MAYNE Pharma Group has reported solid demand for the institutional component of its $65 million equity raising, as it seeks greater sales in the world's largest pharmaceutical market via the ambitious purchase of a US company.
Mayne, which develops and manufactures proprietary and generic pharmaceutical products, said yesterday that all major institutions had taken up their entitlements and new, as yet unidentified, cornerstone investors had emerged.
Mayne is backed by pokies entrepreneur Bruce Mathieson, the Pratt family's investment fund Thorney Investments and former Victorian politician Ron Best. It is chaired by Roger Corbett, who is chairman of Fairfax Media, owner of The Age.
As flagged by BusinessDay last week, Mayne intends to buy the privately held pharmaceutical development company Metrics Inc for up to $US120 million - more than twice Mayne's then market capitalisation of $55 million.
After falling 10.7 per cent, or 3¢, yesterday, Mayne is now capitalised at $38 million.
The planned purchase is to be funded by a $US44.5 million debt facility with a US-based healthcare financier and a $65 million equity raising, conducted by UBS and Credit Suisse. The equity raising is priced at 20¢ a share - compared with yesterday's closing price of 25¢, and Patersons Securities' valuation of Mayne at 30¢.
The deep discount has raised some eyebrows, but the raising is believed to have been conservatively priced amid choppy markets and after a difficult 12 months in which the company was hit by an anti-trust lawsuit in the US.
Patersons analyst Allan Franklin said in a client note the ''acquisition of Metrics clearly strengthens the group's manufacturing capability, expertise and earnings potential''.
The deal would also deliver to Mayne a ''large manufacturing facility, significant pharma expertise and existing relationships with [up to] 100 pharma clients,'' he wrote.
''The combined business will have 14 marketed products and 17 new products in various stages of development.''
Mayne's retail offer, for $24.7 million, will open this Friday.
Having recently reported a profit jump to $6.15 million in the 2012 financial year, Mayne expects the merged company's adjusted profit to reach between $4.3 million and $5.2 million over 7½ months in the 2013 financial year. It also expects the enlarged company to have between $69 million and $82 million in revenue over the same period.