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

Good morning, everyone, and welcome. I am Frank Condella, Chair of Mayne Pharma. And on behalf of the Mayne Pharma Board and the management team, I would like to welcome all of our shareholders, or their proxies, attorneys or representatives present to this Scheme Meeting. I am going to apologize in advance, this is a very long script that I have today, so bear with me. Today's Scheme Meeting will allow all Mayne Pharma Shareholders, proxies, attorneys and representatives to consider and vote on the proposed acquisition by Cosette Australia BidCo Pty Ltd of 100% of the shares in Mayne Pharma by way of a scheme of arrangement, which I will now refer to as the“ Scheme. Cosette Australia BidCo, which I will refer to during this meeting as Cosette Sub, is a wholly owned subsidiary of Cosette's ultimate holding company Cosette Pharmaceutical Holdings, Inc. The time is 10 a.m. Australia Eastern Standard Time, the appointed time for holding of the Scheme Meeting and the Company Secretary has informed me that a quorum is present. I therefore declare the Scheme Meeting open. I'd like to introduce other members of the Mayne Pharma board. Present in the room today are fellow Australian resident Nonexecutive Directors, Anne Lockwood; Professor Bruce Robinson; David Petrie; and our CEO and Managing Director, Shawn Patrick O'Brien. Our other U.S.-based directors Ann Custin, Pat Blake and Katie MacFarlane have joined online. Also in attendance is our Company Secretary, Laura Loftus, and our Executive Vice President and General Counsel, Kimberly Parker. Along with us our Counsel, Adam Laura from Gilbert + Tobin. Representatives of Mayne Pharma's share registry, Computershare, are present to assist in the poll process of the Scheme Meeting. This Scheme Meeting has been called under the notice of Scheme Meeting, which was included as Attachment D to the scheme booklet, which was dispatched to the Mayne Pharma shareholders on Monday, May 19, 2025. The Notice of Scheme Meeting was given in accordance with the orders made by the Supreme Court of New South Wales on the May 15, 2025. Unless there are any objections, I'll take the notice of scheme meeting as read. Before we conduct the formal vote on the Scheme Resolution, I will provide you with an explanation of the voting process and procedures, an overview of the proposed Scheme and the purpose of the Scheme Meeting, including an overview of the current proceedings with respect to Cosette's proposed termination of the Scheme Implementation Deed. A summary of the reasons for the Mayne Pharma directors recommendation in respect of the Scheme and the Independent Expert's conclusion. A summary of the status of the conditions precedent to the scheme becoming effective and the indicative time table for implementation of the Scheme, and a summary of the valid proxies received before the Scheme Meeting. I will begin with some housekeeping matters. Today's Scheme Meeting is held as a hybrid meeting, with attendees in person and virtually online via the Computershare Scheme Meeting platform. The online Scheme Meeting platform enables Mayne Pharma shareholders who are attending this Scheme Meeting virtually to view, ask questions and submit their votes in real time. If we experience any technical issues during today's meeting that result in a significant number of shareholders being unable to participate, I will adjourn the meeting. And in that event, we hope that any technical issues would be resolved quickly, and the meeting would be reconvened. Please monitor our website and the ASX for announcements if this ever happens. This is a shareholders' meeting and only shareholders, their attorneys, proxies and authorized company representatives are entitled to vote or ask questions at this meeting. Throughout the meeting, Mayne Pharma shareholders will have a reasonable opportunity to ask questions. For online attendees, if you have a question that you would like to ask today, you can ask the questions via the online Scheme Meeting platform. And shareholders and proxyholders present in the room can ask questions by raising your hand. Please note that questions will be moderated to avoid repetition and if questions are particularly lengthy, we may need to summarize them in the interest of time. Depending on the question asked, I will either answer it myself or ask the member of Mayne Pharma board to respond as appropriate and may take questions on notice if necessary. To submit a written question online, select the Q&A icon on the screen, type in the question and press send. We encourage you to submit your written questions online as soon as you can. And I will open the Scheme Meeting to questions before voting on the Scheme Resolution closes. So how to vote? I will now briefly summarize the voting procedures which apply to this Scheme Meeting. The only item of business of this Scheme Meeting is the Scheme Resolution, which is set out in full in the notice of Scheme Meeting. Voting on the Scheme Resolution will be conducted by way of a poll. I appoint David Squires of Computershare Investor Services as the returning officer to manage the poll process. Persons who are registered shareholders as Mayne Pharma Shareholders as of 7:00 a.m. Australian Eastern Standard Time on Monday, the June 16, 2025, are eligible to vote on the Scheme Resolution. Shareholders have the option to appoint a proxy in advance of today's meeting. For those shareholders and proxy holders participating in the room may hold a red admission card. On the reverse of your red card is your voting paper. Relevant instructions are also printed