.


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## galumay (26 June 2017)

JTLP said:


> MYX got mentioned as a tax loss seller in the paper, and perhaps that was a reason for a bit of strength recently. I hold, but wouldn't expect too much once July hits tbh.




No doubt there are people who chose to crystallise losses for tax reasons with MYX, I bought in when they fell initially, and have topped up along the way. Long term I think it is a great business to be a shareholder in.


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## VSntchr (26 June 2017)

I don't know much about MYX, but there has been more rumblings out of the US with the health care bill and other regulatory pharma news which may be a factor


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## galumay (26 June 2017)

I certainly think that is driving some of the negative sentiment VSntchr, it doesnt concern me because I dont think it will have material impact on the bottom line in the medium to long term. I just see it as a buying opportunity.


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## Klogg (26 June 2017)

galumay said:


> I certainly think that is driving some of the negative sentiment VSntchr, it doesnt concern me because I dont think it will have material impact on the bottom line in the medium to long term. I just see it as a buying opportunity.




It may have an impact - especially if the US decide they want to import generics.
Unlikely (given Trump is removing FTAs, not adding to them), but it's possible.


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## VSntchr (27 June 2017)

galumay said:


> I certainly think that is driving some of the negative sentiment VSntchr, it doesnt concern me because I dont think it will have material impact on the bottom line in the medium to long term. I just see it as a buying opportunity.



Actually, I was referring to the recent reversal in sentiment potentially due to what this article refers to.


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## JTLP (12 July 2017)

Getting pretty hammered now. Perhaps the results aren't pretty with the generics margins?


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## Quant (12 July 2017)

JTLP said:


> Getting pretty hammered now. Perhaps the results aren't pretty with the generics margins?



Very skinny coverage brokerwise on this stock but earning revisions have been in a downtrend for 12 months now with revenue a little flatter so the margins cant be increasing on this basic metric . Do they have debt issues ??

Technically there are a couple key levels to watch coming up ( I know little about this stock fwiw ) It is one of the most heavily shorted stocks on ASX which may be concerning although a short squeeze sets up for a substantial medium term bounce . Report FY 25 August


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## luutzu (13 July 2017)

Quant said:


> Very skinny coverage brokerwise on this stock but earning revisions have been in a downtrend for 12 months now with revenue a little flatter so the margins cant be increasing on this basic metric . Do they have debt issues ??
> 
> Technically there are a couple key levels to watch coming up ( I know little about this stock fwiw ) It is one of the most heavily shorted stocks on ASX which may be concerning although a short squeeze sets up for a substantial medium term bounce . Report FY 25 August
> 
> ...




Just went through 7 years of its annual reports, though haven't taken into account the Teva/Allergran purchase post the FY16 report... 

Seems like a crappy business. Run by empire builders on both debt and more shareholders cash which they borrowed and raised pretty much on a yearly basis. Producing some profit but nothing to write home about. 

Maybe the latest acquisitions will prove to be game changers, that I don't know. But if history is any guide... not impressed.

Not saying this because the current share price seems to be hammered. There are good quality pharma, a generic one at that. I just don't see it in Mayne.


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## Klogg (13 July 2017)

luutzu said:


> Just went through 7 years of its annual reports, though haven't taken into account the Teva/Allergran purchase post the FY16 report...
> 
> Seems like a crappy business. Run by empire builders on both debt and more shareholders cash which they borrowed and raised pretty much on a yearly basis. Producing some profit but nothing to write home about.




They've tapped shareholders a lot. But a lot of that funding has come from directors, at prices that are favorable to shareholders (SPP discounts were significant)

Just out of curiousity, what makes you say they're empire builders?


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## McLovin (13 July 2017)

luutzu said:


> Seems like a crappy business. Run by empire builders on both debt and more shareholders cash which they borrowed and raised pretty much on a yearly basis. Producing some profit but nothing to write home about.






2010 EPS 2.6cps
2017 1h 5.2cps

If that's empire building, build on.


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## Quant (13 July 2017)

McLovin said:


> 2010 EPS 2.6cps
> 2017 1h 5.2cps  " 2017 EPS 10.0cps "
> 
> If that's empire building, build on.




Obviously large variations on forecasts out there on this given the pretty large fluctuations on earnings over 10 years , The mean forecast is a bit lower than your stated numbers but the spread low to high is significant >20% i'd say debt is a factor  on  discounted SP , if I held i'd try and find exact numbers and interest paid , over leveraged with a revenue hiccup and the stress levels rocket . damn spi open gotta go


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## McLovin (13 July 2017)

Quant said:


> Obviously large variations on forecasts out there on this given the pretty large fluctuations on earnings over 10 years , The mean forecast is a bit lower than your stated numbers but the spread low to high is significant >20% i'd say debt is a factor  on  discounted SP , if I held i'd try and find exact numbers and interest paid , over leveraged with a revenue hiccup and the stress levels rocket . damn spi open gotta go
> 
> 
> 
> ...




I don't hold, and I was being lazy just more or less doubling 1h eps for the full year. The company underwent significant change starting in 2012. The balance sheet doesn't look stretched to me (you'd need to dig into those intangibles to play around with the amortisation and ask what if's around future write-downs and debt covenants given it basically represents the equity in the business). The price deflation in generics was well telegraphed, and their margins surprised to the upside even with 15% deflation. The spread in forecasts isn't surprising given the shorting activity on the stock. I have no real opinion on this stock other than they've done OK with their EPS growth.

I'm surprised how few brokers follow this. I have access to a fair amount of broker research and there just isn't that much on these guys.


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## Klogg (13 July 2017)

McLovin said:


> 2010 EPS 2.6cps
> 2017 1h 5.2cps
> 
> If that's empire building, build on.




Agreed. But to be fair, on the surface it seems like empire building because of the acquisitions and cap raisings.

In reality, these guys are very opportunistic in their acquisitions. ~6 times EBITDA for the Teva generics, whilst Teva paid almost 17 times EBITDA for their purchase from Allergan.
It's also shown in their Fabior and Sorilux sales (SBD products). In under 6months of ownership, sales of Fabior have surpassed the peak whilst owned by GSK - and these are products with a 95%+ gross profit margin...

Their Metrics acquisition was also great. They bought it in 2012, and since it has been growing revenues at around 20% CAGR, with profits increasing in line (actually, a little better, but I don't have the figures in front of me).

I'll leave it there.


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## McLovin (13 July 2017)

Klogg said:


> It's also shown in their Fabior and Sorilux sales (SBD products). In under 6months of ownership, sales of Fabior have surpassed the peak whilst owned by GSK - and these are products with a 95%+ gross profit margin...




I saw that slide, pretty impressive.


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## galumay (13 July 2017)

Agree with most of the above, I reckon its great buying at current prices.


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## skc (13 July 2017)

galumay said:


> Agree with most of the above, I reckon its great buying at current prices.




Can you put on the devil's hat and see what might be the sell thesis?

The short's been rising pretty much since the stock peaked >$2 about a year ago, and it remains one of the most shorted stocks on ASX despite the share price being half of the peak. So someone is reasonably convinced of the downside. Not saying they are/will be right... just wondering if you can see what they see.

http://www.shortman.com.au/stock?q=MYX

Some of the known risk factors I am aware of: DOJ investigation, political pressures on generic margins, potential competitor product launch etc. 

Yes I am aware that most of these risks I mentioned are fairly generic (pun intended).... but just wondering if you see anything else.


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## JTLP (13 July 2017)

ROE -
Any thoughts from you?


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## JTLP (13 July 2017)

SKC - yes the shorts are steadily rising, even the daily turnover on some days is 40% shorts. As I said before there might be people in the know, but it seems pretty beaten down. But who am I to judge?


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## Klogg (13 July 2017)

skc said:


> Can you put on the devil's hat and see what might be the sell thesis?
> 
> The short's been rising pretty much since the stock peaked >$2 about a year ago, and it remains one of the most shorted stocks on ASX despite the share price being half of the peak. So someone is reasonably convinced of the downside. Not saying they are/will be right... just wondering if you can see what they see.
> 
> ...




The real concern is how hard the price deflation hits their products.

The operational leverage at play here is quite large... Putting it into perspective, $1 of revenue at the moment has an approximate 55% gross profit margin. Beyond that, there's about a 2-3% additional overhead cost before it hits the EBITDA line.

So you get: 
$1 revenue
55c GP
52c EBITDA

Imagine you lose 10% (10c) of that:
90c revenue
45c GP
42c EBITDA 

That equates to a 19.2% EBITDA drop, and it gets worse as you go through the fixed costs of depreciation and interest.

Operating leverage truly is a double edged sword.


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## Faramir (13 July 2017)

I topped up yesterday at $0.985. 2,035 shares. I brought some back in January at $1.23.

Cochlear and JB Hi-Fi were once heavily shorted. Can anyone think of examples of where Shorters get it wrong?
http://www.thebull.com.au/premium/a/68221-opportunities-in-top-10-shorted-stocks.html

From the article:
_



			The remaining stocks on the Top Ten List have Hold recommendations although both Western Areas Limited (WSA) and Mayne Pharma (MYX) have double digit two-year earnings growth forecasts (+61.3% for WSA and +20.9% for MYX.)
		
Click to expand...


_
The shorting maybe bad news for the share price in the short term but in the medium term, MYX will recover. You can tell me that I am wrong if you like.


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## Klogg (13 July 2017)

Faramir said:


> I topped up yesterday at $0.985. 2,035 shares. I brought some back in January at $1.23.
> 
> Cochlear and JB Hi-Fi were once heavily shorted. Can anyone think of examples of where Shorters get it wrong?
> http://www.thebull.com.au/premium/a/68221-opportunities-in-top-10-shorted-stocks.html
> ...




You also have to remember where shorters got it right. 
Vocus comes to mind... and it hurts, lol.


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## McLovin (13 July 2017)

skc said:


> Can you put on the devil's hat and see what might be the sell thesis?
> 
> The short's been rising pretty much since the stock peaked >$2 about a year ago, and it remains one of the most shorted stocks on ASX despite the share price being half of the peak. So someone is reasonably convinced of the downside. Not saying they are/will be right... just wondering if you can see what they see.
> 
> ...




So from a little bit of digging, the price weakness seems to be industry wide. The main argument appears to be that with the FDA ramping up approvals that will reduce the time that new generics have no generic competitors, as well as increase competition. On top of this, buying groups have reduced the number of large buyers in the US. How does this play out, Klogg, in your opinion?

And what about the DoJ investigation into price collusion? The Americans love doling out large penalties to naughty corporations.

Sorry for the jumbled post that's just a scratchpad of a few things I picked looking around the Google.

Here's MYX ttm with a few generic comps from India (Teva, Sun Pharma, Lupin, Dr Reddy and Aurobindo). It's certainly not MYX specific, they've copped a belting in the last 12 months, but they ran the hardest in the 12 before that.


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## skc (13 July 2017)

Klogg said:


> The operational leverage at play here is quite large...
> Operating leverage truly is a double edged sword.




Yes and no.... but the fact that gross margin is large by most industry standards actually insulated reduces the operating leverage. Do the same calculation for a gross margin of 20% and the impact will be even greater. 

The high gross margin is an invitation for competition... more on this point below.




McLovin said:


> So from a little bit of digging, the price weakness seems to be industry wide. The main argument appears to be that with the FDA ramping up approvals that will reduce the time that new generics have no generic competitors, as well as increase competition. On top of this, buying groups have reduced the number of large buyers in the US. How does this play out, Klogg, in your opinion?
> 
> Here's MYX ttm with a few generic comps from India (Teva, Sun Pharma, Lupin, Dr Reddy and Aurobindo). It's certainly not MYX specific, they've copped a belting in the last 12 months, but they ran the hardest in the 12 before that.




Thanks. Great chart. 

I have a theory that generic drug companies don't deserve a high multiple. Yes they earn great margins on new products after initial launch and during the ramp up phase, but sooner or later drug sale plateaus, then enter new generic competitions and soon it is just competing on price / marketing efforts. Look at ACR (which has a single generic drug in the market) paints the picture of how the "life cycle" of a generic might evolve.

So a company like MYX needs an ongoing renewal of drugs to keep up sales and profits, let alone growth. Acquiring these drugs will require additional capital. So while a short term sugar hit from new drugs will see EPS growth over the forward estimate periods (most analysts do 3 year out), the earning profile falls off quickly thereafter and overly generous assumptions on terminal value can prove terminal. The question is whether the process of portfolio renewal can be financially self-sustaining...

ASX doesn't have many generic drug companies... and MYX isn't well covered. So perhaps there isn't much expertise in valuing MYX, leading to earlier over valuation. The shorts saw an opportunity, with the other industry headwinds and DOJ issue thrown in as bonus.

This theory sounded great until I see your charts... I can't say that there isn't enough expertise in the US market in valuing generic drug companies. So may be the shorts were just targeting the macro issues affecting MYX.



Faramir said:


> Cochlear and JB Hi-Fi were once heavily shorted. Can anyone think of examples of where Shorters get it wrong?
> 
> The shorting maybe bad news for the share price in the short term but in the medium term, MYX will recover. You can tell me that I am wrong if you like.




