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

Thank you for standing by, and welcome to the Mayne Pharma Group Limited Full Year 2026 Results. [Operator Instructions] I'd now like to hand the conference over to Mr. Aaron Gray, CEO. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining Mayne Pharma's fiscal year '26 Full Year Results Presentation. I'm Aaron Gray, Chief Executive Officer, and I'm joined today by Griffin Buchanan, our Chief Financial Officer, who was appointed in August. Today, I'll begin with our fiscal '26 corporate highlights and global footprint. Griffin will then take you through the group financial performance before I return to walk through each of the three segments: women's health, dermatology and DistributeRx, and international. And we'll then close with our future growth drivers and fiscal year '27 focus and outlook. Then we will open the line for questions. Please take a moment to read the disclaimer regarding forward-looking statements and the use of non-IFRS measures. Today's comments should be read in conjunction with our audited financial statements and ASX disclosures. Turning to Slide 3 and our fiscal year '26 corporate highlights. Fiscal year ' 26 was a year of resilience and focus against the backdrop of considerable distraction and disruption. First, as part of our realignment of the women's health sales force, we refreshed our sales and marketing materials to better support the team in the field. We also introduced dedicated menopause and contraception field representation, which will allow us to drive deeper, more meaningful engagement with our high-value prescribers. In particular, we are increasing our focus on menopause given the strong structural tailwinds behind it, which includes favorable regulatory changes, rising awareness and robust market growth. Second, we launched DistributeRx in March, a landmark step in our disintermediation strategy. DistributeRx is a health care solutions business that partners with manufacturers to streamline prescription distribution and expand patient access, and it has exceeded expectations thus far, necessitating expansion to a new facility, which will include capital equipment that enables continued growth at scale. The new facility is expected to enable a sevenfold increase in capacity over two phases. Finally, the Cosette transaction process and subsequent legal matters placed considerable demands on management focus and organizational bandwidth. We received $14.4 million from Cosette in satisfaction of court-ordered legal costs and interest. The outcome of Cosette's appeal remains pending, and our damages claim against Cosette continues. We've also seen changes to the executive team and Board. I was appointed CEO in February, having previously served as CFO, and Griffin joined as CFO in August. Professor Bruce Robinson was appointed Chair, and we welcomed two new nonexecutive directors following three retirements from the Board, strengthening the experience around the table. I am confident we have the right team to deliver in fiscal year '27 and am excited by what the future holds for Mayne Pharma. This next slide sets out our global footprint. At 30 June 2026, the company employed a total of 470 people, 227 in the United States and 243 in Australia. The majority of our U.S. headcount is focused on sales, with our women's health sales force at 102 employees across 91 territories and our DistributeRx sales force at 28 employees across 23 territories. We operate in territories across the U.S. with dedicated company locations in Lexington, Kentucky, and in Raleigh, North Carolina. Our Australian employees are primarily supporting production at our facility in Salisbury, South Australia, developing and manufacturing products for sale into markets outside the U.S., including Canada, Europe, Asia, Australia and New Zealand. Turning to our fiscal year '26 financial highlights on Slide 5. Group revenue was $383.7 million, down 6% in Australian dollars on the prior year and significantly impacted by foreign exchange translation. Encouragingly, gross margin expanded to 64.7%, up 411 basis points, reflecting disciplined pricing, mix and channel execution. And gross profit was essentially flat at $248.1 million despite the lower revenue. Total direct segment contribution was $107.1 million, down 2%. Underlying EBITDA was $34.2 million, down 27% on the $47 million delivered in fiscal year '25. I do want to briefly address the increase of $2.5 million to our underlying EBITDA between the announcement made on 31 July, when the company anticipated fiscal year '26 underlying EBITDA of $31.7 million to today's number of $34.2 million. The 7.9% increase in underlying EBITDA announced today is driven by the company electing to treat the portion of share-based expense, which is attributable to retention as part of the continuing operations adjustments given the one-off nature of this expense. We closed the year with cash and marketable securities of $80 million. I will now turn the call over to Griffin to run investors through our numbers at the group level and the segment level. Please go ahead, Griffin.

