Is the Mayne Pharma Group Ltd (ASX: MYX) share price a buy after revealing a new supply agreement?
Mayne Pharma is an Australian specialist pharmaceutical company, creating commericialised and generic products you’ll find in pharmacies across Australia. Mayne Pharma’s history started in South Australia. Today, it develops most of its drugs in Australia and the USA.
Mayne’s New Supply Agreement
The healthcare business said that it has entered into an exclusive license and supply agreement with Mithra Pharmaceuticals to commercialise a “novel” oral contraceptive comprising Estetrol and drospirenone in the United States.
Mayne said that phase 3 clinical studies which enrolled more than 3,700 women have been completed, with approval and launch expected in the first half of the 2021 calendar year.
The US contraceptive market is valued at US$5.4 billion with 10 million American women using short acting hormonal contraceptives. Although Mayne is expecting peak net sales potential to exceed US$200 million per year.
The pharmaceutical business is expecting EBITDA (click here to learn what EBITDA means) to be positive in its first full financial year after approval.
This isn’t the first agreement that Mayne has made with Mithra, they are also partners on the generic NUVARING.
Mayne Pharma CEO Scott Richards said: “This transaction transforms Mayne Pharma and is highly consistent with our stated strategy to build our specialty business with durable, high growth novel products in core therapeutic categories leveraging our commercial capability and know-how in the US.”
If Estetrol is approved it will be the first ‘native’ estrogen approved in a contraceptive product in the US and the first new estrogen introduced in the US in approximately 50 years.
Under the terms of the agreement, Mayne Pharma will pay up to US$295 million comprising US$8.75 million and 4.95% of Mayne Pharma’s shares at closing. It will pay a further US$11 million and 4.65% of Mayne shares following FDA approval, and additional payments based on reaching total net sales targets.
The total US$295 million would be paid if sales exceed US$2.25 billion. There is also a transfer price comprising fixed and variable component based on a percentage of net sales over the term of the license.
Mayne seem very confident about this deal to be paying so much. Time will tell if it’s the right move. The pharmaceutical industry isn’t for me due to reliance on government rules and regulations, I’d rather buy shares of the growth businesses in the free report below.
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