The shorts may not be correct but they will definitely have a solid reason for doing so. That's why I asked what's their thesis... it's free research they've done on your investment. The investor can then decide whether it is something they need to take into account or something that offers them an opportunity for cheap entry.

Here's the top 10 shorts from Oct 2013. Some worked well, some worked for a while, others not so much.
http://www.fool.com.au/2013/10/28/stay-away-from-these-top-10-shorted-stocks/


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## luutzu (13 July 2017)

McLovin said:


> 2010 EPS 2.6cps
> 2017 1h 5.2cps
> 
> If that's empire building, build on.




Empire builder wannabe. No?

Don't worry, I'll make my case.


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## Klogg (13 July 2017)

skc said:


> The high gross margin is an invitation for competition... more on this point below.




It is, but it's also indicative of barriers to entry, if it's persistent.



> So a company like MYX needs an ongoing renewal of drugs to keep up sales and profits, let alone growth. Acquiring these drugs will require additional capital. So while a short term sugar hit from new drugs will see EPS growth over the forward estimate periods (most analysts do 3 year out), the earning profile falls off quickly thereafter and overly generous assumptions on terminal value can prove terminal. The question is whether the process of portfolio renewal can be financially self-sustaining...




Agreed. It's somewhat like a mining company - you spend money on exploration, you find a mine and use it over an infinite lifespan. Meanwhile, you explore for further mining sites.
The question is whether or not the money spent exploring returns enough to sustain the business and return money to shareholders, and in this case, that depends on the drugs bought.

Something like an oral contraceptive is unlikely to be replaced. There may be more competitors, but these have existed for quite sometime without significant competition.
The same can be said of the Doryx franchise. Over time, sales dropped, so they added a modified polymer coating (MPC) and started selling it, on the basis that this causes a delayed release. Minimal investment, renewed sales.

Drug selection is super important in this case. Mayne won't go for a drug with a 2bn addressable market, they're mostly interested in niche drugs that have significantly less competition. This from their investor presentation:
_"50% of portfolio have 2 or less generic competitors and 45% of the top 20 products have the leading market share position"_

With three main distribution (Amerisource Bergen, Mckesson and Cardinal Health), there are more distributors than manufacturers, in at least 50% of the portfolio. Given Mayne are very small in the scheme of things (i.e. relative to most pharma companies), they have the luxury of seeing the impact of niche drugs on their P&L - whereas Teva couldn't do the same.




> So from a little bit of digging, the price weakness seems to be industry wide. The main argument appears to be that with the FDA ramping up approvals that will reduce the time that new generics have no generic competitors, as well as increase competition. On top of this, buying groups have reduced the number of large buyers in the US. How does this play out, Klogg, in your opinion?
> 
> And what about the DoJ investigation into price collusion? The Americans love doling out large penalties to naughty corporations.




The FDA are ramping up approvals, but there's still a significant backlog. That said, those pharma companies with the best operations/R&D and the best drug selection will come out on top. I can't speak to operations vs someone say Teva, because I don't know it well enough - but the drug selection history speaks for itself so far. The Doryx acquisition is a great example of this, Fabior and Sorilux (so far) appear to be another.

As for the buying groups, that can only go so far. Distributors margins have been hit and manufacturers are next - but how far can they go? Drugs with one or two manufacturers can easily regulate supply so that price doesn't get hit too hard. The simpler to produce/lower barrier to entry/higher demand than supply situations won't be so lucky.

Finally on the DOJ - I have no real insights here, other than to say that I think its overblown. The Doxycycline case against Mayne (and 6 other pharma companies from memory) is only for the generic, not for Doryx. I don't know the volumes Mayne sell of the generic alone, so I can't be sure of the penalty, if there is one.
Price fixing is very hard to prove, but if they do prove it, the penalty won't be small (relative to the amount of drugs sold, that is)


----------



## Value Hunter (13 July 2017)

Well I do not know much about the company but looking at their last released half year report while the company showed a strong profit, the operating cash flow was a hugely negative figure.

Does anybody with more knowledge care to try and make a case for accounting fraud/overstated earnings?

Also as has already been pointed out on this thread a lot of their equity is goodwill and other intangibles. The NTA is tiny in comparison to total liabilities. Any future goodwill write-downs could decimate the balance sheet.

This is on top of all the industry headwinds already discussed. There just seem to be too many red flags.


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## Klogg (13 July 2017)

Value Hunter said:


> Well I do not know much about the company but looking at their last released half year report while the company showed a strong profit, the operating cash flow was a hugely negative figure.
> 
> Does anybody with more knowledge care to try and make a case for accounting fraud/overstated earnings?
> 
> ...




The cash flow relates to the Teva portfolio acquisition. They essentially bought the ANDA approval to make the drug, but needed to spend approx. $180m on working capital to ensure enough inventory.

Not sure where the accounting fraud comes from.... They even stripped out the Forrest Labs settlement and clearly identified 'underlying earnings'.

And given the industry, the IP behind obtaining an ANDA approval is naturally going to be an intangible.


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## galumay (13 July 2017)

skc said:


> Can you put on the devil's hat and see what might be the sell thesis?




I can certainly invert the case for investing in MYX at current prices, but shorters' action has no influence on me at all - just as all the other traders taking long postions has no influence in my decision making. 

I think most of the negatives have been covered through the last couple of pages of posts, my personal view is that the current pricing rather reflects a compounding of all the potential negative outcomes, with no consideration of the potential postives with the business. I see it as a classic case of emotions driving people's behaviour, the high % of shorters just feeds the nervous emotionalism and it becomes a downward spiral. This sort of irrational behaviour piques my interest!

I made my move a while ago, and I will happily wait patiently for the story to play out. I may well turn out to be wrong - it wont be the first or last time!


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## skc (13 July 2017)

Thanks guys for the robust discussion and generous sharing of your knowledge to casual observers like me who spend 20 minutes coming up with immature theories and asking stupid questions. It certainly warrants a closer study on face value. The full year report should be interesting with high hopes and high percentage shorted.


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## galumay (13 July 2017)

skc said:


> to casual observers like me who spend 20 minutes coming up with immature theories and asking stupid questions.




Seriously?! 
skc, if what you post is "immature theories and stupid questions", i must be several degrees more of an ignoramous than I imagined! (and i already saw myself as having very little knowledge or wisdom!) 

Its great to have one's perceptions and beliefs about a business and investment challenged and to read contrary viewpoints. Its hard work trying to manage my very human biases, but posts from the likes of you, klogg and McLovin help!


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## McLovin (13 July 2017)

skc said:


> Thanks. Great chart.
> 
> I have a theory that generic drug companies don't deserve a high multiple. Yes they earn great margins on new products after initial launch and during the ramp up phase, but sooner or later drug sale plateaus, then enter new generic competitions and soon it is just competing on price / marketing efforts. Look at ACR (which has a single generic drug in the market) paints the picture of how the "life cycle" of a generic might evolve.
> 
> So a company like MYX needs an ongoing renewal of drugs to keep up sales and profits, let alone growth. Acquiring these drugs will require additional capital. So while a short term sugar hit from new drugs will see EPS growth over the forward estimate periods (most analysts do 3 year out), the earning profile falls off quickly thereafter and overly generous assumptions on terminal value can prove terminal. The question is whether the process of portfolio renewal can be financially self-sustaining...




I think it depends. I think Klogg is right about choosing to invest in the *right* generics. Being able to run niche lines where you only have one or two competitors and the size of the market generally prevents a third or fourth entrant does create a competitive advantage, and is something that is much harder for Mylan, Teva, Sun to do and still power bottom line growth. The more I read about what's going on in the industry, the less I think it will affect MYX to any great extent. Also I think the DoJ thing is a non-event. Most of the commentary seems to suggest MYX was served so that the DoJ could ask execs questions.

I need to do more work on this.



skc said:


> The shorts may not be correct but they will definitely have a solid reason for doing so. That's why I asked what's their thesis... it's free research they've done on your investment. The investor can then decide whether it is something they need to take into account or something that offers them an opportunity for cheap entry.




Totally agree.



			
				Klogg said:
			
		

> Not sure where the accounting fraud comes from.... They even stripped out the Forrest Labs settlement and clearly identified 'underlying earnings'.




Nothing looks out of the ordinary, but the full year will be better to get the full picture around accounting policies. But yeah, nothing really to see in the accountd.


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## skc (13 July 2017)

galumay said:


> Seriously?!
> skc, if what you post is "immature theories and stupid questions", i must be several degrees more of an ignoramous than I imagined! (and i already saw myself as having very little knowledge or wisdom!)




Well my theory was crafted part way through my post... so it's definitely immature.

@Klogg's knowledge of the company is far far more impressive.


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## luutzu (13 July 2017)

Dam it I'm in trouble. All the smart kids are here and they just don't see what I see.


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## Miner (13 July 2017)

luutzu said:


> Dam it I'm in trouble. All the smart kids are here and they just don't see what I see.



what do you see mate? Take the veil out and show the asset. Sorry for the pun. I really liked this thread and 15 minutes investment from SKC. What could be the hourly rate for SKC if 15 mins deliver so much? Maybe next to Mackenzie's rate.


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## luutzu (13 July 2017)

Miner said:


> what do you see mate? Take the veil out and show the asset. Sorry for the pun. I really liked this thread and 15 minutes investment from SKC. What could be the hourly rate for SKC if 15 mins deliver so much? Maybe next to Mackenzie's rate.




Patience Ari. Got to check, double and triple check the figures... don't want to be looking like an idiot (again? ).


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## luutzu (13 July 2017)

McLovin said:


> So from a little bit of digging, the price weakness seems to be industry wide. The main argument appears to be that with the FDA ramping up approvals that will reduce the time that new generics have no generic competitors, as well as increase competition. On top of this, buying groups have reduced the number of large buyers in the US. How does this play out, Klogg, in your opinion?
> 
> And what about the DoJ investigation into price collusion? The Americans love doling out large penalties to naughty corporations.
> 
> ...





MYX shares hasn't gotten any beating at all since last June, 2016. 

You're right that Generic pharmas have been beaten lately... i know one because I bought it for my sister at 20 pound and it's now some 14 pound. Bought some more for her so hope she doesn't get too upset.

Now, MYX has 809M shares [diluted] at end of FY2016. Its share price then was around $1.42 on 27th June, then jump to some $1.80 at close of FY on news of more empire building. $1.80*809m = $1.456B market cap.

Its latest Appendix 3B released a couple weeks ago put its shares outstanding at 1,512,592,738 [1.5B]. At $1 a share that's $1.5B []... So a slight rise... but let's go with its Annual Report 2016 that its market cap was $1.5B then. 

Share price gone down by half, but increase in number of shares by about 2x... appear like a bargain but nope. That's unless we think it was a bargain at $2 a share back a year ago.


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## Quant (14 July 2017)

luutzu said:


> Share price gone down by half, but increase in number of shares by about 2x... appear like a bargain but nope. That's unless we think it was a bargain at $2 a share back a year ago.



Nice digging there Lu , pretty well explains the price drop to perfection  , I thought there had to be something  .. makes perfect sense timeline wise looking at the revision chart now


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## Klogg (14 July 2017)

luutzu said:


> Patience Ari. Got to check, double and triple check the figures... don't want to be looking like an idiot (again? ).




Dont worry, I make an idiot of myself all the time.
Feel free to post your thoughts, I'm not going to start calling you name if you're wrong - and if you're right, you are doing me a huge favour


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## Klogg (14 July 2017)

skc said:


> Thanks guys for the robust discussion and generous sharing of your knowledge to casual observers like me who spend 20 minutes coming up with immature theories and asking stupid questions. It certainly warrants a closer study on face value. The full year report should be interesting with high hopes and high percentage shorted.




If these questions are stupid, then keep asking stupid questions. 
Nothing better than having your investment thesis questioned/examined. If it results in a flaw in my research, then I can potentially save myself a world of pain.


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## Klogg (14 July 2017)

Quant said:


> Nice digging there Lu , pretty well explains the price drop to perfection  , I thought there had to be something  .. makes perfect sense timeline wise looking at the revision chart now
> 
> 
> 
> View attachment 71831




Sorry for the large number of posts, but I thought I'd mention that I've seen Wilson's research on this. They list SBD's GP for 2H17 to be weaker than 2H16. Yet, the investor presentation states:
*"SBD expected to have a significantly stronger 2H17 versus 2H16 following the launch of Fabior and Sorilux foams"* (Slide 107)

FWIW, Wilsons have 2H17 SBD Gross profits at 33.3m, and 2H16 SBD Gross profits at 35.3m.

Also, Wilson's EPS estimates have dropped as the share price is sliding. Seems like they're afraid to be too far from the pack.


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## McLovin (14 July 2017)

luutzu said:


> You're right that Generic pharmas have been beaten lately... i know one because I bought it for my sister at 20 pound and it's now some 14 pound. Bought some more for her so hope she doesn't get too upset.
> 
> Now, MYX has 809M shares [diluted] at end of FY2016. Its share price then was around $1.42 on 27th June, then jump to some $1.80 at close of FY on news of more empire building. $1.80*809m = $1.456B market cap.
> 
> ...