Thank you, Aaron. I will cover our group performance before turning to our three segments. Turning to our continuing operations for FY '26. Reported revenue came in at $383.7 million, down 6% on FY '25's $408.1 million. That decline was driven by three factors: appreciation of the Australian dollar against the U.S. dollar, a decline in dermatology from the loss of certain insurance coverage, competitive erosion on some brands and a decline in the international as we transitioned our portfolio mix from lower to higher-margin products and exited certain lines. Gross profit held essentially flat at $248.1 million. Reported direct contribution was $107.1 million, down 2% on the prior year, reflecting higher sales and marketing investment in women's health, continued investment behind NEXTSTELLIS PBS listing in Australia and an increased OpEx dermatology tied to higher volumes through Adelaide Apothecary, partially offset by an 11% increase in dermatology's own contribution. Reported EBITDA was $141.4 million, well above FY '25's $18.4 million, though that comparison is affected by one-offs, litigation and restructuring charges, derivative fair value adjustment and the largest impact coming from the release of earn-out liabilities from a reduction in future revenue forecast of certain licensed products. On an underlying basis, EBITDA was $34.2 million, down 27% year-on-year. Operating cash flows from continuing operations was broadly stable at $24.9 million, while adjusted operating cash flow was $34.5 million, down 24%, reflecting the timing and scale of these one-offs. Slide 8 bridges reported EBITDA to underlying EBITDA. Reported EBITDA was affected by significant scheme-related legal fees, including litigation, restructuring charges and non-cash earn-out reassessment of the women's health portfolio. The earn-out reassessment is reflective of a reduction to future forecasted revenues, specifically for ANNOVERA. I have mentioned the reasons of the $2.5 million increase in underlying EBITDA from the expectation we provided to the market on the 31st of July, reflecting the company's decision to treat the portion of share-based expense attributable to retention as part of the continuing operations adjustment given the one-off nature of this expense. In addition, an underlying basis, the year-on-year decline reflects the general business disruption caused by the Cosette transaction, our deliberate step-up in women's health sales and marketing, together with the higher mandatory post-approval study cost, unfavorable foreign exchange of approximately $1.9 million as the Australian dollar appreciated, short-term incentive of approximately $7.1 million expected to be recognized in FY '26 versus none in FY '25. And the absence of prior period managed care true-up benefits of approximately $5.6 million recognized in FY '25. Underlying EBITDA is a non-IFRS measure and is unaudited. Slide 9 walks you through the movement in cash and marketable securities from $100.4 million at the 30th of June 2025 to $80 million at the 30th of June 2026. The continuing business generated positive operating cash of approximately $34.5 million, excluding the Cosette litigation and transactional costs of $12.6 million, and we made payments of approximately $12.5 million in royalties and a $10.3 million earn-out payment for the TWYNEO and EPSOLAY acquisitions. The key message is the underlying business remains cash generative with the year's movement driven largely by discrete earn-out and litigation items. Now turning to the segment performance. Slide 11 shows the FY '26 revenue and contribution split across three segments. women's health contributed revenue of $174.3 million, dermatology, $138.7 million and international, $70.7 million. On total, direct contribution of $100.7 million, women's health delivered $57.9 million; dermatology, $44.5 million; and international, $4.6 million, underlying women's health and dermatology as the group's primary earning engines. Slide 12 summarizes the operating highlights across the three segments. In women's health, the FDA removed the black box warning on BIJUVA in February of 2026. We made a targeted investment in sales, marketing and patient access. We completed a sales force optimization for the menopause contraception specialists in key metro markets, and we advanced the FDA required post-marketing studies for ANNOVERA and IMVEXXY. In dermatology, we launched TWYNEO and EPSOLAY, successfully launched DistributeRx in March, secured a major two-phase expansion at Adelaide Apothecary and broadened the DistributeRx platform. Signing the first third-party partner, we further manufacture agreement and negotiation. In international, we inaugurated $18 million in the Salisbury facility upgraded, which was recognized in export and business awards and importantly, secured the PBS approval for NEXTSTELLIS. In Australia, driving strong prescription growth, expanded KADIAN distribution in Canada and improved delivered in full on time to 97.4%. Turning to the segment performance on Slide 13. Women's health is where the FX impact is most pronounced. Revenue was actually up 2% in U.S. dollar terms at $118.2 million, but down 2% once translated to the Australian dollar at $174.3 million. So on an underlying consistent currency basis, the segment grew. That's reflected across the brand portfolio, too. NEXTSTELLIS grew 6% in U.S. dollars to $45.2 million and BIJUVA grew 20% to USD 15 million and direct contribution came in at $57.9 million, down 7% on a reported basis. For dermatology, revenue was $94.1 million, down 6% on a U.S. dollar basis. But once translated into [ U.S. dollars ], that becomes $138.7 million, down 10%. Direct OpEx was up 4% to $44.2 million. Gross profit rose 7% to $88.7 million on a 63.9% margin and a direct contribution grew 11% to $44.5 million. international delivered revenue of $70.7 million, down 7%, with direct OpEx up 18% to $16.7 million and direct contribution down 38% to $4.6 million. These figures are reported in Australian dollars without a material U.S. dollar cross-currency effect. I will now hand the call back to Aaron to walk through the particular segment highlights. Please go ahead, Aaron.

