Mayne Pharma Group Limited (MYX) Earnings Call Transcript & Summary

I would now like to introduce our Board members, senior executives and company auditors who are all present today online. Joining me in Sydney, fellow directors, Professor Bruce Robinson; and Nancy Dolan.

Good morning.

In Melbourne, we have Ian Scholes; Peter Paltoglou, our CFO; and David Petersen, our company auditor. In the U.S.A., we have Scott Richards in Raleigh, North Carolina. Also online today, we have our 2 U.S.-based nonexecutive directors, Frank Condella and Pat Blake. And Bruce Mathieson is online from Queensland. Lisa Pendlebury, Vice President, Investor Relations, will moderate the shareholder questions. That have been asked both prior to the meeting and during the meeting as we have our -- and are assisted by or with our Company Secretary, Laura Loftus. I now -- I will now outline the procedure for today's meeting. There are 3 items of business on today's agenda. I will present my Chairman's report. Then Scott Richards will provide an update on the trading performance and our key strategic priorities. We will then go to the formal part of the meeting where we will vote on the resolutions outlined in the notice paper. We will then conclude our meeting. I will now move to the Chairman's report. I'm going to take the advantage that the electronic means allows me, and I'm going to make some ad lib comments before I lead into the body of my report. In making these ad lib comments, which, of course, will become part of the formal record of this meeting because they're electronically recorded, I want to make it quite clear that I'm not providing any guidance. I can't do that or am I providing any indication of what the FDA may or may not do in the future. I can't do that, either. Clearly, I don't know. Clearly, no one knows. So these comments are made with that very clear caveat. The FDA is a key partner to this company in America. We have very good relationships with the FDA, and we respect the very important part the FDA plays in administering the pharmacy industry and market in America. The U.S. is the largest and most profitable market in the world in both margins and dollars. And we are fortunate, as an Australian company, to have the assets and positions we have in the American market. The U.S., as a country, as we all know, daily on our radios and TV and newspapers, is undergoing enormous change. This is in the pharmacy market as well, as America grapples with the ever-increasing cost of providing healthcare in that enormous country. And these changes have been significant. They are significant currently, and they will continue to be significant. And whilst here in Australia, we are virtually COVID free, but our colleagues in America are, of course, in the midst of the COVID outrage, and it's pervading that country in a way that it makes it very difficult for us to understand here in Australia, where, as I've said, we're almost COVID free. Now the words are ringing in my mind, and there almost hasn't been a day in the last 12 months where they haven't run in my ears. And that is a shareholder got up, and many of you who are at the meeting would remember this, one of our shareholders got up and said to me words to the effect, "Chairman, the Board has, for the last few meetings, indicated they expected better results in the future. Your shareholders are getting sick of; waiting. When is this likely to change?" I am so disappointed to have to stand at this shareholders' meeting and apologize to you for the situation that this company is in, in both its share price and its performance. And I would have so much wanted both for all our shareholders, for our executive staff and for myself and my fellow directors, for the situation to be other than it is today. Our business has really 4 major businesses. The first and biggest is our generic business. And as Scott will outline later, it is in slight decline, about 10%. But that is consistent with the American marketplace and our business and our share price has reflected, to a very large degree, this big part of our business, which is, of course, exclusively located in America. I am confident that our management team has done the best that they could in managing a situation, which has represented one of the most dynamic changes that have ever occurred in the pharmaceutical business in America. And that business does provide, however, a very substantial gross profit dollar amount, which is very important to sustaining our business and our future opportunities. Our branded business is our second business. You know a lot about it because we reported it on many occasions. That business has had 2 major impacts on it in the last financial year. The first is, of course, the COVID epidemic, which has dramatically affected our ability to communicate directly with our customers through our sales team. There has also been other structural changes in the branded business in America. And in addition, there has been, in some areas, new products, as you would always expect in that space. Now this year, we are holding our own. And I think given the raging COVID problem in America that, that's probably not too bad. Our metric contract business has -- last year, you saw, got double-digit increases. This is a good business. It's a business that we can build customer base. We can build technical capacity and therefore, market differential, and we can build goodwill. And we have that. It was the original business we bought in America with Metrics. That business is growing well. We're investing both resources and capital in that business moving forward, and Scott will say more about it. Smaller businesses in Australia are MPI and MPA. And those businesses are going well. They are being well managed. Unfortunately, they are small, but they are providing a very significant manufacturing base for products in America, they're developing other sources of contract manufacturing and also contract services. And it is pleasing to see a good result in those two businesses. Now looking ahead, we have a number of clear opportunities with great potential for the future, the type of potential that is paradigm changing for our company. We've talked about TOLSURA. TOLSURA has proved itself a very effective deliverer of itraconazole medication, allowing a lower dosage to affect a higher concentration of that chemical in the patients. It has also got far less side effects, and it has got far simpler ways of administering the drug, dietary [ and so ]. We are still confident that this particular product has sufficient and definable advantages in the marketplace to make it a winner in the long-term or at least a very considerable contributor to us. It has been affected by COVID-19 in the last 12 months because our sales team was more or less isolated. But we are seeing some pleasing increases in that currently, and Scott will talk more about that. We had hoped that we would have a new generic product released at this stage to the market, a market of about $160 million. We're relatively confident, and I don't think without good base, that we would get FDA approved. Well, as it turned out, a couple of weeks ago, we got a green tick on the chemical compounds associated with this. But unfortunately, we got a CRL query on packaging aspects. We are confident that we can resolve those packaging aspects relatively quickly and get that product to market as soon as we possibly can. The product -- the chemistry in the product itself was approved, but the question was in regard to packaging. NUVARING is a big opportunity for us. We, again, thought we had a reasonable chance of getting that through. The FDA has given us a CRL on that again in the last few weeks, we've announced this. But we are confident that we can answer the CRL in about 6 months or so or less. And we will then, of course, be in the hands of the FDA, but we are confident we've got a very significant product in NUVARING. NEXTSTELLIS -- and Scott will talk at length about NEXTSTELLIS, but NEXTSTELLIS dossier is in, we have a scheduled arrangement with the FDA, where we'll know progress. We believe that we have put in a very good dossier on a very, very good