They almost doubled their shares on issue, but more than doubled their EBITDA buying ~$110m in EBITDA. Pre-acquisition EBITDA in 2016 was $88.5m, NPAT was $37.4m. If that purchased EBITDA falls to bottom at the same rate (it will be less, I assume, because of the purchased intangibles – but the amortisation around the customer contract stuff can be disregarded, imo) they bought ~$46m in NPAT. Add the existing NPAT of $37.4, so the new company is earning $83.4m, in FY16. On the _expanded_ share base eps rises from 4.6cps to 5.5cps post acquisition. If the outlook of the acquired business is materially different to the existing business, then it's possible the market is discounting it, which explains the sp fall.


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## Ves (14 July 2017)

McLovin said:


> They almost doubled their shares on issue, but more than doubled their EBITDA buying ~$110m in EBITDA. Pre-acquisition EBITDA in 2016 was $88.5m, NPAT was $37.4m. If that purchased EBITDA falls to bottom at the same rate (it will be less, I assume, because of the purchased intangibles – but the amortisation around the customer contract stuff can be disregarded, imo) they bought ~$46m in NPAT. Add the existing NPAT of $37.4, so the new company is earning $83.4m, in FY16. On the _expanded_ share base eps rises from 4.6cps to 5.5cps post acquisition. If the outlook of the acquired business is materially different to the existing business, then it's possible the market is discounting it, which explains the sp fall.



What is the lifecycle of the earnings?

Think it was skc that mentioned that these can have limited lifecycles.  Not sure if true.

But if it is true there is heaps more valuation risk if you're trying to construct a valuation that includes any kind of earnings multiple  (whether it's EBIT or PE based,  or even a DCF model with a perpetuity embedded into it).   If there is a need to outlay capital to buy more drug lines, niche or not, at some stage then these are known unknowns that are basically impossible to value.  Execution risk + valuation risk....  it's all a bit of a headache.  I can see why it was heavily shorted after the initial market exuberance.  Given the unquantifiable factors the share price is always going to be a wild ride.


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## McLovin (14 July 2017)

Ves said:


> What is the lifecycle of the earnings?
> 
> Think it was skc that mentioned that these can have limited lifecycles.  Not sure if true.




Unless they're superseded they don't really stop being used, but in order to get the earnings growth they need to be constantly bringing new generics in as patents expire. With a well diversified portfolio how much risk is there in bringing any single drug to market? I would have thought that with the the margins they have they can probably afford a few duds without any harm coming. Probably also worth remembering they aren't just a generics business.


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## Klogg (14 July 2017)

McLovin said:


> Unless they're superseded they don't really stop being used, but in order to get the earnings growth they need to be constantly bringing new generics in as patents expire. With a well diversified portfolio how much risk is there in bringing any single drug to market? I would have thought that with the the margins they have they can probably afford a few duds without any harm coming. Probably also worth remembering they aren't just a generics business.




The real test case for the lifecycle of a generic will be dofetilide. There was a Paragraph IV challenge, which they won, and ultimately gave them approval to manufacture the first generic of dofetilide with 180days market exclusivity.

This resulted in a HUGE boost to the generics business, and won them a huge amount of market share in that time. Now that others can produce generics (180days has expired), it will be great to see what competition can do to the incumbent and what that means to prices (if they give us that information).


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## McLovin (14 July 2017)

Klogg said:


> The real test case for the lifecycle of a generic will be dofetilide. There was a Paragraph IV challenge, which they won, and ultimately gave them approval to manufacture the first generic of dofetilide with 180days market exclusivity.
> 
> This resulted in a HUGE boost to the generics business, and won them a huge amount of market share in that time. Now that others can produce generics (180days has expired), it will be great to see what competition can do to the incumbent and what that means to prices (if they give us that information).




That's interesting, Klogg. You've sure done your homework on this. When did/does the 180 days expire?


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## Klogg (14 July 2017)

McLovin said:


> That's interesting, Klogg. You've sure done your homework on this. When did/does the 180 days expire?




Well they announced it on the 7th of June, 2016. So it basically expired in Jan this year.

To give you an idea of how big it was, dofetilide provided 17% of GPD revenues ($29m USD in the half year). And since it was launched, check out what happened to the branded product:






They've given specifics on dofetilide market share on slide 32 of the presentation:
"62% product market share, 2 generic companies"

So even after another generic was launched, they've maintained 62% market share, of which generics have about 85%. It really seems that once a generic exists, the incumbent maintains market share unless there's significant price differences.



And to skc's point on pricing, from the investor presentation:
*"Average generic price is 60-70% below brand upon introduction and reaches 80-90% after 2-3years"
*
So the price of the generic halves after the first 2-3years of existence. If you apply this general rule to dofetilide, the same volumes would produce approx. half the revenue. That's IF it follows the general rule, rather than it being a niche product. Time will tell.


EDIT: Not sure why that image has remained as an attachment...


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## craft (14 July 2017)

skc said:


> Can you put on the devil's hat and see what might be the sell thesis?




Understanding where this business sits today with what they have already pulled together through acquisitions is tough. That opaqueness, integration risk and intangible balance sheet pretty much puts the debt market out of reach. Yet it's very arguable that competative advantages for a generics business lay in scale. More acquisitions and more equity capital probably still required, unless they can wait for transparency on current integrations before continuing to build scale, cheap equity will be probably be available from the company itself down the track. That puts a real damper on current market price. Is incentive for potential institutional buyers to wait.

Just guessing, I basically don't know anything about the company, too hard basket for me.


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## Ves (14 July 2017)

McLovin said:


> Unless they're superseded they don't really stop being used, but in order to get the earnings growth they need to be constantly bringing new generics in as patents expire. With a well diversified portfolio how much risk is there in bringing any single drug to market? I would have thought that with the the margins they have they can probably afford a few duds without any harm coming. Probably also worth remembering they aren't just a generics business.



Also a relevant point.  I don't think they're at the diversified stage quite yet and a 'dud' could be quite damaging.

Klogg has quite a lot of good information in this thread, my reading of it is probably a bit different,  more along the lines of that there isn't enough of a track record to see how competent they are when their product lines have increased competition after a more prolonged time period of being 'generics.'

Also agree with craft's comments about scale.   Think they're a long way from it.  Will need a heap more capital yet.  No idea where it comes from.  It feels a bit like a quasi 'roll-up' in that sense.  They will reach a point where acquiring new product lines doesn't swing the needle as much earnings wise.


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## luutzu (15 July 2017)

Klogg said:


> Dont worry, I make an idiot of myself all the time.
> Feel free to post your thoughts, I'm not going to start calling you name if you're wrong - and if you're right, you are doing me a huge favour




Thanks Klogg. Appreciate that. 

I don't claim to be right or wrong, not in terms of the market share price or MYX future price performance. Like APA and other companies, MYX has shown it's been able to both raise new money and borrow more to grow and expand. If it can continue to do that, then it will probably continue to increase its share price.

But as to the company's business performance itself, it's a pretty crap. Poor quality business ran by a bunch of empire-builders wannabes who will bankrupt it soon. But they'll do alright for themselves though, as they have had seeing all those millions in options and incentives.

Here's one chart that kind of speak volumes 






See that black bar? That's contributed equity from shareholders. See how it's a few times above the retained earnings [green] bar? 

No dividend since 2012, barely making any money yet raised and borrow like they'll do great with new and bigger acquisitions. 

And that does not even include the new $888m equity they raised last August to pay for Teva.

A quick look at Teva show they've overpaid for it too. Practically paying $1B for a portfolio of generic drugs that earn some $285m in revenues, with "only" some $700m of potential new revenue in an entire market from 6 drugs in the R&D pipeline. And about 99% of the assets they bought are intangibles.

Compare that to Hikma who paid $US2.1B a year or so ago for Roxane Laboratories. For that price they only dilute their ownership by 16.7%... and that's from issuing new shares to pay to the parent company who want to offload that division. Revenues from Roxane existing portfolio is expected to be some $700 to $750m USD for FY2017. Its R&D pipeline has  some 89 potential products with an addressable market of $41B... and they get to bring the entire R&D team, the labs etc.

From that perspective, Mayne made a pretty bad deal.

While I don't know enough about the drug portfolio they bought from TEVA and Allergran... they might very well bring with them some miracles... I doubt that very much for a generic drug.


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## luutzu (15 July 2017)

McLovin said:


> They almost doubled their shares on issue, but more than doubled their EBITDA buying ~$110m in EBITDA. Pre-acquisition EBITDA in 2016 was $88.5m, NPAT was $37.4m. If that purchased EBITDA falls to bottom at the same rate (it will be less, I assume, because of the purchased intangibles – but the amortisation around the customer contract stuff can be disregarded, imo) they bought ~$46m in NPAT. Add the existing NPAT of $37.4, so the new company is earning $83.4m, in FY16. On the _expanded_ share base eps rises from 4.6cps to 5.5cps post acquisition. If the outlook of the acquired business is materially different to the existing business, then it's possible the market is discounting it, which explains the sp fall.




From its presentation, p.17, the new portfolio's expected revenue for FY2017 is $US237m. With operating margin at 50% (they claim greater, but let's be conservative), that put EBITDA (i'm assuming that's what they meant with operating profit, from memory we don't include DA but it's late and I'm drunk)... so that's $US118.5m... 

Doing a simple NPAT scale down as 2016s figure (before synergies as they say), that put additional NPAT at 1.42*118.5 = $US50m. At xchange rate of $1.2, say... that's $60mAUD.

First, paying practically $1b, or some 16.7x earnings seems a bit stiff. 

But that's a total of some 60+37.4m = $97.4m in NPAT... or 15 time earnings. 

Not a bargain, or reasonable, at $1 a share. And that's if everything goes as planned.


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## McLovin (19 July 2017)

luutzu said:


> Here's one chart that kind of speak volumes
> 
> View attachment 71848
> 
> ...




That chart is totally meaningless without some understanding of the business. There is a difference between growing earnings through acquisitions funded by cap raisings and raising capital to keep the lights on. There are plenty of issues around the growth through acquisition strategy (there's even a thread about it), but you  need a bit more meat on the bone than "company growing through acquisitions issues lots of shares". That's just the bleeding obvious.

You seem to just cherry pick whatever data point will satisfy the view you have already reached. Like below with your use of revenue...



luutzu said:


> A quick look at Teva show they've overpaid for it too. Practically paying $1B for a portfolio of generic drugs that earn some $285m in revenues, with "only" some $700m of potential new revenue in an entire market from 6 drugs in the R&D pipeline. And about 99% of the assets they bought are intangibles.
> 
> Compare that to Hikma who paid $US2.1B a year or so ago for Roxane Laboratories. For that price they only dilute their ownership by 16.7%... and that's from issuing new shares to pay to the parent company who want to offload that division. Revenues from Roxane existing portfolio is expected to be some $700 to $750m USD for FY2017. Its R&D pipeline has  some 89 potential products with an addressable market of $41B... and they get to bring the entire R&D team, the labs etc.
> 
> From that perspective, Mayne made a pretty bad deal.




MYX paid 6x EBITDA for Teva and Hikma paid 8.3x EBITDA for Roxane ($US2.1b for US$725m revenue at 35% EBITDA margin), they were initially going to pay 10x EBITDA. So who got the better deal? Like I said, Sharebase dilution is pretty meaningless stat on its own, all it does is tell you the company issued shares. Like everything else it needs context, not a pre-conceived narrative. Hikma diluted their share base by 16.7% (again itself not that important a number without some context), but also forked out $600m in cash. 

I'd expect any company whose business is in pharma to have the overwhelming majority of their assets in intangibles.


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## Knobby22 (19 July 2017)

Bought in today at 94c. It just seems insanely cheap. EPS of 9.7c forecast + growth.
Will stand ready to buy more if results are good. Reporting season soon which is good as I am a bit bored at the moment.


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## luutzu (19 July 2017)

McLovin said:


> That chart is totally meaningless without some understanding of the business. There is a difference between growing earnings through acquisitions funded by cap raisings and raising capital to keep the lights on. There are plenty of issues around the growth through acquisition strategy (there's even a thread about it), but you  need a bit more meat on the bone than "company growing through acquisitions issues lots of shares". That's just the bleeding obvious.
> 
> You seem to just cherry pick whatever data point will satisfy the view you have already reached. Like below with your use of revenue...
> 
> ...




No, if there's one chart that could immediately tell the investor whether a company has been good for their wealth or not, it's that one. It's a given that when investors contribute cash to a business, they ought to get a return - that the company makes money. 

Mayne has made a few cents on the dollar for their shareholders all these years. 

True that an investor need context, need to understand the business, know where it is in its life cycle to make a more "understanding" interpretation of why shareholders haven't made any profit yet. But...

For a 7 year old company [I'm ignoring the Halcygen years, the other years of operations from businesses/products MYX acquired]... After all those years, with $1B of shareholders equity, we're still asked to kind of ignore the past performance, look to that brighter future full of possibilities?