on the reverse of your admission card. For those participating online, voting for all resolutions are open and remain open during the meeting. If you are eligible to vote at this meeting, you will see a vote icon displayed on your screen. To cast your vote, select one of the available options. You have the ability to change your vote up until the time I declare the voting is closed, at which time your most recent selection will be registered. So please note that if you cast a live vote at today's Scheme Meeting, then the live vote will supersede any previously submitted vote by proxy. I confirm that as Chair of the Scheme Meeting, I will vote all available proxies in favor of the scheme resolution. I will announce the closing of the voting on the Scheme Resolution once voting is closed, all submitted votes and voting cards cannot be changed. After the meeting closes, your votes will be counted by our registry Computershare and the results will be announced on the ASX as soon as they are available, which is likely to be later today. To provide Mayne shareholders with ample opportunity to vote, I now declare the poll on this Scheme Resolution open. Please submit your votes at any time. I'll give you a warning before I move to close the voting. And please submit your votes at any time throughout this meeting. We'll go through the Scheme Resolution shortly, but first, I'll provide a brief explanation about why we are meeting today. Details of the scheme are outlined in the scheme booklet dated May 15, 2025, which was dispatched to all Mayne shareholders on May 19, 2025, as well as the supplementary scheme booklet dated June 4, 2025. And the purpose of this meeting is for Mayne Pharma shareholders to consider and if thought fit, approve the proposed acquisition by Cosette Sub of 100% of the shares in Mayne Pharma by way of scheme of arrangement. The scheme booklet and supplementary scheme booklet, which were sent to the Mayne Pharma shareholders include among other things, an overview of the scheme and the key considerations relative to each shareholders vote, including reasons to vote in favor of, against the scheme as well as the risks associated with the scheme, a summary of the Australian tax provisions and implications and notice convening today's meeting. If the scheme is approved and implemented, in return for transfer of all Mayne Pharma shares to Cosette, Mayne Pharma shareholders will receive $7.40 from Mayne Pharma share held at the scheme record date, which I will refer to during this meeting as the scheme consideration. Implementation of the scheme is subject to certain conditions precedent, details of which are set out in the Section 6.3 of the scheme booklet. Shareholder approval is required for the scheme. This condition requires that Mayne Pharma shareholders approve the Scheme at this Scheme Meeting by the requisite majorities. Another condition is court approval in accordance with the Corporations Act. If the scheme is approved at today's meeting, Mayne Pharma will seek the approval of the Supreme Court of New South Wales to implement the scheme. The second court hearing is presently scheduled to be held at 9:15 a.m. on Thursday, September 18, 2025. And this has been delayed from the date originally disclosed to enable the dispute with Cosette, which was subject of the supplementary scheme booklet, and which I will discuss more to be determined by the court. Any variation to the Court timetable, the second court date, or any other key dates relating to the Scheme will be notified to shareholders via the ASX company announcements platform. Implementation of the Scheme is conditional on the independent expert continuing to conclude that the Scheme is in the best interests of Mayne Pharma shareholders, up until 8:00 am on the second court date. And implementation of the Scheme is also conditional on there being no material adverse change and no Mayne prescribed occurrence at any time up until 8:00 am on the second court date. As announced to the market and disclosed in the supplementary scheme booklet, Cosette has alleged that a Mayne material adverse change has occurred and has purported to terminate the Scheme Implementation Deed on that basis, among other grounds. Accordingly, the Scheme is subject to the court determining whether Cosette's purported termination of the Scheme Implementation Deed is valid. The Scheme is also subject to regulatory approval from the Foreign Investment Review Board or FIRB. As at today's date, FIRB approval has not yet been obtained, however Cosette has agreed with Mayne Pharma to continue to progress the FIRB application and to gain approval. Any update regarding FIRB approval will be notified to Shareholders via the ASX. If the outstanding conditions are not satisfied or waived, where capable of waiver, the Scheme will not proceed to implementation. In that scenario and during the period from today until the implementation date, Mayne Pharma will continue as a standalone entity listed on the ASX. Now as disclosed on the company announcements platform of the ASX and in the supplementary scheme booklet, Cosette has served a notice of termination on Mayne Pharma purporting to terminate the Scheme Implementation Deed, on the grounds that a Mayne material adverse change has occurred, or if those grounds for termination are not valid that there has been a breach of the Mayne representation and warranty contained in paragraph 15 of Schedule 2 of the Scheme Implementation Deed. Cosette has served a cross-claim on Mayne Pharma, alleging Mayne Pharma has engaged in misleading or deceptive conduct in breach of the Australian Consumer Law, as