Why Mayne Pharma shares tanked on its AGM

The shares are now down more than 75% since August 2016 just after the group made a giant $887 million acquisition of a portfolio of generic U.S. drug products mainly funded via a capital raising.

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The Mayne Pharma Group Ltd (ASX: MYX) share price tumbled 11 per cent today after the wholesale pharmaceutical drugs merchant reported sales for the first four months of FY 2020 were down 16 per cent to $154 million.

The group blamed the result on the additional competition in two of its generic products named liothyronine and dofetilide.

Other bad news for investors included falling gross profit margins due to a "changing product sales mix" and "inventory obsolescence". 

The shares are now down more than 75% since August 2016 just after the group made a giant $887 million acquisition of a portfolio of generic U.S. drug products mainly funded via a capital raising.

However, the products have not performed as expected, while the election of U.S. President Donald Trump has also put more pressure on drug pricing.

President Trump has been on the record to claim generic drugs companies are "getting away with murder" in terms of the pricing they charge for reimbursement from U.S. government sponsored health insurers providing services to veterans for example. 

Mayne Pharma is looking to find significant cost savings over FY 2020 and the medium term in response to the problems. 

Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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