Thanks, Griffin. Now going into some further detail on women's health. Slide 15 frames the menopause opportunity, which underpins BIJUVA and IMVEXXY. The category is being derisked by regulation changes with the FDA's removal of the black box warning for certain hormone replacement therapies, including BIJUVA. There is a powerful demographic tailwind with around 75 million women in the United States now in peri or post menopause and a further 1.3 million entering each year, a market that remains significantly underserved. Celebrity-led destigmatization is converting awareness into clinical demand. Payer coverage is expanding and independent estimates see the menopause market growing from around USD 10 billion to 15 billion in 2026 to USD 15 billion to USD 25 billion by 2030, or an estimated 60% growth. We invested in a specialist menopause sales force in the second half given the category's potential. BIJUVA delivered total prescription growth of 26% and net sales up 20% to USD 15 million. IMVEXXY grew prescriptions 6%, with net sales up 8% to USD 29.3 million. Slide 16 covers contraception and NEXTSTELLIS. Key drivers include expanding payer willingness to cover open, affordable contraceptive access under the Affordable Care Act, growing digital and direct-to-patient access through telehealth and online pharmacies and improved payer coverage that drove a significant step-up in volumes in the fourth quarter. We added approximately 15 million additional covered lives in fiscal year '26. NEXTSTELLIS delivered demand cycles up 15% and net sales up 6% to USD 45.2 million. ANNOVERA saw prescriptions up 2%, though net sales were down 13% to USD 25.7 million, reflecting persistent product returns, which we are actively working to address. Turning now to dermatology and DistributeRx on Slide 17. Slide 18 shows how a shift in our dermatology product mix is driving margin and contribution growth. Branded products increased as a share of the portfolio from around 54% in fiscal year '25 to 58% in fiscal '26. That shift, combined with continued channel optimization, drove gross margin and contribution growth even against a lower revenue base. Slide 19 sets out our dermatology portfolio, a mix of branded and generic products, six branded products and 25 generic and authorized generic products for 31 total Mayne Pharma dermatology products, with long-dated patent protection extending in some cases to 2041. I should note that a generic RHOFADE launched in July 2026 as expected. Slide 20 explains our disintermediation strategy. removing intermediaries between Mayne Pharma as manufacturer and between the patient. The U.S. pharmacy distribution system creates real friction, handoffs, stage gates, opaque financial incentives and obstructions that increase cost to patients and manufacturers through rebates and fees, increase unfilled prescriptions from barriers and outright abandonment, and create significant additional effort to patients and HCPs to attempt to get the prescribed medication into the hands of the patient. DistributeRx with Adelaide Apothecary as our licensed cash pay pharmacy arm addresses that friction. Mayne has been focused on these problems for 5-plus years. And as a result, fiscal year '26 saw approximately 60% of our U.S. women's health and dermatology volumes move through those non-traditional channels. Slide 21. DistributeRx is a wholly owned subsidiary of Mayne Pharma focused on partnership with manufacturers, providers and pharmacies to improve patient access and offer predictable prices. We compete in the e-pharmacy market space. This market is expected to reach around USD 252 billion by 2030. The launch of DistributeRx materially exceeded expectations, delivering strong prescription growth ahead of forecast and the prior corresponding period, with around 5,000 new prescribers added since launch. In May, we announced a major expansion of Adelaide Apothecary in Lexington, Kentucky, lifting capacity to up to 2.5 million prescriptions per annum across two phases, with around USD 4 million invested for capital equipment and automation. Slide 22 shows the total DistributeRx portfolio, including the Mayne Pharma and non-Mayne products. At present, the channel carries the previously mentioned 31 Mayne Pharma dermatology products alongside a further 208 third-party products, with a pipeline of additional products across several new manufacturers, including our first third-party partnership with Resilia Pharmaceuticals announced 1st of June 2026. Turning now to our final segment, international. NEXTSTELLIS was added to the PBS on the 1st of October 2025, with around 1.7 million Australian women using contraception each year and following our investment in sales and marketing post listing, we've generated strong prescription growth with Australian demand cycles rising materially through the second half and reaching record [indiscernible]. Slide 25 sets out our future growth drivers. In women's health, our strong intellectual property and current market share provides ample headroom to continue to grow all products. We have a significant market opportunity in the hormone replacement therapy space, with the promotion, sales execution and access all in the right position at the right time to pursue this opportunity. In dermatology, the main products can address as many as 1 in 3 derm conditions, and there is an acute and growing need for improved patient access, price transparency and process efficiency. The DistributeRx solution has been purpose-built, tested and launched to address these needs. We do see opportunities to continue to expand our asset portfolio with a focus on profitability and capital efficiency and as mentioned, have a number of promising manufacturing partnerships in work. In international, NEXTSTELLIS growth has accelerated following the PBS tailwind and the Salisbury capacity upgrade, together with significant business development efforts will add partnerships to grow exports and add products. Slide 26 summarizes our fiscal year '27 focus. In women's health, we will leverage the current commercial structure to grow where the opportunities are greatest. Improved coverage on NEXTSTELLIS, removal of the black box warning on BIJUVA and general increase in awareness on hormone replacement therapies to treat menopause creates significant opportunity. We will further optimize how our products move through distribution channels to improve patient and manufacturer outcomes. In dermatology, we will grow the portfolio and optimize supply and pricing in the face of some anticipated loss of coverage, insurance coverage on TWYNEO and generic entry against RHOFADE. DistributeRx will be focused on prescription growth with addition of territories, products and partnerships driving growth in new and repeat writers. In international, we will build on NEXTSTELLIS growth and leverage the Salisbury investment for export and contract manufacturing growth. And at a corporate level, we will continue to evaluate capital-efficient synergistic acquisitions alongside disciplined capital management. In closing, fiscal year '26 was a year in which we strengthened the foundations of the business, and we enter fiscal year '27 with clear commercial momentum and a disciplined plan to convert it into durable profitable growth. And I would like to thank all of the Mayne Pharma employees who all contributed to make that happen. That concludes our formal presentation. Griffin and I would now be happy to take your questions. Our Investor Relations contact details are on screen.

