Through a Mayne Pharma, Concisely
I put 5% of the 10foot portfolio in Mayne Pharma (ASX: MYX). My purchase thesis was way too long to be useful to readers. I have created an abbreviated version here:
- Mayne is undervalued given its cash earning ability
- Performance in FY18 will provide a much clearer picture of the combined organisation’s (post Teva/Allergan portfolio acquisition) earnings potential
- There is some growth potential in the core businesses
- Debt is significant, but survivable in the event that things move against the company
- Price is undemanding in the event of reversal of earnings
This is built on a few assumptions:
- Teva/Allergan portfolio is fundamentally sound
- Much of the impact of Doryx generic competition is already priced in
- Based on industry dynamics etc, current levels of profitability are sustainable
- Big pharma is hugely self-interested and incentive to compete on price is low
- Big pharma has tentacles everywhere and likelihood of regulation adversely affecting Mayne is low (e.g. via opiate sales)
- Belief that Mayne hasn’t been price fixing
- Belief that management will deploy cash earnings wisely (would like to see debt paid down and minimal acquisitions)
And runs a few risks:
- Profitability may not be sustainable
- Teva/Allergan portfolio turns out to be a dog after all
- Risk of previously undisclosed wrongdoing/ price fixing etc
- Regulatory risk
- Increased generic competition (both on market share and price) in Mayne’s more exclusive products
On 30/08/2017 I bought 800 Mayne Pharma shares at $0.6625 plus brokerage, for $544.95, or $0.6811 apiece.
I own shares in Mayne Pharma. This is a disclosure and not a recommendation.
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