SA pharmaceutical firm pays $38 million to settle class action

Salisbury-based Mayne Pharma has agreed to settle a shareholder class action relating to alleged anti-competitive conduct in the United States.

Jul 02, 2024, updated Jul 02, 2024
Photo: Mayne Pharma.

Photo: Mayne Pharma.

Mayne Pharma settled the shareholder class action with a $38 million payment but without any admission of liability by the company concerning alleged anti-competitive conduct in the US and misleading or deceptive conduct to shareholders.

Law firm Phi Finney McDonald filed the class action in August 2021 on behalf of shareholders who held company shares between 24 November 2014 and 15 December 2016.

It followed a December 2016 announcement that the Attorney General of Connecticut had commenced anti-trust proceedings against Mayne Pharma’s US subsidiary, which was alleged to have participated in a conspiracy to restrain trade, inflate the price of generic pharmaceuticals and reduce competition.

Mayne Pharma’s share price fell around 10 per cent following the announcement.

Phi Finney McDonald alleged on behalf of shareholders that Mayne Pharma contravened its continuous disclosure obligations by failing to properly inform the market about alleged discussions and agreements its US subsidiary had with Heritage Pharmaceuticals in relation to sales of a product called “Doxy DR”, which could have been regarded as anti-competitive and contrary to US law.

It also alleged that the company engaged in misleading or deceptive conduct by maintaining public representations that Mayne was compliant with competition law, had appropriate systems for ensuring compliance, and was not exposed to the risk of reputational, financial or other impacts in the US for non-compliance with competition law.

The law firm also alleged that investors who acquired Mayne Pharma shares during the claim period were entitled to compensation for loss and damage, claiming they paid more for those shares than they would have as a consequence of Mayne Pharma’s conduct.

Mayne Pharma said approximately $4.7 million of the $38 million settlement payment will be covered by insurance, while the remainder will be paid from its cash reserves.

The settlement amount includes interest, litigation costs and the plaintiff’s legal fees.

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Mayne Pharma said it had $146.8 million in cash as of 31 December 2023, and “has sufficient cash reserves for its operations and obligations”.

“The settlement is without any admission of liability by Mayne Pharma – both with respect to the alleged underlying anti-competitive conduct in the United States, and the alleged misleading or deceptive conduct and breaches of continuous disclosure obligations – and is subject to Court approval,” Mayne Pharma said.

“The agreement to settle was a commercial decision made in the best interests of Mayne Pharma shareholders.

“The resolution of this matter enables Mayne Pharma to avoid the distraction and significant expense of a lengthy trial, and to remain focused on driving growth and shareholder value through its core commercial business.”

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