Pharmaceutical company Mayne Pharma is significantly undervalued and its stock price could double if it achieves its ambitious growth plans, according to Morningstar.
An analyst’s report on the company says it has rapidly developed a vertically integrated specialty drug manufacturing business, with a strong focus on the United States market.
Uncertainty in the timing of new product approvals has provided impetus for ongoing brand acquisitions in order to build scale, Morningstar says.
Over the past few years the company has made a number of acquisitions. Starting in 2012, when it took over the US company Metrics Inc, it has completed seven takeovers and purchases or drug portfolios.
These include the US generic drug company Libertas Pharma Inc, selected brands from US company Forest Laboratories and product portfolios from Teva and Allergan.
Over the same period it has launched a number of its own products.
Market capitalisation has grown from $50 million to $1.7 billion over that period and revenue has grown from $83 million in 2012/13 to $590 million in the six months to December (annualised).
Its generic products division is the biggest revenue earner. The company sees generics as a strong growth segment, particularly in the United States.
It markets 55 products in the US and is ranked a top 25 supplier in the US retail generics market. It is the number two supplier of generic oral contraceptives in that market.
The company spends $30 million a year on research and development, up from $4 million in 2012, and it is spending $100 million on expansion capex, compared with less than $3 million in 2012.
The company held an investor day earlier this month, where it said its R&D pipeline would help it generate revenue of $1.5 billion by 2021, with double-digit growth in earnings per share.
Mayne Pharma reported what it described as “exceptional growth” in the December half, with revenue up 132 per cent on the previous corresponding period and net profit of $72.7 million up 278 per cent on the previous corresponding period. Earnings per share were up 109 per cent.
The company said its development pipeline included 50 products, of which more than 40 are targeted at US markets that have total sales worth more than US$6 billion a year.
It has another 19 products awaiting approval by the US regulator.
The company’s stock is trading around $1.10 a share, after coming of a recent high of $2 a share in August last year.
Morningstar says it is hard to assign a fair value to the company, given the changing nature of its business, and this is reflected in its share price movement. However, it believes fair value is around $2 a share.