announced by Mayne Pharma on the ASX announcements platform on June 16, 2025. Mayne Pharma disputes these allegations and intends to defend them. Mayne Pharma has rejected the purported termination of the SID and has filed proceedings in the Supreme Court of New South Wales, seeking a declaration that the termination notice is invalid. Mayne Pharma will continue to keep the market informed regarding material matters relevant to the proceedings with Cosette, including any other material developments with Cosette. In the absence of any other agreement being able to be reached with Cosette in relation to the dispute, the successful implementation of the Scheme is subject to the Court ruling in Mayne Pharma's favor in such proceedings. Now noting the uncertainties inherent in litigation, if Mayne Pharma is unsuccessful in the litigation on these matters, Mayne Pharma may be subject to financial detriment, including damages claims and/or costs orders and the payment of a break fee to Cosette, as disclosed in the scheme booklet. The directors of Mayne Pharma continue to hold the view that it is in the best interests of Mayne Pharma shareholders, that the litigation be pursued to seek to hold Cosette to its obligations under the SID entitling shareholders to receive the Scheme Consideration. The directors of Mayne Pharma have carefully considered the reasons to vote in favor of and against the Scheme and have unanimously recommended that Mayne Pharma Shareholders vote in favor of the Scheme, in the absence of a superior proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of Mayne Pharma shareholders. Mayne Pharma shareholders should have regard to the interests of Mayne Pharma directors when considering the directors recommendation. These details are disclosed in Sections 11.1 and 11.2 of the scheme booklet. Prior to today's meeting, Mayne Pharma directors who hold or control Mayne Pharma shares have instructed that all their shares be voted in favor of the Scheme, in the absence of a superior proposal and subject to the independent expert continuing to conclude that the Scheme is in the best interests of Mayne Pharma shareholders. The Mayne Pharma Board appointed Deloitte Corporate Finance Pty Limited as the independent expert to assess the merits of the Scheme. The independent expert concluded that the scheme is fair and reasonable and in the best interest of Mayne Pharma shareholders in the absence of a superior proposal. The independent expert has assessed the underlying value of Mayne Pharma shares to be in the range of $6.61 and $7.99 per Mayne Pharma share. The scheme consideration of $7.40 per Mayne Pharma share is within this range. The independent expert's report is set out as a full Attachment A to the scheme booklet. And Mayne Pharma shareholders should carefully review and consider the independent expert's report in its entirety. As previously noted, the timetable for the implementation of the Scheme has been impacted by Cosette's purported termination of the Scheme Implementation Deed. In order to provide time for the dispute for Cosette to be determined in court, the second court date has been listed for September 18, 2025. If the scheme is approved by the requisite majorities of Mayne Pharma shareholders at today's Scheme Meeting, all other relevant conditions present to the scheme have been satisfied and the court finds in Mayne's favor on the litigation with Cosette, Mayne Pharma will be seeking to proceed to implementation of the scheme shortly after the second court date. The transfer of all Mayne Pharma shares from shareholders to Cosette will not occur until the scheme consideration has been paid to those Mayne Pharma shareholders at the scheme record date. A more detailed update on the timetable will be provided on the company announcements platform of the ASX, once the scheme timetable is more certain and subject to court oversight. I'll now turn to the formal business of today's scheme meeting and address any questions from Mayne Pharma shareholders. The only item of business today is for Mayne Pharma shareholders to consider and, if thought fit, to pass the following Scheme Resolution in accordance with Section 411(4)(a)(ii) of the Corporations Act. You can see it displayed on the screen here. "That pursuant to, and in accordance with Section 411 of the Corporations Act, the scheme, the terms of which are contained in and more particularly described in the scheme booklet of which this notice of scheme meeting forms part is approved with and without alterations and/or conditions as approved by the Court and agreed to by Mayne Pharma and Cosette". In accordance with the requirements of the Corporations Act for the scheme to proceed, the Scheme Resolution must be approved by the requisite majorities, being, at least 75% of the total number of votes cast on the Scheme Resolution by eligible Mayne Pharma shareholders present and voting at the Scheme Meeting, and majority in number, that is more than 50% of eligible Mayne Pharma shareholders present and voting at the Scheme Meeting. We will now take questions in relation to the scheme and the scheme resolution. A reminder that this is a shareholder meeting, so only Mayne Pharma shareholders and appointed proxies are entitled to ask questions. I will first ask if anyone in the room has a question, then we will move to questions from the call line and then any questions that have been submitted online during the meeting. If you have a question, please raise your hand and we will pass you a microphone. And please state your name before asking your question. Laura, do you have any questions from the online?