new contraceptive medication. It is the first such medication. It's going to operate in a market of about $2.5 billion. And we've also got the license in Australia. And that is a paradigm changing opportunity. I just wanted to give you that picture. I'm terribly disappointed with the results. Take nothing from me. But I have to day your Board and particularly your management, have worked immensely hard in the last 12 months to have it other than it is. But certainly, COVID and the FDA regulations, by which I'm implying no criticism, have stymied where we thought we would be. And each of our businesses I've outlined, and each of our major opportunities I've outlined. And your Board is enthusiastic, capable and, I believe, confident in delivering the full potential of those opportunities moving forward. Now I'm going to revert to my speech on Page 3. And I'm going to start at the part, we remain confident in bringing these products that I've described to the U.S. market in a timely manner based on our ongoing dialogue with the FDA and our development partners. The U.S. pharmaceutical market has experienced significant disruption over the last 4 years, driven by the consolidation of the wholesalers, retailers, insurers, pharmaceutical benefit managers, which all have impacted both on our generic and now our branded business. This year, we have also been faced with COVID-19. Notwithstanding these challenging market dynamics, your management team has been focused throughout F '20 on repositioning the business for growth through investing in sustainable products, distribution channels, therapeutic areas, instructing our cost -- restructuring our cost base and rationalizing the generic portfolio. As indicated in the AGM last year the licensing of the novel oral contraceptive NEXTSTELLIS in the U.S. and Australia is highly consistent with our strategy. We worked extensively on optimizing our cost base over F '20. We decreased operating expenses by $16 million versus the prior corresponding period and gross research and development spend decreased by $15 million. Whilst we have continued to invest in R&D and business development activities, we have focused from the more volatile retail generic segment to the more sustainable areas in women's health, dermatology and infectious disease. The company reported a revenue of $457 million, down 13% on the previous period, reported a $80 million -- an EBITDA of $80 million and underlying EBITDA of $95 million. At the bottom line, the company reported a net loss after tax, which was largely impacted by intangible assets impaired -- impairment of the generic portfolio. In terms of cash flow, we delivered a solid result, generating $100 million of operating cash flow and we're able to reduce our net debt by $32 million to $248 million. In terms of our segments, metric contract services (sic) [ Metrics Contract Services ] delivered another good result with revenue up double digits from favorable market dynamics, new development and commercial manufacturing. Generic Products was impacted by, in F '20, by competition on its key products and abnormal gross-to-net charges and inventory adjustments on discontinued products. Specialty Brands was impacted by COVID-19 as well as new competition in the acne and psoriasis space and tougher managed care environment. Finally, Mayne Pharma International, our rest of the world business, grew revenue benefiting from new contract services and manufacturing revenues along growth in key specialty products. Now I would like to make some comments about the future and key growth initiatives to return Mayne Pharma to sustainable growth. Our key strategic initiatives, as I covered broadly a couple of minutes ago, is, firstly, the successful commercialization of NEXTSTELLIS, which is expected to be transformational for Mayne Pharma. NEXTSTELLIS will compete in the short-acting combined hormonal contraceptive market, which is valued at USD 4 billion in the U.S. and $70 billion (sic) [ AUD 70 million ] in Australia. Our business plan for NEXTSTELLIS is targeting peak sales of $200 million in the U.S., which represents approximately 2% of the market units. In April this year, we filed NEXTSTELLIS with the FDA and have a target action date of April 2021 in Australia. We filed NEXTSTELLIS with the TGA in August last. Secondly, we are also focused on expanding our dermatology and women's health portfolio through R&D and selective business development activities. In women's health, we have a number of pipeline products, including some high-value complex programs such as the generic version of NUVARING. The generic NUVARING program remains highly attractive, with only one independent generic approval and an addressable market of $900 million. In dermatology, we launched 3 new products in F '20 following a partnership with Teligent and Encube, topical developers and manufacturers. We continue to have active discussions with a number of parties around further product partnerships in dermatology to build on a differential business model. We continue to invest in SUBA-itraconazole platform and have recently announced results from an endemic clinical study, which investigated TOLSURA versus conventional itraconazole in treatment of endemic fungal infections. This data demonstrated some of the clinical advantages of TOLSURA, including the product was safe, well tolerated and consistently leads to itraconazole levels that are higher than conventional itraconazole but administered at substantially lower doses. We continue to believe in the potential of this product to capture meaningful share of the U.S. itraconazole market over time. Globally, we have 2 contract development manufacturing organizations supporting more than 100 active clients, including 14 of the top global pharma companies in the world. The U.S. Metrics business, metric contract services (sic) [ Metrics Contract Services ] that I've referred to earlier, has demonstrated a solid record of double-digit growth, benefiting from the investment we have made in Greenville site, including the USD 80 million solid oral dose manufacturing facility that was completed in 2018. In Australia, the business trades under the name of Mayne Contract Services and leverages Salisbury's 40 years of history in developing new oral drug delivery systems, which have been successfully commercialized in numerous products that are marketed around the world. Finally, the company continues to improve its cost base through greater operating efficiencies in our manufacturing network and cost savings through the realignment of our supply chain. In Greenville, our manufacturing dose volumes were up 57% in F '20 versus the previous year. We continue to look at ways to increase our volumes in both our plants and we hope to be able to leverage over time government policies to increase the domestic manufacture of critical medications. I would now like to make a few comments on the Board's renewal following the announcement we made a few days ago. And I announced that it is my intention and my colleague's, Bruce Mathieson's, intention to retire within the next 12 months. And I've announced that I will be replaced at the Board's decision by an American Chairman. And at the same time, we will appoint a -- an Australian Deputy Chairman to handle, of course, our listing and our shareholders in Australia. Finally, I would like to thank all the employees and our leadership team for their hard work. And commitment and most importantly, to our shareholders for your patience and for your loyalty. 2020 has been an unprecedented year with the global pandemic, and we look forward to the impact of the pharmaceutical industry in 2021 as we come out of these very difficult times. Again, I would like to -- shareholders, I wish our results were other than they are. But I can assure you, your Board and your management have left no stone unturned and done everything we possibly could, faced the circumstances we have faced. As I've outlined, I do feel that we have in the pipeline sufficient new products and new initiatives to have an enormous positive effect on this company moving forward. Scott, I call upon you, if you'd give your report, please.