It's a $1.5Billion company. Its main business is selling boring, generic drugs with established markets and a customer base. All it needs to do is be good at manufacturing and logistics... and a few bucks here and there for R&D to differentiate through different dosage or colouring. 

So for a $1.5b company operating in an established market, taking in $1B of shareholders fund over years... for that company to ask us to wait for it to bloom. That'd be like me asking you to put money into my training for the Olympics 100m sprint. Possible, I wouldn't put my money on me qualifying though.

-----------------

Hikma's purchase was far more superior to Mayne's Teva/Allergran. For one thing, Teva gave Mayne the IPs. No inventory, a year's consultancy on that pipeline of work and technical transfer for $35m? 

Sales from the new portfolio being some $US235m? Compare that to Roxane's FY17 estimate of $US700-$US750m. 

The Roxane purchase push Hikma to 6th place in the US generic market by sales. It comes with all the labs and the brain trust that's been working on the new portfolio just acquired, as well as the R&D team currently working on that 89 or so products with a market potential of some $US41B [vs Teva's potential of $US7b].

Then there's the 16.7% ownership from Roxane's parent company. It's a bit safer for Hikma's shareholders' sleep if the seller is willing to climb into bed with them too. To hit and run like Teva/Allergran... possible that they're "forced" to sell their best products and Mayne is lucky to be getting it. That's remain to be seen... all shareholders have seen is that they've just had their ownership diluted by about 40% from the acquisition.

------

There are circumstances where dilution of shares can be reasonable. But to do it year after year so that the company can have money to acquire, expand and "grow". That's not a $1.5B company.


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## luutzu (19 July 2017)

McLovin said:


> ....
> 
> I'd expect any company whose business is in pharma to have the overwhelming majority of their assets in intangibles.




Possibly. 

MYX will have another $800m in intangibles with the Teva purchase this coming report. So that put their intangibles at $1.13b? On a $1.5b market cap company?

Jesus! Is this a generic drug company or a CocaCola with its secret formula still hidden?


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## galumay (19 July 2017)

Knobby22 said:


> Bought in today at 94c. It just seems insanely cheap.




With some patience, I think that will prove to be the case. It may take a couple of positive reports before the SP really recovers but I agree its very cheap at less than a buck. 

Not that it means anything, but a couple of big, successful investors I know have taken large positions in MYX, prior to the current lows, and they are confident MYX will be a very strong performer in their portfolios going forward. The common factors in their confidence were beliefs that the business was set for strong growth and the market had completely misjudged the potential negative impacts on the business. 

Mind you I know a few big, successful investors who are now small, unsuccessful investors so I wouldnt read too much into it!


----------



## luutzu (19 July 2017)

galumay said:


> With some patience, I think that will prove to be the case. It may take a couple of positive reports before the SP really recovers but I agree its very cheap at less than a buck.
> 
> Not that it means anything, but a couple of big, successful investors I know have taken large positions in MYX, prior to the current lows, and they are confident MYX will be a very strong performer in their portfolios going forward. The common factors in their confidence were beliefs that the business was set for strong growth and the market had completely misjudged the potential negative impacts on the business.
> 
> Mind you I know a few big, successful investors who are now small, unsuccessful investors so I wouldnt read too much into it!




It might get a whole lot cheaper. Maybe not right away. 












See how the above two companies raked in big earnings on an almost consistent basis, with very little or no new equity?

Here's a couple that fail, and MYX.
















Investors piled in cash after cash, management kept acquiring new and improved opportunities. 

Didn't end well for ABC Learning. I know because I was young and stupid I followed the "smart money" like Singapore's Tamasek [?] sovereign fund. That and how can a company possibly not make money looking after kids at exorbitant prices.


----------



## Klogg (19 July 2017)

Knobby22 said:


> Bought in today at 94c. It just seems insanely cheap. EPS of 9.7c forecast + growth.
> Will stand ready to buy more if results are good. Reporting season soon which is good as I am a bit bored at the moment.




Remember, that figure has within it a $20m+ settlement from Forrest Labs. Certainly not a one time thing (these sort of law suits seem to go hand in hand with the industry), but I wouldn't be factoring it into regular earnings numbers.


----------



## mcgrath111 (19 July 2017)

luutzu said:


> It might get a whole lot cheaper. Maybe not right away.
> 
> View attachment 71917
> 
> ...



You're starting to sound like a broken record. 

I enjoy a good apple for apple comparison but I find apple to meat pie is a tad confusing.


----------



## luutzu (19 July 2017)

mcgrath111 said:


> You're starting to sound like a broken record.
> 
> I enjoy a good apple for apple comparison but I find apple to meat pie is a tad confusing.




A business is a business. It's supposed to make money.

It can sell widgets, generic medicines, news and current event, or just about anything and everything... a business must make money for its shareholders. 

That's not comparing apples to meat pie. It's comparing to a known quality business against a known bankrupted one, against one under discussion. All using the same measure of what make a business a continued success or a potential bankruptcy.

----

Here's the cash flows overview for three drug companies:












Blue bar is net operating cash flow; red is net investing cash flow; green is net financing cash flow.

In all cases, you'd want a business to generally make a positive cash flow from operations.

You'd generally want negative outflow of cash from investing as that's the investing activities. So negative is it buying and making investment for future growth.

You'd want negative [outflow] of financing as that kind of activities goes negative when dividends and/or debts are paid. A positive mean more cash were raised or/and borrowed.

Putting these three activities together, you'd want to see an inflow from net cash from operating activities to to out weight the combined outflow of cash used in investing _and_ cash used in financing activities.

Sirtex demonstrated this very simple idea to the T. It has always been operationally positive cash. Those cash more than paid for investments that it makes as well as financing - which if we look further into, will just be dividend payment as it has no debt to repaid.

The only year that stands out for SRX and raises questions would be 2012. Its cash used in investing outpaced the year's inflow from operations. Why is that? Can it afford it? Look at 2010 and 2011 where they made good operating cash in flow but little invesing and dividends... maybe its cash holdings would still cover that year's investing activities. But dig deeper to be sure.

*Hikma paints* a similar story. Though its 2014 and 2015 should be further looked at as they raises some cash. See if the balance sheet is still in good shape, maybe a little borrowing isn't such a bad idea else you'd get a lazy balance sheet. 

But overall, Hikma's operating activities bring in more cash than it spend on investing and financing activities. So that's a good business.

*Mayne* again show the trait of a poor business.

Operating cash are positive but relatively small compared to investing outflow and financing inflow. i.e. Its operations does not produce enough cash to self-fund its ambitions. Needs to dip back into sharheolders pockets to get the cash... and all that cash has not produced much operating income to impress anyone but future generations, maybe.


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## mcgrath111 (20 July 2017)

luutzu said:


> A business is a business. It's supposed to make money.
> 
> That's not comparing apples to meat pie. It's comparing to a known quality business against a known bankrupted one, against one under discussion.
> 
> ...




I didn't say a business isn't supposed to make money, I thought I was on the MYX thread not MRM. 

"It's comparing to a known quality business against a known bankrupted one, against one under discussion."
I also didn't know Mayne was Bankrupt... 

You should note the Mayne / Teva acquisition skews the numbers significantly. 

I feel your posts have a strong confirmation bias, but I'm sure we all experience that.


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## luutzu (20 July 2017)

mcgrath111 said:


> I didn't say a business isn't supposed to make money, I thought I was on the MYX thread not MRM.
> 
> "It's comparing to a known quality business against a known bankrupted one, against one under discussion."
> I also didn't know Mayne was Bankrupt...
> ...




I hope you're not taking what I say personally man. It's all just my opinions and I do try to support it with your standard accounting analysis. 

MRM weren't valued based on earnings, it's valued based on its NTA. For a company with NTA of some $1.70 but sells for $0.40 and does not seem to be going broke [at the time], I'd do it again if I find another opportunity with those same characteristics.

As to MRM's NTA being about $0.67 at last report, I'm not too concerned about that as assets have been sold off, some debts have been repaid, and the rest of the devaluation are just paper, non-cash impairment. 

It's a bit close for comfort but I did add more at 20c, some more recently at 16c. So let's see if they will pick up work and put those assets to some decent earnings. 

-----------

As to MYX... post Teva it will have some $1.1B in intangible assets. Market cap currently at some $1.4B... and going my McLovin quick estimate of its EBITDA of some $88m, interests, taxes and depreciation are real so that would put its post-Teva earnings at $60m? $50m?

That's a PE of 1400/60 = 23 times. That's at 92c a share and assumes management forecasts hit the mark. Not a screaming bargain. 

And here's where I don't know much of anything about drug manufacturing... but it would be a small miracle if MYX management and people could pull off the Teva transfer as planned. Not in one financial year. 

I mean, MYX just bought a company that is is essentially 4 times its size. For $1B in total [ip, working capital, technical transfer etc]. With no inventory acquired with the transaction that size, with no human resources acquired to help with ongoing operations beside the "technical transfer" consulted for some $35m.

Man, getting your head around a $1B operation isn't easy. To put all the logistics, the manufacturing (even if they're partly or mainly outsourced)... I guess it's possible. That would explain why management is looking into another business to acquire around the same time this biggest deal ever was being announced.

Anyway...


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## Klogg (20 July 2017)

luutzu said:


> A business is a business. It's supposed to make money.
> 
> It can sell widgets, generic medicines, news and current event, or just about anything and everything... a business must make money for its shareholders.
> 
> ...




I think the reason why a company is cash flow negative is extremely important. As an example, consider TGR. They generate free cash flow, and pay a small-ish dividend, which would result in net cash gain. But they've also used the rest of this cash, plus a little more, to invest in their business. Hatcheries, pens, leases - they're all items that need up front investment, hence they need to re-invest the cash back into the business.
By your example, TGR, or any other company reinvesting back into the business, would be a poor investment?

Another example - TGA. Their main line of business is writing consumer leases. To do this, they need to use their operating cash flows, and sometimes borrow some extra, to keep up with demand.
If they use all their operating cash flows and some more to write new loans, does this make them a bad business? Or could one reasonably assume that because it's their main line of business, perhaps reinvesting into the business will be beneficial for future cash flows to shareholders?

What really matters are future cash flows, not historical ones.


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## Klogg (20 July 2017)

luutzu said:


> I mean, MYX just bought a company that is is essentially 4 times its size. For $1B in total [ip, working capital, technical transfer etc]. With no inventory acquired with the transaction that size, with no human resources acquired to help with ongoing operations beside the "technical transfer" consulted for some $35m.
> 
> Man, getting your head around a $1B operation isn't easy. To put all the logistics, the manufacturing (even if they're partly or mainly outsourced)... I guess it's possible. That would explain why management is looking into another business to acquire around the same time this biggest deal ever was being announced.




MYX essentially bought the approval from the FDA to manufacture these drugs. Whether they do it themselves or from a third party is another thing, but all they really bought is an approval, a license.
Everything else could remain the same - manufacturer, distributor, sales force, etc.

For what it's worth, from the half yearly report:
"_Successful transition of the acquired portfolio
- No supply chain disruptions or material loss of business outside normal market competition 
- 99% of products SKU’s now in Mayne Pharma labelling 
- Positive feedback from customers and Federal Trade Commission (FTC)_"

Given almost everything has Mayne Pharma labelling, there was no supply chain disruption and the FTC are giving positive feedback, one could reasonably assume that this acquisition has progressed rather well, from an operations standpoint.


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## luutzu (20 July 2017)

Klogg said:


> I think the reason why a company is cash flow negative is extremely important. As an example, consider TGR. They generate free cash flow, and pay a small-ish dividend, which would result in net cash gain. But they've also used the rest of this cash, plus a little more, to invest in their business. Hatcheries, pens, leases - they're all items that need up front investment, hence they need to re-invest the cash back into the business.
> By your example, TGR, or any other company reinvesting back into the business, would be a poor investment?
> 
> Another example - TGA. Their main line of business is writing consumer leases. To do this, they need to use their operating cash flows, and sometimes borrow some extra, to keep up with demand.
> ...




No, a company ought to reinvest back into the business. That's what it's supposed to do. I actually don't like dividends being paid out, but that's just at my current life-cycle where I don't need it. Others would want dividends etc. 

Point is, a company should definitely reinvest their earnings. I agree with you.

But the key word there is _re_invest. The business ought to earn enough cash from its operating activities to re-invest back for further organic growth or one through acquisitions.

If its current operating activities does not generate positive cash inflow to exceed investing and/or financing outflow requirements... maybe more expansion through acquisition isn't the answer the business and managerial inadequacy.

MYX's net operating cash is quite puny in relation to its "needs" for investment and debt repayment. That's why it kept on financing new cash. Can't keep that up so one way to fake it is acquire and "grow". Get the cash in early enough, pay out later enough and you got yourself a perpetual cycle of growth through acquisition to one day dominate the world. 

That's not to say that businesses shouldn't grow through acquisition either. A quality business, one so profitable and well-oiled that management can sit back from the day to day operations to study and think about new opportunities and directions... those companies still make strong positive net operating cash year on year, then in between those good years, yes, raise new equity (at what would be a high share price) or borrow for that "transformative" acquisition. 

