Cosette likely to remain player for Mayne Pharma despite threat to walk away

Mayne Pharma produces a range of oral and topical dose medications for the Australian and US markets. Picture: iStock

Mayne Pharma’s suitor Cosette is understood to have spent millions of dollars conducting due diligence on its $675m target, offering confidence to some shareholders that it will not walk away from the buyout completely.

And similar cases in the past that have headed to court indicate that it is likely to have little success trying to do so.

The Australian-listed drug maker has been in a trading halt this week after Cosette tried to claim that recent developments amounted to a material adverse change in the conditions, triggering the need to enter a 10-day consultation period before either party can terminate the deal.

Cosette said it may terminate the transaction.

But while some say that its lenders, healthcare private equity firm Avista Partners and Hamilton Lane, had got cold feet on the transaction what with the change in market conditions, others believe the group will likely be using recent developments just as leverage over price.

Already, some sources have suggested Cosette has spent about $15m on due diligence, so it has a financial incentive to proceed.

The price of $7.40 per share agreed in February is around the middle of the price range offered by an independent expert that suggests between $6.61 and $7.99 is fair and reasonable. It may be that the price is revised down to about $6.70 per share.

Cosette is moving to extract itself from the current terms of the transaction that were announced on February 20 after its third quarter trading update for the 2025 financial year was lower than expected. This is together with ongoing litigation with TherapeuticsMD and a letter from the Food and Drug Administration.

In the letter, the FDA claims a speaker deck made false or misleading claims and presentations about the risks of Mayne’s contraceptive drug that it sells, Nextsellis.

Shares in Mayne Pharma fell about 30 per cent on the news and are around $4.35, down about 38 per cent in the past month, but about 9 per cent this year.

In April, the ASX-listed Mayne said it expected full-year underlying earnings to range from $47m to $51m, representing a 105-123 per cent improvement on 2024 following a weak third quarter. Mayne disputes there has been a material adverse change in conditions.

Mayne Pharma produces a range of oral and topical dose medications for the Australian and US markets.

Some analysts have compared the latest situation to EQT’s bid for Metlifecare in 2020, when it attempted to walk away from its $NZ7 per share offer for the business, citing Covid-19 as a material adverse change. Metlifecare rejected the termination attempt and the dispute escalated to the New Zealand High Court, where Metlifecare sought specific performance and declaratory relief.

EQT and Metlifecare ultimately entered into a revised deal at $NZ6 a share, and agreed to settle the dispute.

Some market experts believe Cosette’s claims were likely being used as a pressure tactic to force renegotiation rather than a genuine attempt to terminate the deal completely, with grounds for termination being a reduction of at least $10m from a specific event to future

earnings before interest, tax, depreciation and amortisation.

Cost synergy opportunities exist for Cosette to buy Mayne, focused on making, developing and selling pharmacy products such as creams and ointments, by expanding into oncology, dermatology, and branded specialty pharmaceuticals.