Figure 1: MYX FY18 results summary

Source: Company, BTIG estimates; mat = material movement

GPD drives group performance. After challenging first half of FY18, MYX had a significantly stronger second half of the year with improved earnings, operating cash flow and non-recurrence of extraordinary items. This was driven by a significant turnaround in the core value driver division of Generic Products Divisions (GPD), which saw 2H18 revenue up +4.4%, gross profit up +23% and GP margin expansion of 840bps. This was supported by improving performance in the Specialty Brands Division and ongoing strength in Metrics Contracts Services.

Strong products’ pipeline. MYX’s development pipeline includes over 30 products, targeting U.S. markets with sales greater than $5.0bn. In FY18, MYX launched 6 products in the U.S. and 2 brands in Australia. The Company has filed 8 products with the FDA, including their first NDA application (New Drug Application) for SUBA-Itraconazole anti-fungal capsules. This means MYX now have 15 products pending approval, targeting markets with sales greater than US$2.5bn, of which 7 have no generic equivalents today and could be potential first-to-market opportunities.

Headline numbers. As noted above, MYX performance over FY18 really was a case of two halves – 1H18 versus 2H18. Revenue was $530m over the year, with 2H18 sales up +18% on 1H18. FY18 gross profit was $256.6m was driven by a +68% jump in gross profit in 2H18 vs. 1H18. Underlying operating earnings (EBITDA) of $165.3m for FY18 was down -20% year on year, however 2H18 EBITDA was up +35.5% on 1H18.

Generic Product Division (GPD). In FY18, GPD sales were down -7.9% to $385.7m on pcp, with the 1H18 being adversely impacted by rebidding activity in the early 2017. 2H18 sales were up +13.2% on pcp, with gross profit increasing +79% on the back of new product launches, normalized levels of stock obsolescence, improving business mix and cost savings from the transfer of manufacturing into Greenville and Salisbury from third parties. Dofetilide, MYX’s largest product, performed well with sales up +22% year-on-year, however expect increased competition going forward given recent competitor product launches.

Specialty Brands Division (SBD). Both sales and gross profit in FY18 were down on pcp, however this was largely due to abnormal Doryx returns in the first half. The segment saw much improved 2H18 with revenue up +122.8%. Removing the impacts of Doryx returns, segment sales were up grew +17% in the 2H18. Management noted improved performance was also driven by the expansion of the Specialty Brand sales team to 114 reps: “…this expanded team has begun to drive underlying prescription volume growth with the second half volume up 30% for Fabior and 75% for Sorilux versus the first half. The dermatology sales team are focused on growing our 2 foam products, and the business is significantly growing the number of individual prescribers by around 50% to 2,800 per month in the case of Fabior and 1,400 per month for Sorilux since we expanded the sales team late last year”.

Metrics Contract Services (MCS). The segment continues to deliver solid results, with management highlighting that it is outperforming industry sector growth rate. For FY18, revenue was up +9.2% (up +12.3% in 2H18 vs 1H18) and gross profit up +5% (up +13.8% in 2H18 vs 1H18) year on year, driven by repeat business with existing clients and increased late-stage development work.

International (MPI) saw FY18 revenue up +7.3% and gross profit up +17.6% on pcp, with key product contributions from Itraconazole and oxycodone and launches of Monurol and Urorec.

We have only used our DCF methodology ($1.26) to arrive at our price target of $1.25. However, for the sake of transparency we note our EV/EBITDA valuation, based on global peer group average multiple, gives us a much higher valuation.

Figure 2: EV/EBITDA valuation

Source: Company, BTIG estimates

Figure 3: Global comps table

Source: Bloomberg

Figure 4: MYX Financial Summary

Source: BTIG, Company, Bloomberg