Those quality operations are never operating cash poor yet still keeping on buying and borrowing/raising cash. Not year on year like MYX has over the past eight.

That's not growth, definitely not quality. That's a bad business with management stumbling around to find the next big thing to make it work. And if the market and shareholders are patient and generous enough with their cash, someday they might hit the jackpot... Teva might very well be that jackpot. Though, again, on a theoretical basis, Teva don't get to where they are through offloading businesses with great future potential - forced or otherwise by the FDA.  

Here's another cashflows summary of Monadelphous. A company I think we all agree are well managed with outstanding financial position and performance.






Here's the bankrupted ABC Learning Centres. The growth through debt and expansion story of the early 2000s.

Not raking in enough operating to fund all those growth. Those growth did not produced much noticeable contribution to cash inflow either.







You can look above for MYX. The only good thing we can say about MYX cash summary is that it's been improving lately. Then came the $888m cap raising with the rest borrowed for that $1B acquisition (includes costs). That'll show up FY17. Won't be pretty.

As Buffett said, if an investor (fund manager) fail to perform in their domestic market, it's a bit much to expect to say that once they goes offshore they'll really begin to show their stuff. Same with business management - Mayne have failed to deliver much back to shareholders over the past 8 years, we're now told to expect that this Teva acquisition they just bought for a $1b is going to be a game changer (in a good way). Maybe. Maybe they're kidding themselves.


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## luutzu (20 July 2017)

Klogg said:


> MYX essentially bought the approval from the FDA to manufacture these drugs. Whether they do it themselves or from a third party is another thing, but all they really bought is an approval, a license.
> Everything else could remain the same - manufacturer, distributor, sales force, etc.
> 
> For what it's worth, from the half yearly report:
> ...




Yea, you could be right. I really don't know. I guess we just take management's words that things are progressing well.

Just from my limited experience getting paid from large corporations and gov't agencies... and maybe it's just the amount we get paid are the equivalent of half a cent compare to these hundreds of millions... but it took a couple of months to just get the paperwork and verification as to why they ought to pay us for the same work, under a new contract. 

People are in no hurry to pay you, it seems. Any excuse to delay a month or two will do.

Bu tyea, it's a big purchase and certain hickups are expected so even if there's some delay I wouldn't blame MYX management over it. Mr. Market might not be so patient or nice though


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## mcgrath111 (3 August 2017)

Teva just reported.

Clear pricing pressure in generics (as expected).
Revenues were up, but that didnt translate into the bottom line.

As some on HC brought to my attention is that mayne focus more on specialised generics / vs teva's all reaching/producing everything under the sun.
Reportingtime will be interesting. I dont expect big things, just not too bad on the price deflation front.

But who knows!


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## luutzu (3 August 2017)

mcgrath111 said:


> Teva just reported.
> 
> Clear pricing pressure in generics (as expected).
> Revenues were up, but that didnt translate into the bottom line.
> ...




Don't mean to be a pain in the azz but think about it a bit...

If you're Teva, would you offload your best, most profitable stuff?


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## Klogg (4 August 2017)

luutzu said:


> Don't mean to be a pain in the azz but think about it a bit...
> 
> If you're Teva, would you offload your best, most profitable stuff?




I would offload whatever the FDA told me I had to offload to ensure my $40bn transaction goes through.


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## JTLP (4 August 2017)

Well MYX is copping an absolute pummeling this morning off the back of this. World of hurt for holders!


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## galumay (4 August 2017)

JTLP said:


> World of hurt for holders!




...or opportunity to accumulate, depends on how your viewpoint!


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## JTLP (4 August 2017)

galumay said:


> ...or opportunity to accumulate, depends on how your viewpoint!




Maybe post results.


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## luutzu (4 August 2017)

Klogg said:


> I would offload whatever the FDA told me I had to offload to ensure my $40bn transaction goes through.




That's one interpretation.

The other would be that Teva deemed their own offloads weren't as good as the Allergran's version of those generics so they gave it away for $1B.

I mean the FDA forced Teva to offload due to competition concern right? So whatever it was they offloaded to MYX, there's at least one other competitor in Allergran. I'm no lawyer but it seem that the FDA would be fine if either the Teva's version is offloaded or the acquisition's version. 

Anyway...


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## mcgrath111 (4 August 2017)

galumay said:


> ...or opportunity to accumulate, depends on how your viewpoint!



Its never nice seeing an 8% drop. The difference I am seperating from the two is:
Teva is debt funded.
Mayne was funded by equity.

Mayne could post average results, and they may very well do that.

But, the difference in Mayne and Teva is substantial from the fiancial perspective. 
They both sell generics, but thats largely (imo) where the comparison ends.


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## Garpal Gumnut (4 August 2017)

Big Pharma is basically a ponzi game.

The chart says it all.

MYX is a dead parrot.

Jump.

gg


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## luutzu (4 August 2017)

Price drop could also be due to news that Wal-Mart, Walgreen [and presumably all the major retailers] are putting their pricing power on the generic drug makers. 

If Teva's going to have a hard time with WalMart, I don't think MYX's US operations will have much better luck. 

Good thing they do some business in Australia where the supermarkets have somehow not been allowed to sell prescription drugs. I mean, have the regulators been to a typical pharmacy nowadays? It's like a more expensive version of Coles or Woolies - with a couple of pharmacists stacked away in some corner at the back.


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## Knobby22 (8 August 2017)

Very good article from Mish about how the big drug companies collude with chemists, insurers and politicians to limit generic use while still charging huge prices. Also saw CEO is relocating to the US, good move. I am in a little bit of pain with this one.

https://mishtalk.com/2017/08/07/beh...ont-necessarily-reduce-prices-mish-proposals/


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## JTLP (8 August 2017)

Crunch. This is really on the nose now. Apparently the profit numbers were far below analysts expectations?


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## PZ99 (8 August 2017)

Profit's fine it's the outlook that's bad because of increasing competition.


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## skc (8 August 2017)

JTLP said:


> Crunch. This is really on the nose now. Apparently the profit numbers were far below analysts expectations?





PZ99 said:


> Profit's fine it's the outlook that's bad because of increasing competition.




Yes indeed. The profit from this year is only going to be slightly below consensus - I had $114.2m consensus NPAT vs ~$110m in today's forecast (before the pre-tax $25m impairment). And I believe the market has a pretty low expectation below actual consensus. When I read that news I thought the stock could easily rally on this, especially given the high short interests. I think that is why the share traded slightly stronger for the first 5 minutes or so. 

But then the market quickly started to focus on the outlook. Whilst no actual numbers were forecasted, the generally tone implied that external industry condition is expected to get worse. So the stock turned weak and finished very much on its lows. 

The chart is looking definitely bearish, the fundamentals is all about getting through this cycle. MYX's balance sheet appears in fine shape so it shouldn't do a Day 2 plunge like TEVA did.


----------



## skc (8 August 2017)

skc said:


> Yes indeed. The profit from this year is only going to be slightly below consensus - I had $114.2m consensus NPAT vs ~$110m in today's forecast (before the pre-tax $25m impairment).




The announcement said "Reported NPAT of between A$92-A$95m", and reported usually means including all impairments. If that is the case then my interpretation above would be correct.

However, one report I just read mentioned that the $92-95m range is "Adjusted NPAT", not including the $25m impairment. I am unsure how they come up with this interpretation, but if that is the case then it's a 18% miss on the NPAT line which is much more significant.


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## McLovin (8 August 2017)

skc said:


> The announcement said "Reported NPAT of between A$92-A$95m", and reported usually means including all impairments. If that is the case then my interpretation above would be correct.
> 
> However, one report I just read mentioned that the $92-95m range is "Adjusted NPAT", not including the $25m impairment. I am unsure how they come up with this interpretation, but if that is the case then it's a 18% miss on the NPAT line which is much more significant.




Don't forget the reported result also includes a first half one off $22.5m net gain from litigation.

Bets on whether that's the last write down on the generics business?


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## Value Hunter (9 August 2017)

This stock/company definitely looks like a falling knife. When it comes to companies that make big acquisitions and keep doing frequent capital raisings I like to take a guilty until proven innocent approach. I just assume things will blow up down the line unless I see compelling evidence otherwise.


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## JTLP (9 August 2017)

skc said:


> The announcement said "Reported NPAT of between A$92-A$95m", and reported usually means including all impairments. If that is the case then my interpretation above would be correct.
> 
> However, one report I just read mentioned that the $92-95m range is "Adjusted NPAT", not including the $25m impairment. I am unsure how they come up with this interpretation, but if that is the case then it's a 18% miss on the NPAT line which is much more significant.




That's what I thought. Plus mr market must too - smashed again today.


----------



## skc (9 August 2017)

Value Hunter said:


> This stock/company definitely looks like a falling knife. When it comes to companies that make big acquisitions and keep doing frequent capital raisings I like to take a guilty until proven innocent approach. I just assume things will blow up down the line unless I see compelling evidence otherwise.




I don't disagree that approach, but I believe in this instance the issues are more industry-wide rather than MYX- or acquisition-specific. Again, investors should at least be thankful that MYX balance sheet isn't highly geared.



McLovin said:


> Don't forget the reported result also includes a first half one off $22.5m net gain from litigation.
> 
> Bets on whether that's the last write down on the generics business?




True... but I am reasonably confident that my initial numbers were correct... i.e. reported NPAT includes the one-offs and the underlying NPAT is a bit higher than the reported number.

Accounting question for you McLovin if I may... if a company announces a $100m non cash write down for say full year 2017, does the D&A terms get reduced immediately? In other words, if a company announces an asset impairment and upgrades EBIT in the same breath... are they just talking $hit?


----------



## McLovin (9 August 2017)

skc said:


> True... but I am reasonably confident that my initial numbers were correct... i.e. reported NPAT includes the one-offs and the underlying NPAT is a bit higher than the reported number.




Yeah, I'm kind of confused by what you mean by this...



> However, one report I just read mentioned that the $92-95m range is "Adjusted NPAT", not including the $25m impairment.




Are you saying that that report says the adjusted number excludes the $25m? So actual adjusted should be $67-70m? As far as I can see the write down and the litigation win cancel each other out more or less so that reported NPAT should approximate underlying. That is, underlying shouldn't be up around the $110m mark.

Sorry, I might be totally misreading what you're trying to say.





skc said:


> Accounting question for you McLovin if I may... if a company announces a $100m non cash write down for say full year 2017, does the D&A terms get reduced immediately? In other words, if a company announces an asset impairment and upgrades EBIT in the same breath... are they just talking $hit?




A management accountant would be better to answer this, or @Ves As the D&A expense is probably done at the end of the period (or maybe qtrly), I guess it would be done after the asset is written down (easier to move a portion of it to the once-off column, and get a bump in the underlying). Maybe the accounting rules stipulate current period d&a cannot be shuffled into a write down. That's a pretty good question. I'd like the answer too.

ETA: The more I think about it the more I'm thinking that you can't shove current period D&A into a writedown. It goes against the matching principle of accounting. If you write down the asset at the start of the period then it would be fine though.


----------



## luutzu (9 August 2017)

skc said:


> I don't disagree that approach, but I believe in this instance the issues are more industry-wide rather than MYX- or acquisition-specific. Again, investors should at least be thankful that MYX balance sheet isn't highly geared.
> 
> 
> 
> ...




Why should investors be "thankful" that MYX's balance isn't heavily geared? They just pony up some $888m didn't they? I mean for a company that, until recently, was $1.5b, with $888m just raised from shareholders... I'd say it's heavily geared, just geared with generous shareholders' cash instead of the cheaper ones any bankers would be happy to lend to any half-decent business.

To say that shareholders should be grateful... That's like you just gave the mafia money and be thankful that they have enough cash at the moment to be bothering you with another visit.

The company keep talking about "growth"... any fool can grow their revenue if they can raise and borrow money to acquire new businesses. 

So they raised that Feng-Shui friendly $888m, borrowed and spend to some $1B to acquire the IP and working capital/technical transfer etc. This gave it EBITDA of $US94.5 ($A120m)... Let's be generous and uses FY16 ratio of gross profit down to net profit after tax, interests... so gross profit FY16 was $168.4m, NPAT $34.5m gives a ratio of 34.5/168.4 = .20.

It's crude and what not, but it's not an unfair approximation of gross profit down to net right? So that's some 20% profit to shareholders after the ITDA is deducted from the EBITDA... for the $A120m EBITDA, that's .2*120 = $24.6m net profit from Teva's $1,000m acquisition. 

Management now reckon the useful life of the acquisition to be 15 years... at $24.6m net to shareholders a year... over 15 years that's 24.6*15 =$368.77m. So shareholders are not going to make money within that 15 years "useful life" of their acquisition, even if we allow for efficiency gains and cornering the market that's to come. 

$1,000m/$24.6m = 40.65 years... That's how long, current year being representative of future performance, MYX shareholders would need to wait to see their $1b investment returned to break even. So there better be a whole lot of efficiency and massive potentials from those Teva IP in coming years. 

Then there's the Wal-Mart and other "consortium" that just choke $US5m out of these Teva-acquired products in May and June alone. I doubt Wal-Mart and friends would do a "one-off" on generic guys.


