Mayne shares fire up after announcing promotion of Fabior & Sorilux

Shares in Mayne Pharma Group (ASX: MYX) hit a high of $1.36 in the first hour of trading on Wednesday, representing an increase of 3% compared with the previous day’s close of $1.32.

This is a good performance on a day in which the Healthcare sector is relatively flat and all the focus tends to be on the mining sector with the S&P/ASX 200 Materials index up 2.4%.

However before we go further, it should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

The new products, Fabior and Sorilux, will be promoted in the United States by Mayne’s Specialty Brands division. Importantly, they are complementary to the company’s high profile dermatology product, Doryx, the first branded product launched by the group’s Specialty Brands division in the US in May 2015.

Mayne has been one of only a handful of stocks in the S&P/ASX 200 (XJO) to perform poorly in the last three months as the market boomed in the ASX 200 increased circa 800 points since early November.

Mayne’s share price has declined from circa $2.00 in October to hit a low of $1.20 in mid-December before recovering to its current level, but it has substantially underperformed the S&P/ASX 200 Healthcare index over the last three months.

However, Bell Potter likes the stock, and after running the ruler across it on December 19 the broker maintained its buy recommendation and 12 month price target of $1.83, implying upside of approximately 35% to its current trading range.

Strategic fit

Harking back to today’s news, Mayne’s Chief Executive Scott Richards said, “Both products are a great strategic fit with the existing Doryx franchise, while being well differentiated with compelling clinical data that physicians and patients will appreciate”.

Sorilux is a patent protected foam product indicated for the topical treatment of plaque psoriasis of the scalp and body, a condition affecting up to 6 million Americans each year.

Fabior also has a large addressable market with the patent protected foam product indicated for the topical treatment of acne. The product is part of the single active retinoid market in which 5 million prescriptions are written each year. Furthermore, acne is the most prevalent skin disease in the US, affecting as many as 50 million people of all ages.

From an operational perspective, Richards highlighted the fact that the company has now internalised its 60 person dermatology sales team from a third-party contract sales organisation which should provide cost savings, assist in attracting and retaining talent, while also leading to improved performance management.

Looking to the future, Mayne expects to commercialise complementary product innovations in dermatology and other specialty therapeutic areas, utilising the company’s internal pipeline or via targeted in-licensing and/or product acquisitions.