Once one of the biggest names in the pharmaceuticals industry, Mayne Pharma (ASX: MYX) has suffered a string of bad luck—or bad decisions—since 2015. It has consistently been reporting losses to the tune of millions. In FY22, it reported a loss of about $260 million. Shareholders have been eagerly standing by for a financial miracle (or a sweet exit).
It looks like they will have to wait a little longer.
On October 4 last year, the Company sold off its US retail generics business in North Carolina for over $720 million ($361 million of which it used to repay the debt). Then, on January 3, 2023, it entered into an exclusive license agreement worth $221 million with US-based women’s health products company TherapeuticsMD. The already debt-ridden company decided to take on more debt through this transaction. Plus, it will be spending $30 million annually to support the new product portfolio from TherapeuticsMD.
Originally, the plan was to return shareholder dividends, including a pro-rata capital return of up to $65.5 million (approximately 3.8 cents per share). The remaining funds would be used to repay debt. Now, however, there’s a change of plans. Mayne Pharma’s newly appointed board has decided to defer capital return by two months to March 2023 to support its new focused branding.
Mayne Pharma Chair, Frank Condella, said, “The Board recognised the importance of returning funds to shareholders following the Metrics sale. Our main goal is to position Mayne Pharma for sustainable growth and the TXMD transaction is expected to solidify the Company’s place as a leader in the US women’s health market. It’s critical that we maintain the appropriate funding flexibility to achieve our strategic objectives.”
Following the divestment of its US business (citing that its retail generics were unprofitable), the Company is looking to secure new financing arrangements. Still, the status of the capital return hangs in limbo, as Mayne Pharma reported that the Board could still defer, reduce or even cancel the return.
Mayne Pharma CEO Shawn Patrick O’Brien commented, “The deferral and further consideration of any possible reduction or cancellation of the capital return by the Board reflect the mismatch of timing of cash flows and a conservative approach to our balance sheet in the short term.”
Not all shareholders are missing out, though. For those invested in TherapeuticsMD, it is about to rain dividends. The Executive Chairman of TherapeuticsMD, Tommy Thompson, noted, “We are pleased to have completed this transaction with Mayne Pharma, which enabled us to repay our debt, redeem our preferred stock and provide our common shareholders with the value from ongoing royalty revenue streams for decades to come.”
By selling off its generic product component and focusing on women’s health, Mayne Pharma is attempting to narrow the focus of its portfolio.
Mayne Pharma decided to rejig its business in 2022. That started by appointing a whole new team to spearhead the mission. O’Brien was appointed to the board in October 2022 while Condella became Chair a year prior. The new board was brought in to steer the Company in a new direction. This is it.
Though the shareholder return is postponed, issuing the special dividend will proceed as planned, with payment on 27 January 2023.
With a history of bad choices under its belt, will this be yet another one? Or, is it the turning point that shareholders have been awaiting?
Following the announcement, the Company’s share price has fallen by 5.43% to 21.8 cents per share.
Alinda is a Business Reporter for The Sentiment
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