Health Check: Mayne Pharma shares tumble after suitor threatens to walk over ‘adverse events’

Cosette Pharmaceutical’s $600 million offer for Mayne Pharma looks imperilled after the bidder raised concerns about “adverse events”.

Failing some smooth talking, Cosette's $600 million bid for Mayne Pharma looks to be ending in tears. Pic via Getty.

• Cosette Pharmaceuticals’ $600 million tilt at Mayne Pharma is in peril

• Analysts back Monash IVF after earnings update

• EBR Systems launches $55 million capital raising

Investors have birched shares in takeover target Mayne Pharma (ASX:MYX) after the company today revealed a dispute with its suitor over what constitutes an ‘adverse material change’ to the business.

Mayne shares are now trading almost 40% lower than Cosette Pharmaceuticals’ $7.40 a share offer price, which suggests little hope of the bid being executed on current terms.

According to Mayne, a note from Cosette notice refers to the “circumstances  associated” with  Mayne’s April 22 earnings update, “previously disclosed” litigation with TherapeuticsMD over a licensing deal and “certain correspondence” with regulators.

The latter refers to the US Food & Drug Administration (FDA) accusing Mayne of misrepresenting the safety risks of its contraceptive pill, Nextstellis.

Cosette alleges Mayne failed to consult on the adverse changes in good faith for 10 business days, as required under the scheme implementation deed.

Mayne contends there was nothing to consult about, in that the matters outlined “did not establish the pre-requisites for a material adverse change.”

It's always a case of 'he said, she said' in marital disputes, innit?

Cosette says the consultation obligations are “enlivened” and the bidder intends to comply with them. But failing a “satisfactory outcome”, it will walk.

Mayne holders were due to vote on the scheme of arrangement on June 18, but probably can wash their hair or walk the dog instead.

EBR goes to the well for up to $55 million

Shares in heart device pioneer EBR Systems (ASX:EBR) have entered trading halt, pending a $50 million placement and $5 million share purchase plan.

Arranged by Morgans and Wilsons, the deal is being done at $1 a share – an 18% discount to the frozen price.

On April 11 EBR won FDA approval for its Wise device, the world’s first and only leadless tool for left ventricular endocardial pacing.

The funds will be used to commercialise Wise, with the company estimating the initial market opportunity at US$3.6 billion a year.

EBR faces no rival products, while Wise can be used alongside existing right-hand leadless pacemakers.

EBR held $84.5 million of cash as at the end of March. Post raising this cash swells to $125 million, which should provide a runway until the September quarter next year.

EBR shares have lost 28% since the company-making FDA approval, reflecting investor expectations of a raising.

Echo IQ tries again for US reimbursement

Still on matters of the heart, Echo IQ (ASX:EIQ) shares this morning bounced up to 16%, having lost one third of their value before a trading halt was imposed on Monday.

The company requested the halt after hearing that the American Medical Association (AMA) had declined to provide a specific reimbursement code for its heart tool. Echo Solv AS.

These codes are essential for billing because they provide a standardised language for reporting medical procedures and services to insurance companies and other payors.

Echo Solv AS evaluates aortic stenosis non-invasively, based on data from an echocardiogram.

This use should have justified a specific reimbursement code, but for some reason the AMA’s relevant panel declined to provide one.

The setback doesn’t look to be the end of the world, in that the company can submit a new code change application that addresses deficiencies the panel identified.

“The company understands it is not uncommon for applications to be rejected initially, and it is confident it can strengthen its application to be able to meet the criteria.”

Unsurprisingly, EchoIQ plans to do so.

The company today said while reimbursement strategy remains a priority, the company was “advancing the deployment” of Echo Solv AS with large hospital groups and other US strategic partners.

It’s also working on an FDA application for a second product, Echo Solv AF.

Echo IQ shares fell by one third on Monday, ahead of a 1.25 pm trading halt. This freeze should have been requested at the start of the day, but an administrative glitch prevented this from happening.

Monash IVF is due for a baby bounce

Monash IVF Group (ASX:MVF) is poised for a “reset” following last month’s embryo snafu and yesterday’s earnings downgrade, according to analysts.

Management revised full-year underlying profit expectations by 10%, to $27.5 million. Tellingly, the company cited generally soft conditions rather than the Brisbane “incident” that resulted in one mother receiving the wrong embryo.

The company has commissioned an independent review, led by prominent barrister Fiona McLeod SC, to recommend improvements.

Broker Morgans opines the downgrade “resets the base” for the company, which will continue to benefit from the industry’s fundamental growth.

Post the baby bungle revealed on April 11, Monash IVF has not seen any change in patient registration or transfer levels.

“We think this is positive, though the lack of news around the outcome of the independent review … will continue to weigh on the stock.”

Macquarie Equities expects Monash IVF to lose share of both fresh and frozen cycles, but cites “structural headwinds” including the increasing age of new mothers and rising levels of male infertility.

Morgans cites a $1 valuation.

Despite its more caution tone Macquarie ascribed a 12 month “price target” of $1.30 to the shares, 75% higher than their current worth.

It's no dream as Compumedics inks $1 million sleep sale

Compumedics' (ASX:CMP) push into the US sleep testing market has had a boost, with a contract research organisation buying US$600,000 ($1 million) of the company’s Somfit devices.

Compumedics says the sale shows that Somfit is relevant not just for the capacious US home testing market, but adjacent markets such as testing new drugs for their effect on sleep before being approved.

The sale takes US orders so far this year to US$12 million, 130% better than a year ago.

Meanwhile, management affirms guidance of full-year sales revenue of $50-55 million, with underlying earnings of around $3 million.

Founded in Melbourne in 1987, the company carries out a broad range of brain and sleep monitoring globally.

Originally published as Health Check: Mayne Pharma shares tumble after suitor threatens to walk over ‘adverse events’