Of course this is not to say that MYX will go broke, and not saying it because its current share price is down. Other generic drug companies' share price are also taking a hit. Just that if we study MYX's history and its most recent, biggest, boldest move... It's not a blip or something shareholders should just shrug off as market sentiment or shorters doing their dirty work.


----------



## skc (9 August 2017)

luutzu said:


> Why should investors be "thankful" that MYX's balance isn't heavily geared?




They should be thankful because if MYX is heavily geared the share price would be down 40% not just 15%. And without too much debt it gives them a chance to ride out the cycle (if it is indeed a cycle and not structural). It's the same as saying to someone who just survived a car crash that they are lucky to be alive. No there is nothing lucky about a car crash, but it's all relative. 



luutzu said:


> I'd say it's *heavily geared, just geared with generous shareholders' *cash instead of the cheaper ones any bankers would be happy to lend to any half-decent business.




Sure. Feel free to define the word "gear" to mean whatever you like. 



luutzu said:


> So they raised that Feng-Shui friendly $888m, borrowed and spend to some $1B to acquire the IP and working capital/technical transfer etc. This gave it EBITDA of $US94.5 ($A120m)... Let's be generous and uses FY16 ratio of gross profit down to net profit after tax, interests... so gross profit FY16 was $168.4m, NPAT $34.5m gives a ratio of 34.5/168.4 = .20.




No. This is wrong. Gross profit and EBITDA are different things. You have calculated a NPAT to gross profit ratio and applied it to EBITDA. If you want to use the NPAT/EBITDA ratio it is 51% (45.2/88.5) for FY16.









luutzu said:


> Management now reckon the useful life of the acquisition to be 15 years... at $24.6m net to shareholders a year... over 15 years that's 24.6*15 =$368.77m. So shareholders are not going to make money within that 15 years "useful life" of their acquisition




Again this is totally wrong. The return on an investment depends on the cashflow it can generate, not the NPAT. 

Imagine there is an investment where you can buy a $9m machine that generates $7m of cashflow a year for 3 years, after which the machine is worthless (so you depreciate the machine over 3 years). The NPAT each year is $2.8m ($7m gross profit less $3m depreciation less 30% tax). So in 3 years total NPAT is only $8.4m hence it's a terrible investment using your method of assessment.

But in reality, the investments yields a total cash of $17.4m over 3 years after paying tax of $3.6m, and it is absolutely worthwhile.

I am not saying MYX made a good investment. I am just pointing out that your method of assessment is wrong, and the calculation within your assessment is also wrong.



McLovin said:


> Sorry, I might be totally misreading what you're trying to say.




Don't worry about what I was saying. It's only 1 piece that I read which that has raised this... it will all be clear come the actual report anyway.



McLovin said:


> ETA: The more I think about it the more I'm thinking that you can't shove current period D&A into a writedown. It goes against the matching principle of accounting. If you write down the asset at the start of the period then it would be fine though.




Makes sense. Let's see if we can get a professional opinion.


----------



## luutzu (9 August 2017)

skc said:


> They should be thankful because if MYX is heavily geared the share price would be down 40% not just 15%. And without too much debt it gives them a chance to ride out the cycle (if it is indeed a cycle and not structural). It's the same as saying to someone who just survived a car crash that they are lucky to be alive. No there is nothing lucky about a car crash, but it's all relative.



Alright, looking on the brighter side of things. Fair enough. 




skc said:


> Sure. Feel free to define the word "gear" to mean whatever you like.




Shareholders' money _outside of MYX_ ain't free, right? So when shareholders are given the rights to take from their own pocket, hand it over to MYX management to fund new ventures... it's not exactly the same as money MYX has made and are reinvesting it instead of paying a dividend.

It could also be argued that having just raised cash to be in a fortunate financial position (where the share hasn't crashed further)... if MYX is to face more financial headwind, which is highly likely given the resources that's needed to merge the new acquisition, promote, manufacture, distribute... and being up against the likes of WalMart, pushing MYX to now think of "expanding" its sales into specialty pharmacies and other channels... These stuff costs money.

Now that shareholders had just pony up the cash, if there's a headwind and new cash is needed... who's going to write the cheques? Shareholders are more generous and understanding than bankers, but how much more would they be willing to fork out now? 




skc said:


> No. This is wrong. Gross profit and EBITDA are different things. You have calculated a NPAT to gross profit ratio and applied it to EBITDA. If you want to use the NPAT/EBITDA ratio it is 51% (45.2/88.5) for FY16.
> 
> View attachment 72186




Dude, re-read what I wrote. The idea was to use some "crude" method to gauge an approximate ratio of EBITDA down to NPAT. I didn't say EBITDA was the same as Gross Profit. In fact, I said I was being generous and not do it...

So they paid $880m [or so?] to Teva for the IP. Those are to be written down in 15 years. $880/15 = $58.7m in write-downs per year? That's going to be in one of the D or A right? Each and every year for 15 years? Give or take depending on whatever straight line or acceleration period etc. But around that number over the next 15 years.

Then there's the interest incurred on the new debt to help pay for the acquisition... Say 4% on some $200m [from memory?]. 

But alright, let's use FY16 as a very rough guide to get the ratio... 

btw, your "NPAT/EBITDA ratio it is 51% (45.2/88.5)" uses the "underlying" NPAT... there's a few one-offs in that figure versus the $34.523m Reported figure... and should we really use the $37.31m "comprehensive" figure that add the exchange rate gains? 

We're arguing over a couple of millions in earnings for a $1.5b company. 

But alright, let's use the FY16 figures as representative of that future ratio, and use its EBITDA and underlying earnings.

So that's $45.2/88.5 = 51%.  At the $A120 EBITDA from Teva that's $61.2. $1000/61.2 = 16.3 years.

A 15 year to worthless assets will take 16.3 years to break even? 

Don't know man, 16 years is a long time in medicine.





skc said:


> Again this is totally wrong. The return on an investment depends on the cashflow it can generate, not the NPAT.
> 
> Imagine there is an investment where you can buy a $9m machine that generates $7m of cashflow a year for 3 years, after which the machine is worthless (so you depreciate the machine over 3 years). The NPAT each year is $2.8m ($7m gross profit less $3m depreciation less 30% tax). So in 3 years total NPAT is only $8.4m hence it's a terrible investment using your method of assessment.
> 
> ...




Yea, I haven't seen the cash flow on Teva's acquisition so who knows. 

Just that if history is any guide for MYX, its acquisitions hasn't returned the kind of cash flow a good company would have.


----------



## Miner (10 August 2017)

Gees
What a high quality of discussions with fact and figures . 
I am in all honesty felt humbled and failed to recognise how come ASF should not attract more members.
Joe
Please do more to make sure ASF gets recognised.
Each of recent postings are so good which i dont get in motley fool, fat prophets or Potter Publishing on which i paid fortune and found them not value for money. 
I was tempting to buy myx until i read the articles here.
So put a buy order at 50 cents price with a hope it will not reach below that.
Cheers


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## galumay (10 August 2017)

Miner said:


> So put a buy order at 50 cents price with a hope it will not reach below that.




If you could buy MYX for 50c it would be the bargain of the year! All you need with MYX to make plenty of money is patience, it has been massively oversold IMO.


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## McLovin (10 August 2017)

luutzu said:


> Dude, re-read what I wrote. The idea was to use some "crude" method to gauge an approximate ratio of EBITDA down to NPAT. I didn't say EBITDA was the same as Gross Profit. In fact, I said I was being generous and not do it...




It's not a crude method, it's just plain wrong. You used a margin of 20% when the real margin was 50%. You'd do yourself a huge favour if every now and then you just admit, like the rest of us, that you make mistakes.


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## luutzu (10 August 2017)

McLovin said:


> It's not a crude method, it's just plain wrong. You used a margin of 20% when the real margin was 50%. You'd do yourself a huge favour if every now and then you just admit, like the rest of us, that you make mistakes.




I'm not saying all these to say that I don't make mistakes, or to offend or insult others who bought MYX. I've made plenty of investment mistakes and have said it here and there on this forum. 

So just to be clear, I'm just trying to have a discussion where I can learn something that could be use in other investment decisions. I mean, I don't think any of us here wants to, or could, move markets so it's no use trying to prop the stock up. 

Now that that's out of the way, if you don't like to continue then ignore. If you want a friend, get a dog. 

-----------------

The aim of getting a ratio was to convert the reported EBITDA down to NPAT. 
NPAT at *50% or 51% *of EBITDA is *not possible*.

First, the recent update of "Underlying EBITDA of between A$212 - A$216 million" with "Reported NPAT of between A$92 - A$95 million"... 92/212 = 43.4% to 43.98%.

You'd get to 49% if you reduce that EBITDA with the $25m non-cash impairment. But then does the reported NPAT also need to include [reduce] by that $25m as well? Not clear from their updates, but we'd think they'd need to.. if not to that bottom line, then to that underlying or whatever earnings-if stuff they do nowadays.



Second, Teva's portfolio EBITDA was $US94.5m, or about $A120m.

For that Teva's NPAT to be at 50%, it'll be $60m after taking out the ITDA.

MYX paid Teva some $880... writing this all down in 15 years... that's amortisation at $880/15 = $58.67m a year.

Debt was also raised for the purchase [total expenses on the purchase adds to some $1B]. So interests and taxes will have to be paid... That will push the ITDA past the $60m [or 50%] mark. 

So 50% NPAT from EBITDA is not possible.


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## McLovin (11 August 2017)

luutzu said:


> Second, Teva's portfolio EBITDA was $US94.5m, or about $A120m.
> 
> For that Teva's NPAT to be at 50%, it'll be $60m after taking out the ITDA.
> 
> ...




You're not buying EBITDA, you're buying cashflow. EBITDA's usefulness is as a short-run cashflow proxy (and in industry comparisons), but you've got to know what makes up the DA, and what is or isn't an expense going forward. skc gave you an example as to why your line of logic is wrong, I even mentioned the EBITDA and the use of DA to NPAT calculation way back in post 126...



> If that purchased EBITDA falls to bottom at the same rate (it will be less, I assume, because of the purchased intangibles – but the amortisation around the customer contract stuff can be disregarded, imo)




The purchase of the portfolio is a sunken cost. The amortisation accounting that goes along with it is not relevant to someone looking to buy MYX today, nor is it relevant to measuring the competitive performance of the portfolio. If you were going to buy the _entire_ Teva portfolio off MYX would you give two sh!ts what accounting charge they were using to amortise the price _they_ paid for it?


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## skc (11 August 2017)

McLovin said:


> You're not buying EBITDA, you're buying cashflow.




McLovin, I think there's enough discussion here for the readers to interpret the arguments and numbers... So I think it's best to reassess whether you want to engage with luutzu further (assuming you would like to remain sane).


----------



## McLovin (11 August 2017)

skc said:


> McLovin, I think there's enough discussion here for the readers to interpret the arguments and numbers... So I think it's best to reassess whether you want to engage with luutzu further (assuming you would like to remain sane).




Yes, you're right. I'm really just laying out a path for any newbie who stumbles on this thread.


----------



## galumay (11 August 2017)

skc said:


> ..assuming you would like to remain sane).




I found the ignore button protected my sanity.


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## luutzu (11 August 2017)

skc said:


> McLovin, I think there's enough discussion here for the readers to interpret the arguments and numbers... So I think it's best to reassess whether you want to engage with luutzu further (assuming you would like to remain sane).




Hmmm... not that the Market is always right or anything... but for a company where shareholders see their share price halved in a year, yet the company's market cap is still the same size. i.e. at $2 cap was $1.5m, at $1 a share, still $1.5. It's a pretty crappy business for shareholders.

When I raised the issue and say it's a crappy business - at $1 a share - Most people think it's a real bargain and reckon it'll go to $1.60s once the Teva acquisition put a fire under the FY17 results. 

Didn't impress the market too much, price crashed to $0.70s... don't know man, maybe I'm not completely clueless I can't figure out the numbers. 

Here's another prediction... MYX will raise more cash in FY18. Not because it needs to, of course. But because of "new opportunities".


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## luutzu (12 August 2017)

galumay said:


> I found the ignore button protected my sanity.




Good on you mate. Awesome. We all know that the best way to see every side of the issue is to ignore those who raises too many issue it makes your head hurt. Always best to have "yes man" around.


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## luutzu (12 August 2017)

McLovin said:


> You're not buying EBITDA, you're buying cashflow. EBITDA's usefulness is as a short-run cashflow proxy (and in industry comparisons), but you've got to know what makes up the DA, and what is or isn't an expense going forward. skc gave you an example as to why your line of logic is wrong, I even mentioned the EBITDA and the use of DA to NPAT calculation way back in post 126...
> 
> 
> 
> The purchase of the portfolio is a sunken cost. The amortisation accounting that goes along with it is not relevant to someone looking to buy MYX today, nor is it relevant to measuring the competitive performance of the portfolio. If you were going to buy the _entire_ Teva portfolio off MYX would you give two sh!ts what accounting charge they were using to amortise the price _they_ paid for it?