Thank you, Roger, and good morning to all of you from North Carolina. I'll start by giving a brief update on the business and our key priorities, and then I'll finish with our trading performance for the first 4 months of this financial year. But first of all, I'd just like to acknowledge the impact that COVID-19 has had on our business and on our people. Whilst this remains a deeply challenging situation in the United States, in particular, and has added complexity to our operating model, I'm pleased to report that we are navigating this environment well. We've adapted our work practices to ensure the safety of our employees, whilst maintaining morale, productivity and importantly, output. We've also adapted to a new type of engagement with customers, doctors, pharmacists and patients, and we continue to look for more innovative and effective ways to better run our business as we hopefully emerge from this public health crisis in 2021. Our key priorities remain consistent with our last market update, that is preparing to launch our novel oral contraceptive, NEXTSTELLIS; expanding our dermatology and women's health care portfolios; driving growth of our branded anti-fungal, TOLSURA; accelerating our global contract services platform; and optimizing our cost base. NEXTSTELLIS is the company's most significant near-term pipeline opportunity, as Roger alluded to. The product is a novel oral contraceptive, which contains a new estrogen called Estetrol, or E4 for short, in combination with a progestin, drospirenone. If approved, E4 will be the first new estrogen introduced into the United States for contraceptive use in 50 years. E4 is a low-impact estrogen with a unique mechanism of action that offers potential advantages over other estrogens used in contraception today. The company's strategic development partner, Mithra Pharmaceuticals, has studied this product in more than 4,000 women in Phase II and Phase III clinical trials. The Phase III trials met efficacy endpoints and demonstrated good bleeding control, which is a clear expectation of women using an oral contraceptive. Further, a Phase II study importantly showed a favorable effect on certain markers associated with blood clotting, which is one of the known risks with many contraceptives. NEXTSTELLIS has also shown a neutral effect on weight gain, a very important consideration for women. And being a native estrogen, NEXTSTELLIS has the potential to have a lower adverse impact on the environment. And this could be a key differentiator against other contraceptives on the market today. Mayne Pharma has the distribution rights for NEXTSTELLIS is in the U.S. and Australia, as Roger mentioned. The product is currently pending at a number of regulatory agencies around the world, including, of course, the United States, Europe, Canada and Australia. In September, we had a mid-cycle review meeting with the Food and Drug Administration, and we're pleased that no substantive issues and no major safety concerns were raised. We have another important meeting with the FDA in early 2021. At which time, we expect clarification on all major review matters as we close in on our target action date set in April 2021. We've also considered to advance our prelaunch awareness education around NEXTSTELLIS, with thought leaders and prescribers and associated launch planning. To that end, we've broadened our leadership team to support NEXTSTELLIS, with the appointment of Mr. Don Pearl as Executive Vice President Women's Health. Don brings almost 30 years of highly relevant industry experience, including leadership of significant U.S. brand commercial businesses. And importantly, the establishment of new sales and marketing organizations through the launch phase. The second key priority for the business is to continue expanding our product portfolio through selective licensing and partnering activities. Given Mayne Pharma's scale and differentiated commercial infrastructure, we are well positioned to add additional products in an efficient manner. In women's health, we recently added 5 branded generic oral contraceptive products through the Novast Laboratories supply agreement. Four of these products are already approved and are expected to launch in the coming months, including versions of the top 2 prescribed contraceptive products in the U.S. today, ORTHO CYCLEN and ORTHO TRI-CYCLEN. We recently licensed a new brand, SOLTAMOX, which is an oral solution of tamoxifen, which is indicated for the treatment of women with estrogen receptor-positive metastatic breast cancer and prophylaxis for women at high-risk of breast cancer. This product will be promoted digitally until our new women's health sales team is in place. We have a number of dermatology and women's health products pending at the FDA. As Roger mentioned, the recent delays in 2 of our key generic programs has been very frustrating. And we're working hard with our partners to address the FDA's questions. In one of the programs, the FDA found all key disciplines of the ANDA adequate with the exception of the packaging facility. And I expect that we can resolve those issues quickly. In the case of our generic version of NUVARING, we expect to submit our response to the FDA in the new year -- quite early in the new year, hopefully, after which we will receive a new target action date. Both of these product opportunities, as Roger talked about, remain highly attractive with very limited competition. Our earlier-stage pipeline program also includes some interesting products, in particular, the novel retinoid trifarotene to treat patients with lamellar ichthyosis, which is a rare disabling disorder that causes severe skin scaling from birth, and there are no approved treatments for this condition in the world today. We've recruited 41 patients in the Phase II clinical trial, and we expect top line results to report in early fiscal '22. We continue to remain confident about the potential of TOLSURA, again, as Roger alluded to, and its ability to capture a meaningful share of the itraconazole market over time. This product has faced challenges this year from COVID-19, as the product is typically prescribed by infectious disease physicians and respiratory physicians who have been heavily involved in the pandemic. Our belief in this product is driven by a growing body of scientific evidence supporting its clinical attributes. Most recently, the company reported initial results in our ongoing endemic mycoses study, which is the largest single study for 30 years in patients with various endemic fungal infections such as histoplasmosis and blastomycosis. Data from this study was recently presented at the Infectious Disease Week here in the United States, the largest conference of its type, and has been very well received. New prescriptions were at their highest level in September since we launched the product, and were up, importantly, 30% on the pre-COVID monthly volumes in the first quarter of this calendar year. Mayne Pharma's contract services business is sometimes described by investors I speak to as an underappreciated asset within the company. CDMO market dynamics continue to be favorable, benefiting from increasing outsourcing trends and growth of molecules in clinical development, particularly in oncology. And that's pretty important for us because we can leverage our high containment manufacturing capabilities at Greenville in particular there. In the United States, Metrics Contract Services supports more than 60 products, of which 16 products are in Phase III and 5 at commercial stage. These are typically first-in-man, high-value and innovative developments, whereby Mayne Pharma is able to capture value across multiple phases of any project and we often retain this relationship and revenue opportunity across the full product life cycle. In Australia, our contract services business has 25 programs under management, of which 20 are commercial products. And this year, we will be making further capital investments of approximately AUD 15 million into our 2 sites to further enhance capacity and support planned commercial manufacturing growth. Finally, in terms of our cost base, we're continuing to see material operating expense savings, as I will highlight shortly in the trading update. We have a broad platform to drive efficiencies across our entire supply chain through reducing product cost with new supply agreements such as the recent deal with Novast Laboratories, where we have secured supply on more favorable terms for 8 products previously supplied by Teva. We continue to seek more economic sources of active drug raw materials, drive overhead recovery improvements in our manufacturing plants and distribution efficiencies through the way we ship our products around the world via sea or air. Moving to our year-to-date trading. At a group level, revenue to the end of October was AUD 140 million, down 9% on the prior corresponding period. These results were impacted by the weakening U.S. dollar exchange rate, which increased $0.03 to $0.715 and a softer generic result. Group gross profit margin has remained consistent year-on-year at 47%, and operating expenses have fallen by 20% or AUD 10 million, benefiting from the restructuring undertaken in fiscal '20 and ongoing cost containment measures. Pleasingly, at the underlying EBITDA line, the result was marginally above the prior corresponding period. And on a constant currency basis, year-to-date revenues and gross profit were consistent with the monthly average for the second half of fiscal '20, highlighting the stability of the business since the beginning of this calendar year. Moving to some of the divisions, starting with the Specialty Branded division (sic) [ Specialty Brands Division ]. SBD revenue was USD 17 million in the first 4 months of fiscal '21, down 3% on the prior corresponding period, impacted by COVID, as Roger talked about earlier, and unfavorable changes to managed care coverage that occurred across fiscal '20. Notwithstanding the significant restructuring that occurred to the dermatology sales team in fiscal '20, prescription volume performance has been consistent over the first 4 months versus the prior corresponding period. And importantly, over that period, SBD operating expenses have decreased by USD 4 million versus the prior period, driving a more profitable business. The NEXTSTELLIS operating expense investment year-to-date has been USD 400,000, with significant further spending expected to be aligned to our confidence around the approvability of the dossier as we progress through future stage gates with the FDA. Moving to our Generics division (sic) [ Generic Products Division ], GPD. GPD revenue was USD 55 million in the first 4 months of the year, down 10% on the prior corresponding period. Performance of key products was mixed with growth in liothyronine, budesonide and carbidopa/levodopa, offset by weaker performance in methylphenidate, amiodarone and butalbital. GPD has seen limited benefit from new product launches so far this year. But in the second half, we look forward to the planned launch of 5 already approved products, including 4 oral contraceptives sourced from Novast and chlorpromazine tablets, which participates in the USD 120 million addressable market. In addition, the company is expecting to yield more than USD 5 million of cost savings from product transfers, stronger manufacturing overhead recoveries and improved product cost benefits in the second half of fiscal '21. Moving to our third business segment, Metrics Contract Services. MCS reported revenue of USD 17 million in the first 4 months of the year, consistent with the prior corresponding period. Whilst the sales line reflects some delays in programs due to COVID-19, gross profit was up on the prior corresponding period, reflecting a better product mix. In terms of outlook, the pipeline of committed business revenue, which reflects the next 6 months of signed statements of work, was up more than 10% versus the balance at the end of fiscal '20. Moving to our last business unit, Mayne Pharma International. Sales were AUD 15 million in the first 4 months, up 11% on the prior corresponding period, benefiting from strong growth in third-party contract development and manufacturing services and growth in select commercial products in Australia. And finally, in closing, I would like to thank the executive leadership team and the Board and all of our employees for their tireless commitment, agility and passion in what is, as Roger talked about, a complex and dynamic market here in the U.S., in particular. I'm confident the successful execution of our key priorities that I've outlined will deliver long-term sustainable growth for this company. And with that, I'll now hand back to Roger to complete the formal part of the meeting. Thank you.

