The Mayne Pharma Group Ltd (ASX: MYX) share price is sinking lower in morning trade following the release of its half year results.
At the time of writing the pharmaceutical company's shares are down 5% to a multi-year low of 38 cents.
How did Mayne Pharma perform in the first half?
For the six months ended December 31, Mayne Pharma reported revenues of $227.2 million and underlying EBITDA of $47.4 million. This was a 17% and 42% decline, respectively, over the prior corresponding period.
This poor performance is due to tough trading conditions in the U.S. generic drugs market. This led to the company's key Generic Products Division reporting a 29% decline in sales and a 55% reduction in gross profit. This offset modest growth in the Specialty Brands Division and reasoanbly solid growth from its Metrics Contract Services business.
Mayne Pharma's CEO, Scott Richards, explained: "As previously foreshadowed at the 2019 Annual General Meeting, performance in the 1HFY20 has been disappointing due to the competition we have faced on our key generic products. The US generic market continues to be challenging with aggressive contracting behaviour driving heightened levels of price deflation, particularly in markets where there are multiple generic players."
On the bottom line, Mayne Pharma reported a net loss after tax of $17.5 million. This was the result of lower earnings and restructuring expenses.
In respect to the latter, Mr Richards advised: "Given these dynamics, the Company has executed meaningful reductions in its cost base during the period with operating expenses declining by $10m versus 2HFY19 on a constant currency basis. We have also rationalised our generic portfolio, discontinuing several unprofitable products, and will continue to extract further meaningful cost reductions in future periods."
Outlook.
No guidance was given for the full year. However, management appears confident in its long term outlook.
It notes that it has a clear strategy for growth which centres on repositioning the business into more sustainable categories and therapeutic areas such as dermatology, women's health, infectious disease, and contract services.
It also intends to continue to tightly manage its expense base, achieve greater operating efficiencies in the manufacturing network, and optimise the supply base to realise further cost savings.
