Mayne buys cancer drugs for US market

Mayne Group (ASX:MAY) has continued its move into the US oncology market with the AUD$9.37 million purchase of two injectable oncology products from US firm Xanodyne Pharmacal.

The drugs are methotrexate sodium, used to treat a range of cancers, and leucovorin calcium, used to counteract the toxic side-effects of certain chemotherapy treatments, including methotrexate, the company said.

Mayne expects to begin selling the drugs in the US from November. CEO Stuart James said the purchase would extend the company's focus in the US and boost its market presence.

In September, Mayne paid AUD$132 million for NaPro Biotherapeutics' paclitaxel drug business and the rights to sell the cancer treatment in North America. Last year it launched another generic in the US market, pamidronate.

"We have a good understanding of [the new products] because we manufacture and market them in other major regions, and this transaction means our entry to the US market is on a well-established sales base," James said.

Earlier this month, James told would-be investors at a UBS healthcare conference that Mayne saw pharmaceuticals as ahead of its other key market areas -- diagnostics and primary care -- in terms of margins and industry growth rates.

He said Mayne was the market leader in injectable oncology drugs in Australia, the UK, and Canada, and fourth in the US. He said the company had 23 products in the regulatory pipeline, which he said had a global market of more than $3 billion.

S&P lowers Mayne rating

Meanwhile, Standard & Poor's ratings service has lowered the corporate credit and guaranteed-debt issue ratings on Mayne to 'BB/B' from 'BBB-/A-3', and the rating on Mayne's bank loan to 'BB' from 'BBB-'.

"The lowering of the ratings reflects Mayne's narrower business focus following the sale of its hospital businesses and the potential sale of its pharmacy services business; the risks associated with its growth strategy, which increasingly will focus on the global specialty pharmaceuticals industry given uncertain management ability in this industry; and management's poor track record, as evident in its fiscal 2003 results and most recent asset sales, which have been executed at significantly written down values," said Standard & Poor's credit analyst Brenda Wardlaw, director of corporate and infrastructure finance ratings, in a statement.

While Mayne is the number two player in both the Australian diagnostics and pathology sectors, it is a relatively small player in the global specialty pharmaceuticals market, although it has a stronger position in the oncology injectable segment, S&P said.

S&P said Mayne would have to prove that it could manage its growth in the pharma sector, in the face of the challenges associated with developing and managing a strong product pipeline, outsourcing anufacturing, regulatory issues, R&D, and longer-term changes in the types of treatment used.