Thank you, Scott, and we thank you and the efforts of your team in what's been a very difficult year for you all, and we thank you for your efforts. We now move to the formal part of the meeting. This AGM provides the opportunity for you to reelect your directors to reflect on the company's performance over the past year and to raise any questions you may have about our company. All shareholders should have received the Notice of Meeting, and it is my intention to take the Notice of Meeting as being read. I want to make sure all shareholders feel comfortable to ask questions today and express any comments they might have with our company or any of the resolutions that are on the agenda. There are a number of procedural matters to which I must draw your attention. This is a shareholders' meeting and only shareholders, their attorneys, proxies and authorized company representatives are entitled to vote or speak at the meeting. Each item of business will be discussed in turn, and members will have the opportunity to ask questions on that item of business. In order to ensure that all shareholders' views are taking into account, all items of business before the meeting where a vote is required will be determined by a poll. I appoint David Squires of Computershare Investor Services, as the returning officer to manage the poll process. If you experience any difficulty in your participation via the online platform, please call the AGM helpline on your screen. Following questions on each resolution, details of the proxies received by the company from the shareholders will be displayed on the screen. Open proxies in favor of the Chairman will be voted in favor of all the resolutions on the agenda. I will now go through the items of business, ordinary business, annual accounts. The first item of business listed on the Notice of Meeting is to receive and consider the financial report of the company for the financial year ended the 30th of June 2020, and the reports of the directors and auditors. This item also gives shareholders the opportunity to ask questions about the company and its operations. The company's auditors, David Petersen from EY, is also available today to answer any questions on the audit, if required. I'm now going to ask Lisa to read me the questions, and I'll then either answer them or ask one of my colleagues to assist. When there are no more questions, I will move on.