If I am going to buy that Teva portfolio and the net earnings would take some 16 years to break even the price tag... maybe I'd give some shiet about it. 

Anyway, take a look at MYX cash flows since eternity. They've never managed to return enough cash from those investing and financing activities. i.e. they've financed [borrowed and raise equity] year on year, make loads of "investing" year on year... and not exactly raking in the cash from operation has it?


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## skc (13 August 2017)

luutzu said:


> Hmmm... not that the Market is always right or anything... but for a company where shareholders see their share price halved in a year, yet the company's market cap is still the same size. i.e. at $2 cap was $1.5m, at $1 a share, still $1.5. It's a pretty crappy business for shareholders.




On one hand you are saying the market was wrong @ $2 a share, on the other you are using the market pricing it at ~$0.80 a share now to validate that you are right. 



luutzu said:


> When I raised the issue and say it's a crappy business - at $1 a share - Most people think it's a real bargain and reckon it'll go to $1.60s once the Teva acquisition put a fire under the FY17 results.




Most people? A few posters thought it's a bargain. 2 weeks on they are neither right or wrong. 



luutzu said:


> Didn't impress the market too much, price crashed to $0.70s... don't know man, maybe I'm not completely clueless I can't figure out the numbers.




You made a mistake in your calculation (applying a NPAT-to-gross profit ratio to the EBITDA) and you used the wrong methodology (using NPAT as payback calculations) in your assessment. Sometimes the correct answer (in this case it was just 50:50) can be reached using the wrong methodology and/or despite calculation errors. But the fact remains that the mistakes were still there and the methodology was still wrong. This is why any discussion with you lasting more than 2 posts drive people insane. Because you never address the arguments and simply move from one issue to the next.

I will continue to post here on MYX depending on where the discussions go, but you will understand when I don't reply to your posts in order to keep my sanity.


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## luutzu (13 August 2017)

skc said:


> On one hand you are saying the market was wrong @ $2 a share, on the other you are using the market pricing it at ~$0.80 a share now to validate that you are right.
> 
> 
> 
> ...




Where did I say the market was wrong at $2 but right at ~$0.80? I even said that "not the the market is always right" etc.... So yes, those who think it's a bargain at a buck would be more right that it's even a better lately. So if they believe in their analysis and management's enthusiasms, load up... I recently did load up on Hikma when I bought in at 20 pound just to see it drop to ~14, and it's now in the high 12s.

The point I raised about the price crash was those who believe that MYX's history hasn't been that bright, but the Teva portfolio will be a game changer (of a good kind). Maybe it will be, one day... so far, the market hasn't been impressed. i.e. maybe I'm not always completely clueless.


As to EBITDA and NPAT... I've answered it above.

I remember reading some old Buffett's newsletter about EBITDA... it's management's way of telling shareholders how great the company's performance has been (if you ignore all the real life, bad stuff). You know, in real life taxes have to be paid, interests better be paid, depreciation and amortisation does actually costs the company money (eventually). But maybe that's just Buffett and what does he know.

As to using either Gross Profit or EBITDA to NPAT to gauge the recent market update that report the Teva's EBITDA's... as I said above, Interest will be higher FY17 (and coming years) as $145m was also raised for the Teva acquisition... add to the $888 raised, that's $1.033B.

Interest will also be higher now that MYX has $A355m "undrawn" debt facilities it just open up. Why open it when you're not going to use it soon, right?

Then there's the A or the D on that $1.033B (or $881m, depends on how you want to look at the actual costs of Teva's)... that's going to be written down to zero over 15 years. Do the maths and see how these alone will affect the "50%" EBITDA to NPAT this and in coming years.

I know, it's the cash flow, stupid. 

Look through MYX historical cash flows. Those has never really been big enough to cover its dreams and ambitions. So that will leave either the shareholders or the lenders to fork out the cash. 

So far in its corporate history, MYX shareholders has given some $1.2b (from memory)... If they still have faith in that brighter future, then sure.

As to the bankers... they kinda told MYX to better go raise more equity before they would think about lending more cash. Now that that's done and more debt has been raised... wanna bet how keen the bankers would want to lend given that most of MYX's assets are "intangibles"... you know, filing cabinets and office stationaries they can flog off at 10cents on a dollar. "Intangibles"... who knows.


Anywho... MYX is one of those companies that if you own it, best to take a really, really close look. Get a PhD in medicine if you need to. I mean, unless those new Teva R&D pipelines, or those R&Ds MYX has a definite chance of curing cancer or something, it's not going to be easy holding on. 

If you study the likes of WalMart, or even BNSF... and study the failures like ABC Learning Centre and One.Tel.... MYX is more the One.Tels than the WalMart.


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## JTLP (29 August 2017)

Director stepping up and buying a cool 8m shares (nigh on $6m worth) around this price.


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## luutzu (30 August 2017)

JTLP said:


> Director stepping up and buying a cool 8m shares (nigh on $6m worth) around this price.




The cynic in me thinks Brucie will offload his previous purchase within this financial year to please his accountant. But I guess it is a positive that a director have faith in the business's future.


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## mcgrath111 (15 September 2017)

Mayne announced two new products today. (Which could explain the recent rise from 64.5 to 74?). 
Both products in regards to dealing with UTI's.

Announcement mentioned:
"Mayne Pharma received a 5-year period of protection for the information it provided in its application to the TGA for approval for the products. Data exclusivity commences from the date on which the new product is registered and the effect is that generic competitors are not permitted for the period of exclusivity from using an innovator company’s data in support of their own application for approval of a generic product."
How significant is this? Wouldn't this largely be standard in the generic market?


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## luutzu (28 November 2017)

Scanned through the CEO's speech today.... 

So it's been a bad year with sales down, earnings down. But, he says, if we ignore that and assume a more "normalised" future where the times are good again, it's going to be good. 

How come people laugh at only me when I say stuff like that 

And oh yea, they're cancelling/taking a lost on the share incentives. Rationale being that (with the share price being so freaking low) giving shares away is not going to incentivise the "employees" (aka, executives).

As Han Solo says to Chewy, that's not how incentives work! 

You don't hand out cheap/free shares to "employees" to encourage them to create value for shareholders just to then take a lost on it and give them other more beneficial "incentives" when they failed to deliver the value to shareholders.

That's lowering the bar, widening the goal posts, heads I give you shareholders' money tails I give you more shareholders money.


I mean there are good and bad years in any business, even those managed by the best of them. But to have a board that does this kind of rubbish just isn't cutting it.


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## JTLP (18 December 2017)

Mayne on the march today, not sure what courtesy of...either the US tax break or short covering I would assume...


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## VSntchr (18 December 2017)

JTLP said:


> Mayne on the march today, not sure what courtesy of...either the US tax break or short covering I would assume...



TEVA has been going up in the USA.
Cutting back their workforce might mean less competition for MYX.


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## pixel (10 January 2018)

MYX chart looks good. C&H breakout should trigger lots of buying interest.
I'm not on yet, but put it on buy alert. Waiting for volume supporting price.


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## Wyatt (1 June 2018)

pixel said:


> MYX chart looks good. C&H breakout should trigger lots of buying interest.
> I'm not on yet, but put it on buy alert. Waiting for volume supporting price.
> 
> View attachment 85609







Is this the price and volume action Pixel was waiting for?

I'm in for a small punt to find out


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## Knobby22 (1 June 2018)

pixel said:


> MYX chart looks good. C&H breakout should trigger lots of buying interest.
> I'm not on yet, but put it on buy alert. Waiting for volume supporting price.




I have noticed that there has been lots of interested buyers over the last month. Sellers are drying up when once there were plenty.


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## kid hustlr (2 June 2018)

So often in my endeavors I find myself:

- gun shy on a stock I've taken a loss on
- questioning whether I should be buying a stock breaking from a basing pattern over a stock that is clearly in an uptrend.

The dilemmas remain in this example however the patterns look promising.

Shout out to Pixel!


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## So_Cynical (4 June 2018)

I have a parcel @ 63 from around Nov 2017, just a small punt with the IB account.


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## Boggo (4 June 2018)

Came up in my weekly system


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## Country Lad (4 June 2018)

kid hustlr said:


> So often in my endeavors I find myself:
> 
> - gun shy on a stock I've taken a loss on
> - questioning whether I should be buying a stock breaking from a basing pattern over a stock that is clearly in an uptrend.
> ...




Kid, in my early trading days, I had a similar reluctance to buy back into ones that had not gone according to plan even though I was comfortable with the company, only to see them rise again.  Then I had the logical light bulb moment realising that I had selected the right company, just at the wrong time.  No hesitation now as long as I am still happy with the fundamentals or potential.

Breaking or one in uptrend?  Both, I love breakouts and also often go for ones when they achieve 12 month highs.


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## barney (8 July 2018)

Courtesy of @tech/a .........… Original post … June 21, 2018


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## Faramir (26 July 2018)

Any feedback please? I wish I chose Mayne Pharma for the tipping competition instead. It's up for grabs if anyone wants it. This time last year, everything looked horrible for Mayne Pharma. Now, I think things look better.
It may not close above 96 cents by the end of today. It did peak at 97 cents.
Your call anyone??


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## Knobby22 (26 July 2018)

It's been doing well. Hard to call Farimer but I own.


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## JTLP (26 July 2018)

Knobby22 said:


> It's been doing well. Hard to call Farimer but I own.




I bought a little higher than this so pleased to see a turnaround. Not sure what’s driving it though, unless the price of generics has bottomed?


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## tasmanian (31 July 2018)

MYX seems to be coming off a nice basing pattern. Possibly forming another flag/box here. Could be the start of a new uptrend? Had some good volume lately also.


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## JTLP (31 July 2018)

tasmanian said:


> MYX seems to be coming off a nice basing pattern. Possibly forming another flag/box here. Could be the start of a new uptrend? Had some good volume lately also.




Has tried and failed to stay above $1 though. Would be positive to see a close above this.


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## galumay (31 July 2018)

I think we will have to wait for the EOFY report to see any improvement in the SP, I expect the report will surprise to the positive and we should see the growth in SP come.


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## luutzu (1 September 2018)

The rise doesn't make sense.

It's priced on great expectation. Whether or not that will be delivered I don't know... but given its history, market mainly fungal and pimple products, generics... Maybe there's something in the pipeline the market knows well but still... at some $1.86B with sales of $530M. Pretty pricey.

That and declining revenue, EBITDA, margins... I guess the market like it because its H2 was better than its H1... but then its FY18 was worst than its FY17 so we're to ignore the yearly trend but take the half yearly (more favourable) trend??

I like this line:
"Operating Cashflow Before WC, interest and tax 139.7"

No need for working capital? No debt to pay interest? No taxman around?

But please don't take my word. I just look at the recent financials. With these drug companies, new fortune could, maybe, be around the corner. 

If it ain't... it's going to get smashed. It's priced to be.


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## galumay (2 September 2018)

galumay said:


> I expect the report will surprise to the positive and we should see the growth in SP come.




Seems that was the case, I think patient investors will be well rewarded in the long term. I bought too soon when it initially fell from grace, but well back in profit now. 

I remember this was one of @ROE's high conviction holdings - and history shows he didnt get too many wrong!


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## JTLP (10 September 2018)

@joeblow - where is ROE?

Anyway, MYX did spike on the report - up to $1.46ish I believe, but really closed out the day weak. Languishing in the teens now - not sure what the catalyst will be for the next move. Risk off sentiment doesn’t help.


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## galumay (10 September 2018)

JTLP said:


> where is ROE?




He still posts in other places, so he is around. Doesnt seem to pop in here any more.


----------



## just_jay (13 November 2018)

AGM coming up on 29 Nov.
Saw the nice increase in vol today and the strong candle and I'm off chasing the carrot.


----------



## mcgrath111 (27 December 2018)

Taken a big falls in recent months, I'm wondering if it is to do with the 'cartel conduct' investigation currently being undertaken by the DOJ?
Last report looked pretty good & shorts are down...what am I missing?


----------



## Darc Knight (2 January 2019)

Here's another of these Stocks sitting just outside range of $3+bil Index Funds.
201 on ASX ranking, up 1.29% so far this morning.


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## Knobby22 (28 January 2019)

Gone Mayne Pharma in the comp. 
Interim report released near the end of the month. Hoping drop in Aussie Dollar combined with good sales will lead to a rerating. No longer own but still interested.


----------



## galumay (28 January 2019)

Hopefully you are right Knobby22 as I still hold!


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## Knobby22 (28 February 2019)

galumay said:


> Hopefully you are right Knobby22 as I still hold!



I thought the result looked OK. Why is the market unhappy galumay?
Right near the bottom for the comp.


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## peter2 (28 April 2019)

After the disappointing year that MYX has had I'd hate to get anyone's hopes up. There's a reversal BO opportunity on my chart right now. This is only for the "desperates" and those who can manage their downside exposure. Price probably needs a lot more time. The last basing pattern lasted one year before the break-out. It could just be that investors are feeling good with the market at yearly highs and they're willing to have a punt on a downtrodden MYX.


----------



## greggles (14 May 2019)

Mayne Pharma Group savaged today after announcing that their Generic Products business has been under-performing and is 32% down in January to April 2019 as compared to the same period last year.