Yes, there is a handful of online questions. The first one is, Mayne Pharma is a Melbourne-based company. So why is the scheme being managed through the New South Wales Supreme Court?

Okay. The question is about why we're working with the New South Wales Supreme Court and the -- it's mandated under the SID as agreed by both Cosette and Mayne Pharma. And it was chosen really due to efficiencies and speed. Any other questions, Laura?

Yes. Next one is, has Cosette stopped pursuing FIRB approval as part of its tactics to get out of the deal? Or is further approval or something that is still being pursued?

FIRB approval, as I mentioned earlier, is still being pursued and Cosette is actively doing that.

Next question is, thank you for disclosing the proxy position. The turnout appears for on the headcount metric with just 862 shareholders registering their proxy vote compared to the total number of shareholders. Is that accurate? And are we disappointed with the number of shareholders that participated?

It is accurate, and it's actually more than the number of shareholders that participated in our last AGM.

And then the final online question is, unrelated to the same, is what are the plans to increase positive cash flow?

This meeting is really not the forum to talk about business update or business dynamics and we'll be giving a full update on the business in our August full year results. Any other questions, Laura? Any other questions in the room? Okay. I can see we have no further questions. The details of the proxy votes received from Mayne Pharma shareholders prior to the Scheme Meeting are now on the screen. And I now formally put the Scheme Resolution to the meeting and ask Mayne Pharma shareholders and other eligible participants to cast their vote if they have not already done so. Please now select For, Against, or Abstain, next to Scheme Resolution on your electronic voting card or your paper voting card. I will cast all proxies I hold in respect of the Scheme Resolution in accordance with the terms of my appointment, including all undirected proxies that I hold, in favor of the resolution. If anyone present believes they are eligible to vote but has not yet registered, please raise your hand, and assistance will be provided. One you've completed your voting card, kindly place it in one -- actually give it to [indiscernible] who is in the room here [indiscernible]. If you need any help, please raise your hand, and someone from Computershare will help -- assist you. So we're going to take a 2-minute break right now and allow all folks online and everyone in the room ask to place the voting card there. [Voting]

Voting papers have now been completed and lodged with Computershare and now declare the poll is closed. As previously mentioned, results of the poll will be announced on the ASX later today. And this concludes the formal part of the Scheme Meeting, and I now declare the meeting is closed. I'd just like to take a minute to thank you all for your attendance here and participation today as well as your continued support of Mayne Pharma. I'd also like to thank my fellow directors that are both here presently and those that are participating online, the executive leadership team and particularly the employees that have remained committed to continuing to grow this exciting business that we have and their support throughout the whole process and that means employees here in Australia and those in the United States. So thank you for coming today and be well.