We have been asked a question by Mr. Stephen Mayne at the beginning of the meeting to declare any of the proxy votes where there is a dissenting vote of more than 10%. There is only one such resolution, and that is my own reappointment where the proxy vote against is 13%. So the first question that we have is from a shareholder that says, "Chairman, the first question comes from a number of shareholders, which is in relation to Mayne Pharma's share price and when it will recover." Well, clearly, thank you for that question. That is a question that is on everyone's mind. I can assure you everyone working in Mayne Pharma, of course, their incentive plan is based on the share price. So you can be rest assured everyone in the management team, on the Board, many of us are significant shareholders, are very, very conscious of the share price. Now I certainly can't answer that in terms of timing. But what I can [ say ] is that the share price is going to respond to the company's performance. In fact, it's the only thing that drives the share price in the long term. And I've outlined to you those products that we have in the pipeline that are -- some of them paradigm changing products, particularly NUVARING and NEXTSTELLIS. These things will dramatically or have the potential to dramatically change this company and its share price. And that is your Board and management's focus. Chairman, the second question also comes from a number of shareholders. And it says, when will we return to paying dividends or return some capital? Well, we haven't paid a dividend and do not, at this stage, have plans to pay a dividend. What we do have plans to do is to invest in the products and activities that both I and Scott have outlined. And we trust that the growth in shareholder wealth comes from a growth in the share price that represents the success of this company. Yes. Could you please read the next question?

