• Like London buses, takeovers tend to come in a rush
• Mayne Pharma had struggled for years, but its performance was improving
• Takeovers in the ASX biotech sector have been few and far between

The ‘London’ Bus theory goes that if one takeover emerges in a particular sector, then others will follow in quick succession.

Announced on Friday after months of speculation, US pharma giant Cosette launched its $670 million offer for Mayne Pharma (ASX:MYX).

Will more deals follow? Global biotech sentiment is improving, money is flowing into the sector and the swooning Aussie dollar makes a local acquisition more palatable.

In January, Johnson & Johnson (J&J), Eli Lilly, and Glaxosmithkline (GSK) all announced big-ticket acquisitions, the biggest being J&J’s US$14.6 billion purchase of Intra-Cellular Therapies.

That deal was also the chunkiest biotech deal since Pfizer’s US$43 billion acquisition of Seagen in December 2023.

No activity for long periods

Still, local history also shows that investors should not expect a free-for-all.

Despite  wishful thinking on the part of pre-clinical developers running out of cash,  only a dozen or so ASX biotechs have been acquired over the last two months.

A handful more fielding offers that didn’t go anywhere, including Clinuvel Pharmaceuticals (ASX:CUV) and Cynata Therapeutics (ASX:CYP).

In London Bus terms, the deals run on early Sunday morning timetable and many break down en route.

The biggest to date has been the US$1.4 billion takeover of targeted liver cancer treatment house Sirtex, by a Chinese consortium in 2018.

Last year, South Korea’s Lunit acquired Kiwi based breast cancer imaging play Volpara for $300 million, while Pfizer shelled out $300 million for cough-in-the-app telehealth diagnosis developer Resapp Diagnostics.

Overwhelmingly, the targets have been at commercial, or near commercial, stage.

A glaring exception is immune-oncology house Viralytics, acquired by Merck of the US (MND) for $500 million in 2018.

For founder Paul Hopper and his investors, it was a case of getting one Alan Bond in their life: four years later Merck later dropped the phase II drug in question, Cavatak, as “part of [its] routine pipeline prioritisation.”

Mayne’s history of pain

Mayne Pharma had had a spotty history with numerous corporate and strategy twists and turns.

Mayne develops and manufactures specialist drugs, notably the natural estrogen contraceptive Nextstellis.

But it was known as a low-margin generics company, bolstered by the US$652 million acquisition of Teva’s generics portfolio in 2016.

Th company in 2023 got out of the generics business by selling its US operation to Dr Reddy’s Laboratories, for US$90 million.

(In a nostalgic vein, Mayne’s website still describes its “robust portfolio of branded and generic drugs in multiple therapeutic areas”).

Mayne evolved from the venerable Adelaide drug maker FH Faulding, which dated back to 1845. The company still has its HQ at Faulding’s Salisbury site.

In 2001 the late serial acquirer Peter Smedley bought Faulding and merged it with his Mayne Group (formerly Mayne Nickless). This was in the hope of creating an integrated drug wholesaling and hospitals logistics conglomerate.

In short – it didn’t work.

Global group Hospira bought the injectables business, while oral drug side morphed into Halcygen Pharmaceuticals.

Halcygen, by then Mayne Group, listed in June 2007 on the back of two licensed anti-fungal and antibiotic ‘super generics’.

While Cosett’s scheme of arrangement is subject to the usual shareholder consent, it’s likely to go ahead and draw a line under Mayne’s convoluted history.

A rial bidder is considered unlikely, with pokies king Bruce Mathieson (a long-term holder) backing the deal.

The Mayne event, or an entree? 

‘Spot the next takeover target’ is a tricky game, because they tend to come from left field.

Combinations that are logical on paper often don’t eventuate for valuation reasons.

For instance, a radiology giant would love to own ProMedicus (ASX:PME) but not at a premium to a  $30 billion market cap and lofty earnings multiple.

The same could be said for the $10 billion market cap Telix Pharmaceuticals (ASX:TLX) or successful neurological drug developer Neuren Pharmaceuticals (ASX:NEU) (although the latter’s 37% share decline over the last year does raise muted murmurs).

Antares Equities nominates Botanix Pharmaceuticals (ASX:BOT) , which last year won rare US food & Drug Administration for its drug Sofdra, to counter excessive sweating.

The fund notes that as Botanix sales rollout has only begun, now could be the time for big pharma to strike.

Regal Funds Management’s Jessica Farr-Jones thinks Opthea (ASX:OPT) could become a target, pending success of its two  phase III trials for wet aged-related macular degeneration.

Top-line results from the first trial are expected in the June quarter.

“We think it will be a value inflexion point and potentially start a bidding war from some of the pharma companies who own the standard of care drugs,” she says.

We’ll throw in LTR Pharma (ASX:LTP), which is developing a spray-delivered version of the most common erectile dysfunction treatment.

The drug, Spontan, is available in Australia via an early access scheme. In view of full commercialisation, the company has forged a distribution deal with wholesaler Symbion (formerly owned by Mayne, incidentally) to access 3900 pharmacies.

LTR would seem attractive bait for Pfizer, owner of the now off-patent Viagra.

 The list is also not complete without autism testing play Blinklab (ASX:BB1).  That’s because it’s chaired by Brian Leedman, founder of the aformentioned Resapp who openly admits Blinklab has been designed to attract an acquirer.

It’s all in the timing

As with erectile dysfunction treatments, acquisitions are all about the timing and Cosett looks to have timed it run well.

That’s because Mayne only just showed signs of turning the corner, having flagged December half revenue of $210 – $215 million, up 12-14% and underlying earnings of  $30-  $32 million (275-300% higher).

While Cosett’s $7.40 a share bid is at a decent 37% premium, Mayne shares hit $42 in 2016.

So, the lesson is that unless investors get their timing to a ‘T’, they are better off with a high-growth companies that have made themselves impervious to takeover.

At Stockhead, we tell it as it is. While LTR Pharma is a Stockhead advertiser, the company did not sponsor this article.