The proposed $672 million acquisition of Mayne Pharma (MYX: $4.95) by US-based Cosette Pharmaceuticals is in jeopardy after Cosette alleged that Mayne had undergone a "material adverse change" since Cosette's February bid at $7.40 per share. The Mayne Board had previously voted to unanimously approve the bid. Cosette is private, funded by equity managers Avista Capital and Hamilton Lane. In 2024, it acquired the US rights to insomnia medication Ambien from Sanofi US, but has since been repositioning from brands to generics.
Cosette Signals Doubts
Consulting group Deloitte helped advise Cosette to propose $7.40 per share, offered and signed in late February, on the back of Mayne's strong earnings. Mayne's share price immediately hit $7.20. The dispute centres on Mayne's trading update in late April, in which the company acknowledged weaker-than-expected performance but maintained FY25 guidance. Cosette claims that Mayne failed to properly consult on these developments during the scheme's prespecified 10-day window.
Cosette's threat to withdraw the offer wiped nearly 30% off Mayne's share price. Cosette may face an uphill struggle in court if it sought to formally terminate the deal based on the 'material adverse change'. Such clauses are notoriously difficult to enforce — famously, Elon Musk attempted to abandon his Twitter purchase in 2022, only to be rebuffed by a Delaware court.
Cosette's strategy may be more tactical than terminal. Possibly, the company is aiming to renegotiate at a lower price, but restarting the court-approved scheme process would be time-consuming and awkward.
Half-Year Results
In Mayne's first-half 2025 update, CEO O'Brien outlined sales of $213 million, up 13% on the PCP, and a significant improvement in net income to -$20 million. Its direct segments contributed $65 million, of which women's health grew rapidly to $39 million.
Mayne's FY24 revenue of $388 million is a far cry from its initial trading years — the company made sales of $573 million in 2017, but revenue cratered to $157 million in 2022. Mayne's net income has consistently been firmly negative, owing to large-scale market conditions — like currency fluctuations and generics competition — and the expensive development of the contraceptive NEXTSTELLIS.
Complicating the picture is Mayne's recent completion of a $38 million class action settlement with shareholders. The lawsuit alleged that the company failed to properly inform shareholders of its involvement in a 2016 anti-competitive pricing suit. Connecticut's Attorney-General claimed that Mayne and other pharmaceutical companies conspired to inflate generic drug prices. Also in early May, the FDA accused Mayne of downplaying the risks of its new contraceptive pill, NEXTSTELLIS.
Strategic Fit
The strategic fit between Mayne and Cosette is clear. Both firms specialise in oral solids and topical formulations, and are both focusing on stabilising mature brands and introducing high-barrier generics. Cosette, however, is more vertically integrated with an emphasis on in-house R&D.
Bioshares recommendation: Not covered
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