Good morning, Mr. Chairman. My name is [ Henry Stephens ]. I'm a voluntary monitor for the Australian Shareholders' Association, which is an independent not-for-profit organization standing up for the rights of retail shareholders. I would like to ask a question about the staggering amount of the impairments the company has written off over the last 3 years. A total of $635 million has been written off, which largely relates to generic intangibles. These write-offs are based on a detailed review of the current or projected generic market dynamics. My question is, have we seen the end of these write-offs? Or do you expect more in 2021? And more importantly, what is happening to Generic Pharmaceutical prices in the U.S. market, especially with respect to the 12 Generic products mentioned in the annual report? The company is targeting with sales of more than $3 billion. Are prices still in decline?

Or are they stabilizing? Well, first of all, let me take the first part of that question. And Scott, I'll ask you if you would mind taking the second part in regard to the $3 billion in the generic pricing. First of all, it's a staggering summer month, $635 million for this company, and we are all devastated that, that has been necessary. But let me tell you that it's exactly consistent with all the major operators in the generic pharmaceutical industry in America. Teva being the business -- the biggest, have written off billions and billions. And across the American market, tens of billions have been written-off in the last few years. This generic market in America went under a dynamic change that we didn't recognize, but in not recognizing it was coming, neither did anyone else, including the major operators in that market, Teva and Allergan. So I regret terribly we've had to write this money. But it hasn't been something that has been unique to Mayne Pharma. It has been absolutely the result of the movement in the industry that was completely beyond our control and beyond anyone else's control. Is it the end of it? I can't answer that question because I don't know. Each half, we do -- we -- there's a formula that's required, we go through it. And that is handled by the Audit Committee and our auditors, and it is a result of the volume and the potential volume of the medications we have. We hope no further write-offs are necessary, but it will be a direct result of the volumes we do and the market -- the generic market in America, both of which are largely beyond our control. Scott, you might take the 12 generic products and the $3 billion market we're addressing, please?

Yes. So the 12 products and $3 billion. The $3 billion represents the total market according to the market reporter IQVIA. And that's a common way for us and for all generic companies to talk about the overall marketplace for their pending pipeline. Clearly, when you launch a new generic product into that addressable market, you do so at a discount. But that just gives you a relative benchmark in terms of the overall market value. What I can say about pricing, which I think was part of the question, the industry continues to experience price erosion. There are 3 major buyers of generic drugs in the United States, and they control 90% of all generic volume in this country. So they still wield considerable power. Supply is very important. Supply is very important, it has become more important through COVID. And I can tell you Mayne Pharma's current customer service levels are industry leading, and that has actually served us well. The other thing is that pricing dynamics really are a product-by-product situation. It goes back to the number of competitors in those markets and also the behavior of those competitors. But overall, we model our generic business. We model base business erosion based on price erosion, anywhere between 5% and 10% on a per annum basis, coming back to the type of product it is. And that will apply post the launch of the 12 products that represent that $3 billion addressable market.

Thank you, Scott. Would you read the next question please, Lisa?

The next question also comes from the Australian Shareholders' Association and is about the acquisition cost of the Mithra E4 license agreement. We would like to know how long it will take for shareholders to get their money back, given the very substantial cost of this 20-year agreement at $284 million? In other words, what is the Board's expected payback for this investment?

First of all, you're asking us an exact question. Of course, in answering this question, we cannot give you an exact answer because it's to do with the future. We can tell you what we think and what our judgments are at this moment, but they're certainly subject to what happens in the marketplace in the future. I have indicated to you that that's a Board's view that this product is an outstanding and transformational product as it is an outstanding product and has the ability to be a transformational product. But none of us, of course, know exactly the sales we'll do. So I'm going to ask Peter, if Peter -- I'll see if, Peter, if you would respond to this question in terms of the payback period that we estimate at this stage will be involved. Thank you, Peter.