[Operator Instructions] I'd first like to hand over to Mr. Tom Duthy to address any pre-submitted questions.

Thank you very much, Darcy. We've had a couple of questions relating to the DistributeRx manufacturing pipeline -- or manufacturer pipeline. So Aaron, this is a consolidated question. One DistributeRx manufacturer, Resilia Pharma is signed and seven more are in negotiation covering 13 pipeline products. What revenue uplift should the market expect as those progressively convert? And on what time line do we anticipate these to be converted?

Thanks, Tom, and thanks for the question. The expansion for these arrangements is driven by manufacturers seeing what Mayne Pharma sees, namely that DistributeRx has a value-added channel for their products. As mentioned, we have seven additional manufacturers in negotiation covering 13 different products. We would expect to convert a significant percentage of those manufacturers in the near term. We don't specifically provide revenue guidance for DistributeRx, but do expect to be able to provide the market with some numbers at the first half of fiscal year 2027. We do anticipate expanding beyond dermatology as well. So some of those products that we would add may expand beyond the dermatology therapeutic area.

Thank you, Aaron. The next question relates to menopause. Menopause is clearly central to your growth story, BIJUVA and IMVEXXY, and the FDA black box warning removal with Mayne Pharma as currently indicated to the market, holding a very low single-digit share of these markets. The question, is why are you so confident menopause is a growth driver for this business and what needs to be true for Mayne to capture a disproportionate share of that expansion?

