Reading Time: 5 Mins
By Team Ace Investors
Company Overview
Mayne Pharma (“MYX” or the “Company”) is a specialty pharmaceutical company focused on applying its drug delivery expertise to commercialize branded and generic pharmaceuticals, offering patients better, safer, and more accessible medicines. Mayne Pharma also provides contract development and manufacturing services to more than 100 clients worldwide, including 14 of the top 20 global Pharma companies. Mayne Pharma has two facilities based in Salisbury, Australia, and Greenville, the USA with expertise in the formulation of complex oral and topical dose forms including potent compounds, modified release products, and poorly soluble compounds. Mayne Pharma has a 40-year track record of innovation and success in developing new oral drug delivery systems and these technologies have been successfully commercialized in numerous products that continue to be marketed around the world. On 16th April’2021, Mayne Pharma received US FDA approval for its New Drug Application (NDA) for the novel combined oral contraceptive NEXTSTELLIS® (3 mg drospirenone (DRSP) and 14.2 mg of estetrol (E4) tablets). NEXTSTELLIS is a new innovative contraceptive developed by Mithra. In two phase 3 clinical studies conducted on 3,725 women, NEXTSTELLIS was shown to be both safe and effective and met its primary efficacy endpoint of pregnancy prevention. Mayne Pharma has a 20-year exclusive license and supply agreement in the US and Australia for NEXTSTELLIS.
Investment Rationale
Pivoting away from the retail generic segment into more sustainable dermatology, women’s health products to deliver long-term shareholder value
The key strategic priority of the company is to return Mayne Pharma to growth through repositioning it into sustainable products, distribution channels, and therapeutic areas like dermatology, and women's health. During the year, the company completed the sale of the sale of Metrics Contract Services (MCS) business to Catalent Pharma Solutions and its US retail generics portfolio to Dr. Reddy's. Mayne Pharma’s key priority is to drive growth through its newly launched NEXTSTELLIS, a novel oral contraceptive containing a new estrogen – Estetrol, or E4. NEXTSTELLIS will compete in the short-acting combined hormonal contraceptive market valued at US$4 billion according to IQVIA. The company is targeting peak net sales of US$200m which represents around 2% of the market by units. The Company continues to invest in activities that are focused on pivoting the business away from the retail generic segment into more sustainable areas in dermatology, women’s health, infectious diseases, and contract services. The Company has several other women’s health pipeline products including a generic version of NUVARING® and remains highly attractive, with only one independent generic approved and an addressable market of US$900m. It also continues to invest R&D dollars into key specialty pipeline programs such as trifarotene phase II clinical development and the development of SUBA®-itraconazole into broader therapeutic areas.
Executed an exclusive license agreement with TherapeuticsMD to create a market-leading position in the US women's health market
On 31 Dec’2022, the company executed an exclusive license agreement to license products from TherapeuticsMD, Inc. (TXMD). Under the exclusive license agreement, Mayne Pharma has secured a portfolio of on-market women’s health products from TXMD, including three patent-protected novel women's health products: ANNOVERA, IMVEXXY®, and BIJUVA® and a portfolio of prenatal vitamins in the US as well as selected assets including inventory and regulatory filings to support the operation and commercialization of the portfolio. Under the terms of the agreement, Mayne Pharma paid a cash consideration to TXMD of US$140m and a US$13.1m payment for acquired net working capital and pre-paid royalties. To fund the acquisition, Mayne Pharma used a combination of cash, existing debt facilities, and a US$27.95m convertible note to Rubric Capital Management LP. These assets have been added to the Women’s Health portfolio and CGU alongside NEXTSTELLIS®. Women's health is a core therapeutic area for Mayne Pharma and the addition of these products into its business is immediately accretive to earnings and supports its ambition to create a market-leading position in the US women's health market.
The sale of its US retail generics portfolio to position the company into a specialty pharmaceutical business
On 7 Apr’2023, Mayne Pharma completed the sale of its US retail generics portfolio to Dr. Reddy's Laboratories SA, a subsidiary of Dr. Reddy's Laboratories, Ltd. (collectively, Dr. Reddy's) for an upfront cash consideration of US$90 million (~A$134 million). The transaction involved the sale of the US retail generics business unit, comprising a portfolio of 85 generic products and 4 generic pipeline products. For the fiscal year ending June 2022, this portfolio generated US$111 million in revenues. Under the terms of the agreement, Dr. Reddy acquired the portfolio for an upfront payment of approximately US$90 million in cash, contingent payments of up to US$15 million plus consideration towards inventory and credits for certain accrued channel liabilities. Mayne Pharma expects to incur up to US$2 million in transaction costs and an estimated US$10 million in one-time restructuring costs. The transaction positioned the company into a specialty pharmaceutical business with strong branded verticals focused on US women’s healthcare and dermatology. Following the transaction, Mayne Pharma's commercial activities will be solely focused on its US women's health portfolio, (including the recent exclusive license of three branded women's health products and a portfolio of prenatal vitamins from TherapeuticsMD, Inc.), US dermatology products and its International business.