Thank you, Roger, and thank you for the question. Perhaps before I provide a degree of guidance, I'll just note for the shareholders that this transaction with Mithra was heavily structured. And in that regards, our cash commitments out of that $284 million number prior to any performance of the product less than USD 20 million. And we have provided some equity to Mithra. And so when it comes to considering the payback and the bulk of those dollars that are referred to in the question, they are aligned with the actual sales performance of the product. Accordingly, when it comes to considering payback, the investments are, as I said, less than $20 million in cash, plus the supporting investments that Scott and our new appointee, Don Pearl, are making to create the capability on the commercial side. So we feel like the deal was well-structured and has enabled us to present an attractive deal to shareholders. And in terms of payback, we estimate anywhere from year 2 to year 3 after launch of the product, depending on the ramp-up profile of the product, represents when we will have all those investments back on the books, so to speak.

Thank you, Peter. Would you read the next question please, Lisa?

The next question comes from Stephen Mayne. With net debt still too high at $248 million, why haven't we done an equity raising to stabilize the balance sheet, like so many other ASX-listed companies have done in 2020? If we do a capital raising, can the Board undertake that it will be a Pareto offer, a pro rata accelerated institutional with tradable retail entitlement offer that treats all shareholders equitably.

Steven, thank you for that question. The funding of the company and the level of debt is something the balance -- that the Board considers constantly. At this stage, we have reduced the debt, as we have said in our report. At this stage, we are still reducing debt. We would consider, if the Board judged it necessary, to raise funds at that time. However, at this moment, we don't think it's necessary. And at a share price of $0.33 or $0.34 or whatever it is today, we don't intend to raise money if we don't need to. We have a number of options to fund the business, and that is why. Should we decide on a raising, I can't give you any absolute commitments on the type of format that we will do, but uppermost will be -- would be in that eventuality -- and it is a hypothetical question, in that eventuality, we would act in fairness to all shareholders. The next question. Thank you.

The next question also comes from Stephen Mayne. Please provide a summary of what the switch from Trump to Biden could mean for our business, along with an assessment as to whether our business would benefit more from a Democrat or Republican-controlled Senate after the Georgia runoff elections.

Thank you, an interesting question, Steven. I'll ask in the first instance, Scotty, if you would answer that question. And then I'll go to our American directors, Frank and Pat, and ask them if they have anything they'd like to add to it. So over to you, Scott.

Yes. Thanks, Roger. Look, I mean time will tell. I think right now, Joe Biden has got a fair bit on his plate in all sorts of other areas. But seriously, one area where I think there is some degree of bipartisanship between the Republican party and the Democratic party is on the fact that, obviously, health care costs and drug costs, in particular, are still too high in the United States. Obviously, our generic business does a lot in terms of helping bring down those drug costs. So we're on the right side of the ledger there, and I don't expect to see any changes with the Biden administration. And on the branded side, we certainly don't participate in the very expensive, highly specialized end of the segment, the biotechnology products, which I think will be under pressure no matter which administration is running this country in 2021. So we don't see a Biden presidency modifying our strategy at this point. But of course, we will be watching and listening and staying close.

Frank? Frank, you got it switched off.

Sorry there. I agree with everything that Scott has just said. I will add that I believe the more Americans that have insurance, the better it will be for pharmaceuticals. And at the current situation, it looks like with Biden as President and the way that the Supreme Court is probably leaning that our Affordable Care Act will probably stay in place. And as long as that happens, we'll have more Americans with access to be able to pay for pharmaceuticals. Also, there seems to be a big bipartisan support for transparency. And if transparency increases in the very complex pharmaceutical reimbursement system we have, I think that, that could actually benefit our particular business.

Thank you, Frank. Pat?

Roger, I agree with Scott and Frank. I think if you look at the races in Georgia, we're over a month away before they'll be called. But regardless of the outcomes, the margin of leadership in the Senate will be a very thin line. And so it's unlikely you're going to see any significant health care reform kind of moves in the United States from my perspective, and I think a lot share that opinion. I do think, however, the focus will be on COVID and the pandemic. It will be on federal stimulus, getting the economy back working. And eventually, there's going to be a big debt to be serviced. So I think those will be the areas of focus in places where they're going to have to try to find bipartisan support.

Thank you, Pat. Well, that was an interesting question and interesting answers. Thank you very much. The next question, please. Lisa?

The next question again comes from Stephen Mayne. Could Bruce Mathieson please comment on whether he intends to retain his shareholding after he retires from the Board next year? Why hasn't he supported the Board announcing a capital raising in recent years? Was he not prepared to inject any more funds into the company given the losses he has suffered from the poor performance of the shares?

