Australia’s government has prohibited the proposed takeover of domestic pharmaceutical firm Mayne Pharma by US-based Cosette Pharmaceuticals, citing national interest and national security concerns.

Treasurer Jim Chalmers, acting on the advice of the Foreign Investment Review Board (FIRB), announced the decision on Friday after months of deliberation.

The rejection focuses on Cosette’s communicated intention to dispose of or close Mayne Pharma’s Salisbury South manufacturing facility in South Australia — a site described as critical to Australia’s pharmaceutical-manufacturing capabilities.

Cosette had offered to acquire Mayne at A$7.40 (approximately US$4.90) per share in February but later attempted to terminate the scheme following a profit-update and regulatory letter from the US Food and Drug Administration.

The New South Wales Supreme Court ruled that Cosette did not validly terminate the agreement and must proceed with the acquisition.

Despite the court decision, FIRB advised the Treasurer that no conditions could adequately mitigate the risk to the supply of critical medicines should the manufacturing facility be closed.

The mediation of this regulatory impasse led to the government’s decision to block the transaction in order to protect Australia’s sovereign capability in pharmaceutical manufacturing, safeguard jobs and preserve local production integrity.

Mayne Pharma’s board described its South Australian plant as a “key pillar” of its operations, pointing to recent investment and approvals from Australia’s Therapeutic Goods Administration and the United States Food and Drug Administration.

Mayne said it had consistently communicated to Cosette that it would not be commercially rational to close the facility.

Cosette’s threat to close or sell the site, coming after its attempt to exit the deal, strengthened the government’s view that local manufacturing and job security were at risk.

Shares in Mayne Pharma slid sharply after the announcement, reflecting investor concern about the deal’s collapse and the future of the company without the takeover premium.

The decision marks a strong assertion of Australia’s investment-screening regime in sectors deemed sensitive.

The case will now test how Australia balances openness to foreign investment with protection of strategic industrial capabilities.

For Cosette, the blocking of the takeover leaves it with a binding scheme it must implement or renegotiate, while Australia signals it will not tolerate transactions that compromise its critical-manufacturing base.