- The transaction streamlined the Company to focus on branded verticals in US women's health and dermatology; and
- Created a leaner organization and freed up working capital to focus on core areas of business growth/value drivers
For the financial year ending on 30 June 2023(FY23), the company delivered a 17% YoY growth in revenue to $183.6 million, driven by solid growth in Branded Products and supported by strong recovery in Portfolio Products. Branded Products for the year delivered a solid 484% YoY growth in revenue to $61.9 million (FY22: $10.6 million) while Portfolio Products rebounded in the second half of the year, with 2HFY23 revenue up 313% from 1HYF23. Portfolio Products (PPD) revenue of $57m for FY23 was down 38% on FY22, reflecting poor performance in 1HFY23 attributable to the normalization of Dermatology channel inventory and increased co-pay liability accruals. International revenue increased 19% to $64.7m, largely due to increased contract manufacturing in 2HFY23. The company ended the year with a $172.6m net cash position vs net debt of $317m at the end of FY22.
During the year, Mayne refocused the company around its core businesses with the signing of an exclusive US license on on-market women's health products (ANNOVERA®, IMVEXXY®, and BIJUVA®) and prenatal vitamins. The Company expects to complete the integration of the in-licensed women's health assets in FY24 with a focus on growth and improving net selling prices. The Company is pursuing a growth strategy with the expected launch of low-strength BIJUVA® and by leveraging its salesforce scale and effectiveness. For NEXTSTELLIS® the Company is targeting a breakeven run rate in 1HFY24, with continued growth throughout FY24. For Dermatology, the Company plans to continue to enter into capital light, accretive business arrangements, and drive commercial excellence in FY24. The company is further developing its channel strategy and leveraging its ability to drive market share to expand partnerships. Improved profitability is a clear objective for the Dermatology business. For International, the Company is pursuing targeted investment and new manufacturing revenue streams. The Company plans to continue to drive specialty and generic product sales including driving growth in NEXTSTELLIS® in Australia and will continue to invest in a targeted manner in the Salisbury facility to improve our productivity and capabilities. With all 3 business units contributing positive direct contributions, the Company expects to return to positive EBITDA and cash generation in FY24.
ACE’s Recommendation
Mayne Pharma is an ASX-listed specialty pharmaceutical company focused on commercializing branded women’s health and dermatology pharmaceuticals. During the year, Mayne refocused the company around its core businesses with the signing of an exclusive US license on on-market women's health products (ANNOVERA®, IMVEXXY®, and BIJUVA®) and prenatal vitamins. On 31 Dec'2022, the company executed an exclusive license agreement to license products from TherapeuticsMD, Inc. (TXMD). Under the exclusive license agreement, Mayne Pharma secured a portfolio of on-market women's health products from TXMD, including three patent-protected novel women's health products: ANNOVERA, IMVEXXY®, and BIJUVA® and a portfolio of prenatal vitamins in the US as well as selected assets, including inventory and regulatory filings to support the operation and commercialization of the portfolio. These assets have been added to the Women's Health portfolio and CGU alongside NEXTSTELLIS®. Women's health is a core therapeutic area for Mayne Pharma and the addition of these products into its business is immediately accretive to earnings and supports its ambition to create a market-leading position in the US women's health market. The company also completed the sale of its US retail generics portfolio to Dr. Reddy's Laboratories for an upfront cash consideration of US$90 million (~A$134 million). The transaction positioned the company into a specialty pharmaceutical business with strong branded verticals focused on US women's healthcare and dermatology. We believe that the sale of its US retail generics portfolio to Dr. Reddy’s and an expanded portfolio with the addition of women’s health products from TXMD is expected to drive growth going forward. The stock closed the day near its 52-week low at A$2.750/share today and presents an attractive investment proposition given an expanded portfolio of Women’s health. So, we would like to recommend a BUY rating on the stock.
Disclaimer: Ace Investors Pty Ltd (ABN 70 637 702 188) authorized representative of Alpha Securities Pty Ltd (AFSL No.330757). Ace Investors has made all efforts to warrant the reliability and accuracy of the views and recommendations articulated in the reports published on its websites. Ace Investors research is based on the information known to us or which was obtained from various sources which we believed to be reliable and accurate to the best of its knowledge. Ace Investors provides only general financial information through its website, reports and newsletters without considering financial needs or investment objectives of any individual user. We strongly advocate that you seek advice, with your financial planner, advisor or stock broker, the merit of each recommendation before acting on any recommendation for their own specific financial circumstances and realize that not all investments will be suitable for all subscribers. To the scope permitted by law, Ace Investors Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Ace Investors Pty Ltd hereby limits its liability, to the scope permitted by law to resupply of the services. The securities and financial products we study and share information on, in our reports, may have a product disclosure statement or other offer document associated with them. You should obtain a copy of these before making any decision about acquiring any security or product. You can refer to our Financial Services Guide.