Okay. Well, thank you for that question. It's verging on the edge of violating people's privacy. And I won't ask Mr. Mathieson to answer that question, other than to say this. Mr. Mathieson has indicated that he continue -- intends to continue to support the company after he is a Director, as I will in my shareholding. We are both focused on wanting to get a good return on our shares, and we are both underwater significantly as every other shareholder is. In regard to the question about fundraising, Mr. Mathieson hasn't been faced with that question, as I said previously, because the Board hasn't decided it's necessary to fundraise in terms of raising capital. I don't think there's anything further to say to that. Although I will give Bruce the opportunity if he wishes to say anything. Bruce?

Now I think I've supported the company wonderfully well and I'll continue to support the company, that's about all I'd say.

Thank you, Bruce. Thank you for that. And indeed, you have. And we are, as a Board, and I'm sure as our shareholders, we're very grateful for the support you have. And like all of us, we realize that you are under substantial water by a lot more money than most of us. Okay. So this question is in regard to [ candidly ] I give a detailed description of the FDA approval process for E4, the NEXTSTELLIS. Scotty, please.

Yes. Well, to the extent that I can. Obviously, the FDA, as Roger -- and as we've seen, the FDA run their own process. But what I can say is that we've had a mid-cycle review meeting with the FDA. There were around 15 FDA people at that meeting. This was at the end of September. I referred to it in my speech. That was a very good meeting. At that meeting, efficacy and safety matters were discussed. Nothing substantive came back to us in terms of any red flags of that meeting. And that was the first opportunity that we had to meet with the FDA following the submission of the dossier in April this year. So that was very important. The second piece here would be in late December. We will receive feedback on the labeling of our product, so this will be the exact prescribing information, and we've submitted a draft label to the FDA. That's what all sponsors do, and we'll receive feedback on that. And that will be important as well because that will dictate what we can and can't promote to. And then the third piece is in the middle of January, the FDA has signaled what's called a late-cycle review meeting where, again, there will be a cast of people from all disciplines at the FDA, and that will be a Zoom meeting, like this one, with company employees, Mithra Pharmaceuticals' people and also external experts. And at that meaning, we expect to finalize all substantive matters dealing with the review of the dossier. And we're hopeful that at that point, we will have a clear line of sight on the approvability of the product. And the final point would be that at the time that the FDA accepted a dossier for review, which was roughly 60 days after we submitted it in April of this year, they also gave us what's called a target action date. And that target action date is in April 2021, which we've talked about before. And that is the date at which they will either give Mayne Pharma an approval or a complete response letter. And the complete response letter means basically a nonapproval and a list of questions that the FDA still needs the sponsor to answer before they can approve the product. It's a similar process, albeit on the generic side that we're going through with generic NUVARING. And the only other thing I would say is the difference between some of our issues on the generic side of the business with NUVARING and the other product we talked about. On the branded side of the FDA, which is where NEXTSTELLIS' review sits, it's a far more interactive process. We don't have the opportunity on the generic side of the business to have meetings with 15 or 20 FDA people. Halfway through the review, 2/3 the way through the review, get their feedback and be able to then respond and react. I mean I wish we did on the generic side, but we don't have that ability. So it's quite a different process. It's far more transparent. And hopefully, that's going to give us a great opportunity to get an approval, which is what we're aiming for, no guarantees, but what we're aiming for in April 2021.

Thank you, Scott. The next question, please, Lisa?

The next question comes from [ Noel West ] from [ Longway Proprietary Limited ]. Mayne has had quite a few generics approved by the FDA during the year, yet they were not informed to the market due to the reason of insignificance for the ASX release. Given this nature, how many generics you mentioned here today in the report are in the same category?

Scott?

Yes. I'm just reading the question again, Roger, to understand it. Well, all of the generic products that we've mentioned today, so we've mentioned a number of oral contraceptive products that are pending or are approved but yet to be launched from our agreement with Novast Laboratories. We've talked about some pending generic dermatology products. And we've obviously talked about NUVARING, generic NUVARING, and one other significant generic women's health product. So they are the principal products that the company has. We also talked about the 12 products pending with an addressable market of $3 billion. And there are a number of products there that when they are approved -- when and if they are approved, some of those will also be material enough to warrant an announcement.

Thank you. Lisa, are there any further questions?

The final question in this item of business, again, comes from Stephen Mayne. Could the Chairman undertake to make a full transcript of today's debate available on the Mayne Pharma website, along with a full archive of the AGM webcast? Some poorly governed companies such as Harvey Norman and Kogan refused to do this when it is necessary to make sure today's AGM debate is accessible to all shareholders.

Thank you. And I understand that it will be, in its complete form, accessible to all shareholders, both the ones that have been here and it will be online for anyone that doesn't -- isn't here or wishes to revisit it. I think that's the correct situation, Lisa, or is it not?

Yes, we can do that.

Thank you very much. So I think that answers your question, Steven. Are there any further questions, Lisa?

There are some other questions, which are a repeat of many of the other questions we've had today. So I'll follow-up directly with those shareholders.