Thanks for that question. Menopause is a -- menopause has been an area that was, especially in the U.S., severely impacted by a study that was performed in 2002. In the year 2000, as many as 27% of women in the United States used hormone replacement therapy for menopause symptoms. Following the WHI study that I mentioned in 2002, that usage declined to around 4% to 6% of women. So the use declined from 27% to something around 5%. Consumer behavior, knowledge of health care providers and regulators signaling an increased acceptance with black box warning removal have all spurred significant growth, with this market, expect to grow as much as 60% by 2030. A reasonable proxy is Europe, where today, approximately 16% of women use hormone replacement therapy for menopause symptoms. The products that we have are best-in-class products. They have an accretive cash profile versus some of our other products. And they've been at the center of some of the investments that we've made to increase digital and in-person promotion of menopause products. And the growth that we've seen to date actually predates those investments. So we've made targeted investments. We've made those investments on -- with very grounded assessments of what those investments will be worth, and we are already seeing the positive results of those investments.

We have a question relating to the gross margin in women's health. There was a decline in FY '26. The question is, can you comment on the direction of the women's health gross margin into FY '27?

We would generally expect the gross margins to improve between fiscal year '26 and fiscal year '27. We continue to see growth in the women's health products. Fiscal year '25 was buoyed by a managed care adjustment of about $5.6 million, which was nonrecurring in fiscal year '26. And so that was -- it was an inflation on fiscal year '25 that we didn't see again in fiscal '26. That was a function of some of the conservatism that I, as CFO, held in the gross to net estimation as we overhauled all of our processes, all of our data, et cetera, over a multiyear period. And so we continue to refine our approach there, but our approach has proven to be quite accurate. Hence, we didn't need to hold the same level of conservatism. We also saw that fiscal year '26 was heavily weighed down with over USD 11 million of product returns on ANNOVERA, and that's USD 11 million negative revenue or debit to revenue, reduction of revenue, with a straight hit to profit. And so we are working on changing the way that product is handled and treating that product more as a specialty product than as a standard pharmacy product that runs through a more traditional channel. So the size of the opportunity there as well is $11 million. In addition to that, the increase in NEXTSTELLIS coverage that I mentioned with the expansion of covered lives gives us a higher mix of covered transactions compared to cash transactions. So we would expect some volume of cash transactions to move to covered. And overall, that mix effect would be expected to be accretive to the fiscal year '26 margin profile.

Thank you, Aaron. Just while we're on women's health and the women's health product, this relates to the international business. NEXTSTELLIS Australian demand is up strongly since PBS listing. Is this a function of the PBS cost effect for patients or the sales and marketing push?

That is a function of both. A 3-month supply of NEXTSTELLIS now costs a patient in Australia $25, which is one factor, putting us on equal footing with other oral contraceptives. But another factor is the unique profile of the product, which has been central to being able to drive increased sales. So we promoted the product. The product is a differentiated superior product, and it's now on equal footing with other oral contraceptives that are on the PBS. We have a solid runway there, and we expect to see continued growth for this product in Australia.

Thank you, Aaron. This question relates to guidance. Is there any guidance for one-off costs moving forward? And can you provide any updates on the legal scheme costs moving forward?

So we don't provide guidance on one-off costs. By their nature, they're relatively difficult to guide upon or predict. We've significantly reduced the one-off costs, having exited the generics business and running down a large portion of the surprises that come there as a function of either Inflation Reduction Act topics, product returns, legacy matters that just -- that were part of the core thesis for us to exit the generics business. So we've significantly run that down. I would expect that to be lower year-on-year than what we've experienced. With respect to other one-off costs, scheme costs, the only -- there are no further costs for the scheme with Cosette. We only would have litigation costs, which we don't provide guidance information to the market, but we would not expect the litigation cost to be outsized relative to other matters that are similar. The litigation forward-looking is -- runs on a more normal time frame and a more normal scale compared to what we worked through in the determination of the scheme.

This relates to the growth opportunity for e-pharmacy and DistributeRx generally. So you've mentioned on the call today that the e-pharmacy market is forecast to reach USD 252 billion by 2030. The question is, what structural shift in U.S. pharmacy distribution makes now the right time for DistributeRx? And how is Mayne positioned to grow this business unit strongly over time?