Unfortunately for MYX their Generic Products business, which includes key products liothyronine and dofetilide, is also the largest part of their business and the company admitted today that the decline in sales is as a result of competitive pressure.






The last nine months have been a shocker for MYX, declining from a high of $1.33 in early October 2018 to a low of 56c today. I suppose the pressing question is where will it eventually bottom out? There might be an opportunity for brave souls looking to pick the bottom here. Unless, of course, there is more bad news to come.


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## galumay (14 May 2019)

I still think there is a good business in there somewhere, its not going to go bust. Its a pretty attractive contrarian play, probably got hammered worse today in a falling market. You probably need a pretty long term view to take a position now, but opportunity is there.


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## Knobby22 (14 May 2019)

Big drop in profit over the last 3 months.
You would have to say if that continues the long term value isn't looking that great and you really need to base any future on the new products to be released.
I'm thinking the present price is about right. Worth keeping an eye on if it goes lower.


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## peter2 (14 May 2019)

Along with their declining revenue there's legal problems for generic drug suppliers in the US. 
*Stocks of generic drug companies fall after more than 40 states file suit alleging price fixing *(Marketwatch article). This issue has caused TEVA and MYL to fall much more than the market. It's going to take years to work through the legal system.


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## galumay (14 May 2019)

Fair points from peter2 & Knobby22. Probably easier places to make a $.


----------



## JTLP (14 May 2019)

One I sold near the top and just got a profit (2%). Thank the lucky stars, this has been a dog.


----------



## peter2 (16 July 2019)

Woof, woof.  Seems like the management are still struggling with problems. It appeared in a short scan yesterday (1st red bar) but I can't short this for fear of a buyout offer.


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## galumay (2 October 2019)

Finally! Good old @ROE knows a business to hold and average down into when he sees one. It was his conviction that allowed me to hold through the last couple of years, todays announcement sent it soaring nearly 20% and the shorts are bleeding! I expect there will be more short squeezing tomorrow on the open as there are still quite a few caught in the trap still!


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## aus_trader (30 October 2019)

I am picking this Biotech/Pharma stock for the Nov stock tipping competition. Given that it's been left behind in the 2019 Biotech/Pharma star performers rallies, I think it has a chance to play catch up. Been as high as $2 in the past so there is a chance to see this stock bounce back up.


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## peter2 (30 October 2019)

MYX has me thinking about the Disney film "Old Yeller", that I saw as a child. It's about a mongrel dog with a lot of convictions that earns the respect and love of a family.

IMO MYX is certainly a dog, but it came to my attention recently after the high volume break-out of my resistance line at 0.55 (weekly chart arrow). Good first step and it's gone through the down trending emas (13,21 wk).

Sideways consolidation above the R line, promising and worthy of a conditional buy if it trades at 0.63/0.64. Disappointment.  Price has now fallen below the line at 0.55. There's too much supply at the higher prices. A few more disappointed long term holders took the opportunity to sell into the high volume pop in price. 

The cond order is scrapped, because now I need to see price form a HL on the weekly chart. This will take more time. MYX remains in the reversal watch list. I'm waiting for that HL and then I'll consider buying a break-out >0.65.


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## galumay (31 October 2019)

This dog will have its day! Its just a bloody long time coming! For me its a classic case of buying too soon, being wrong and being too early look the same for a long time.


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## Klogg (31 October 2019)

galumay said:


> This dog will have its day! Its just a bloody long time coming! For me its a classic case of buying too soon, being wrong and being too early look the same for a long time.




I was just wrong.  My thesis didn't play out, so I sold a while back. Taking such a large loss isn't nice, but better to take the loss when I think I'm wrong.

To be honest, I have no idea how this will play out.


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## galumay (31 October 2019)

To be honest, I was just wrong, too.


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## peter2 (22 November 2019)

Market conditions remain difficult for the generic drug suppliers. MYX reports more disappointing numbers. Their only hope seems to be rights to a new female contraception formulation but this is not due for sales until 2021.

The price chart was looking more bullish with a recent BO-HR. I was waiting to see is the test of the BO level would hold. After today's disappointing news it looks like MYX needs more time. I'll throw it in the spec list.


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## Knobby22 (22 November 2019)

Yes, it doesn't look good. When I sold in January I never dreamed it would fall this far. Kept looking at buying back but the longer it goes, the worse the news.


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## peter2 (29 December 2019)

Is MYX showing signs of life or is it just flailing like a fish out of water? 
My pick for the Jan20 monthly comp or have I missed out on a great selection for the 2020 CY comp? 





	

		
			
		

		
	
  1st Blue bar off support.


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## Dona Ferentes (29 December 2019)

_Mayne Pharma ((MYX)) aims to transition away from its generics business, which is under increasing pressure, outlining at the company’s AGM aspirations for more than 60% of FY24 revenue to be generated by US specialty products.

This rebalancing will be led by the commercialisation of the licensing deal with Mithra, ramp up of new specialty products and optimising the women’s health portfolio.
_
a fair summary of broker views can be found here: https://www.sharecafe.com.au/2019/11/25/mayne-pharma-aspires-to-specialisation/

"while there are interesting growth options, *the balance sheet is too weak to transform at a pace that can benefit investors."*


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## Faramir (1 January 2020)

Second choice for 2020 tipping competition. Just when everyone thinks a stock is a stinker, this is the time to go in. Unfortunately, I have averaged down enough. I just have to sit and wait. I am expecting MYX to transform itself.


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## Trav. (27 January 2020)

I find this chart interesting as it has had a few counter trend signals and one recent BO attempt which had little momentum and retraced.

Bad signs spotted on chart
- lower Highs since October 2019
- low / average volume in the past week
- trend strength fading
- Big gap down 11% (future o/head resistance) November 2019

Good signs
- accumulating phase approx 2 months
- support holding
- Health sector up


Question - Is there a opportunity to enter on pull back? confirmation required BO > 48.5 / 50 c

Any other thoughts appreciated....


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## galumay (27 January 2020)

I sold out recently, I decided the opportunity cost of leaving capital tied up in the business was too great and I found a better (hopefully!) home for it. I think there may be a reasonable business in there, but its taking so long to materialise! There is a fair bit of debt on the balance sheet and a lot of intangible assets. FCF is pretty sad too.


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## JTLP (21 February 2020)

This is one sad sad stock. Biggest sigh of relief getting out of this. 

They are always restructuring and burning cash. Not sure how anyone could have conviction to buy...


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## Dona Ferentes (21 February 2020)

JTLP said:


> This is one sad sad stock.
> 
> They are always restructuring and burning cash...



yup. Awful. Generics is a tough space: "_aggressive contracting behaviour driving heightened levels of price deflation" _Yikes. Double Yikes. Didn't they know beforehand?

(So glad its a distant memory, one time sell discipline worked for me)


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## Dona Ferentes (21 February 2020)

found this from early 2017. (Dow Jones newswires). nothing has changed it would seem


> Things have gone from bad to worse for the generic drug industry just as its biggest players are set to report earnings. The latest sign came late Tuesday. Embattled drugmaker Perrigo said that federal agents executed search warrants at company headquarters, as part of a wide-ranging investigation into price collusion in the generics industry. ...Several other companies have received subpoenas as part of this investigation.
> 
> True, a high standard of proof is required in collusion cases. Many federal inquiries end without charges or penalties. And generic drug stocks generally trade for very low earnings multiples. Those facts could give hope to investors when the largest generics companies report earnings next week.
> 
> ...



2017, folks. _Plus ça change_


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## Telamelo (8 July 2020)

Mayne Pharma Group (MYX) getting noticed/some coverage as Lazard (substantial holder 07/07/20) tops up with $6.5M worth of shares over recent week's.

https://kalkinemedia.com/au/us-shar...der-discussion-3-things-you-might-have-missed

MYX - Very nice strong finish of 44.5c +3.49% (it's day high!) and more importantly, finally closing above it's 200 dma (of 43.2c) so onwards and upwards from here.

1 yr chart shows a big "open gap" b/w 50-55c that sooner or later should get filled imo dyor


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## Telamelo (10 July 2020)

Telamelo said:


> Mayne Pharma Group (MYX) getting noticed/some coverage as Lazard (substantial holder 07/07/20) tops up with $6.5M worth of shares over recent week's.
> 
> https://kalkinemedia.com/au/us-shar...der-discussion-3-things-you-might-have-missed
> 
> ...



MYX appears to be in a "medium-term rally" confirmed by multiple indicators. Most importantly, the 5-day moving average is above both the 20 and 50-day moving averages. Furthermore, it bounced off it's 200dma critical support level yesterday in sp closing just above it.


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## Telamelo (10 July 2020)

Telamelo said:


> Mayne Pharma Group (MYX) getting noticed/some coverage as Lazard (substantial holder 07/07/20) tops up with $6.5M worth of shares over recent week's.
> 
> https://kalkinemedia.com/au/us-shar...der-discussion-3-things-you-might-have-missed
> 
> ...



Great to see MYX sp passing above the 200MA. Could use some big funds being interested at entering at these price levels. Load up and wait imo. "Golden Cross" in sight !!! 
Nice strong green candle today! DYOR

360 buyers for 8,808,887 units vs 244 sellers for 5,214,403 units


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## Telamelo (16 July 2020)

After re-test/holding 40c strong support level yesterday.. MYX since jumped +7.41% this morning.
(pending positive "news flow" anticipated over the coming week's/month's methinks)
DYOR  Cheers tela


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## peter2 (6 October 2020)

Just when I was warming to MYX as a reversal opportunity they receive a "not so fast" caution from the FDA on one of their women's health drugs. The addressable market for this generic drug is huge, so the potential looks promising but they have to get their production facility up to standard for the FDA approval.


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## Miner (6 October 2020)

With massive drop in price due to FDA rejection (returned to sender to send again) the prices dropped heavily.
I noticed an interesting share disposal few days before . It is upto ASIC to ask if the director guessed any thing ?
Ironically another director bought a piece meal lot of share - smoking mirror ??

https://www.asx.com.au/asxpdf/20201006/pdf/44nd0qrbgnwtm4.pdf - drove market price drop today
https://www.asx.com.au/asxpdf/20200901/pdf/44m6n28chf1krv.pdf - sold out 2.2 m shares
https://www.asx.com.au/asxpdf/20200902/pdf/44m7xprzp13pgd.pdf - bought shares of the order of $37 K - peanuts
THIS IS THE FORMAL ANNOUNCEMENT https://www.asx.com.au/asxpdf/20201006/pdf/44nd0qrbgnwtm4.pdf


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## peter2 (7 October 2020)

I understand that the issues raised in the latest FDA CRL were more to do with correcting procedures/documentation rather than anything to do with the compound's efficacy. These details were not provided in the MYX update. The significant selloff that occurred suggests these issues may be more serious than I assume. There was no further selling on the following day. 

I'm considering a partial buy at 0.32, with a tight iSL for the small cap portfolio.  Letting the idea percolate though the grey matter for now. 
No hurry yet, as the last reversal took 40 weeks before the eventual BO-HR.


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## frugal.rock (2 April 2021)

A pop out of the blue today (seemingly?) makes it worth a closer watch for a while.
No announcements recently but traders may be anticipating something? 
Not held.


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## peter2 (30 May 2022)

That little pop has lead to a very tight trading range (0.26 - 0.31). This is looking promising, but it is *MYX *and that's why I'm showing the past three years of price data. They seem to be pinning their hopes on their new oral contraception compound, NEXTSTELLIS.


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## Dona Ferentes (28 October 2022)

Mayne Pharma will return $113 million to shareholders, being the proceeds of its sale of Metrics Contract Services, and proposed a 20-for-1 share consolidation.

It declared a fully franked special dividend of 2.72¢ a share, or $47.3 million, to be paid on 27 January and flagged a _pro rata _capital return of around 3.8¢ a share, $65.5 million, pending shareholder approval.


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## rcw1 (Today at 9:01 AM)

Good morning
Announcement today (12/01/23) ...

Mayne Pharma Group will defer a previously announced capital return to shareholders due to _sensitive timing around transactions and funding talks._

The pharmaceutical company today announced a revision to the timetable for the capital management initiatives announced on October 28 and approved by shareholders at the AGM on November 30.

The $113m capital management initiative followed the completion of the sale of Metrics Contract Services and comprised a fully franked special dividend of $47.3m at 2.72c per share and a pro-rata capital return of up to $65.5m, about 3.8 cents per share.

Mayne also proposed a share consolidation in which every 20 shares would be consolidated into one share.

After November's AGM Mayne Pharma announced it had entered into an exclusive license agreement with TherapeuticsMD for three branded women’s health products and a portfolio of prenatal vitamins.

The board said today, it was now "prudent" to defer the capital return – but not the special dividend or share consolidation – by at least two months to March "due to the timing of this transaction" and ongoing discussions with parties to secure renewed financing arrangements.

The board said it would provided an update on the capital return in late February or early March, and left the door open for further deferrals.

Hmmmmmmm

Have a very nice day, today
Not holding.

Kind regards
rcw1


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