MYX - Mayne Pharma Group

[Klogg]

Pulled from a 2015 broker report, so a bit outdated - but made me chuckle.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]

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]

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?

 

[mcgrath111]

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.

 

[mcgrath111]

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)

 

[Klogg]

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.

 

[luutzu]

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!

 

[McLovin]

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)

 

[JTLP]

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

 

[Klogg]

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.

 

[skc]

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.

 

[Klogg]

Probably just the difference between transaction and settlement dates.

Of course. Thanks

 

[JTLP]

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

 

[skc]

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....

 

[McLovin]

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



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....

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.

 

[JTLP]

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



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....

Thanks SKC. Bit of an effort to get to!

 

[skc]

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.

 

[Klogg]

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.

 

[Klogg]

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...

 

[Klogg]

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.