In morning trade the Mayne Pharma Group Ltd (ASX: MYX) share price has continued its slide lower and is down 2.5% to 61 cents following the release of a trading update at its annual general meeting.
This brings its year-to-date decline to a disappointing 53%.
What was in the update?
Unfortunately, today's trading update has dismissed any hopes of a near-term recovery in the U.S. generic drugs market.
Management once again advised that the sector continues to face a tough deflationary period driven by aggressive contracting behaviour from the major wholesaler/retailer buying alliances.
Largely as a result of this, group revenue as of the end of October was down 12% to $151 million compared to the prior corresponding period.
While this is expected to lead to a weak first-half result, management is working on a range of initiatives which it believes will lead to a vast improvement in the company's future performance.
In fact, had these initiatives not been introduced then its group revenue as of October would have been significantly worse. According to the release, the initiatives led to a 25% increase in net sales and a 50% increase in gross profit in the month of October compared to the monthly average in the first-quarter.
According to the release, these initiatives include the expansion of its dermatology sales team in order to drive greater prescription demand across its three brands, cost savings from the restructure of its supply chain network and operating expense base, and new opportunities to gain market share in existing and new channels for its generics business.
It is perhaps because of this that Mayne Pharma's shares have not fallen as much as many might have expected today following the disappointing update.
Should you invest?
Although management expects these initiatives to drive a very strong recovery in the company's financial performance in the second-half and beyond, I would suggest investors wait for proof of this recovery before investing.
In the meantime, investors may want to consider investments in CSL Limited (ASX: CSL) and Telix Pharmaceuticals Ltd (ASX: TLX) instead.
