Mayne Pharma settles shareholder class action for $38M with no admission of guilt

A standoff with shareholders dating back to 2014 has finally ended with Mayne Pharma (ASX: MYX) agreeing to settle a class action brought against them from shareholders, centering around allegations of misleading and deceptive conduct by the pharma company. 

The origins of the class action trace back to investigations by the US Department of Justice (DOJ) and the Office of the Attorney General in Connecticut, which examined potential anti-competitive practices within the pharmaceutical industry. Mayne Pharma, alongside other companies, was scrutinised for its involvement in alleged price-fixing and market manipulation, which significantly impacted its share value during the mentioned period.

Prior to the investigation, MYX shares traded around $35 per share but since the regulatory investigation broke, shares came tumbling down and contributed to several restructures within the business, for shares to now be trading around $4.50. Now, Mayne primarily focuses on women’s health products. 

Under the settlement, Mayne Pharma will pay a total of AUD $38 million to the class action plaintiffs, with approximately $4.7 million covered by insurance and the remaining amount drawn from the company’s cash reserves. As of 31 December 2023, Mayne Pharma had $146.8 million in cash, ensuring sufficient funds for ongoing operations and settling the matter. The Company has confirmed that this settlement will not affect its financial outlook for FY24, with Full Year results expected in August.

Importantly, the settlement agreement is made without any admission of liability from Mayne Pharma concerning the alleged anti-competitive conduct or the alleged misleading and deceptive practices and breaches of continuous disclosure obligations. The agreement remains subject to Court approval.

The decision to settle, rather than proceeding to court, was a strategic choice aimed at protecting shareholder interests. A lengthy trial would not only be costly but would also divert management’s attention away from the Company’s core business operations. By settling, Mayne Pharma has avoided the uncertainty and expense associated with protracted litigation.

Class actions, such as the one faced by Mayne Pharma, often arise when investors feel misled by a Company’s disclosures or conduct, especially if it leads to financial losses. In Mayne’s case, such losses were reflected in the huge drop in capital value of MYX shares which still haven’t recovered from those pre-investigation highs. 

This resolution comes at a critical time for Mayne Pharma as it seeks to reinforce its market position within the pharmaceutical industry. 

For the Half Year ended 31 December 2023, Mayne Pharma reported $188 million revenue which represented a 43% increase on the previous HY (HoH, H2 FY23), citing strong performance in US Women’s Health (formerly BPD) and Dermatology (formerly PPD) segments. These sales generated underlying EBITDA of $8 million. 

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Alfred Chan

Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.

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