A big-money bid for an Australian medicine maker has been scuppered by Treasurer Jim Chalmers after the Foreign Investment Review Board found the deal was not in the national interest.

The sticking point for the $672 million acquisition of Mayne Pharma came after the bidder, US healthcare giant Cosette, threatened to sell or shut down the Australian company's factory in Adelaide.

The treasurer said his decision to kill off the deal was "entirely consistent with the FIRB advice" that the proposal would be contrary to Australia's national interest.

"Following broad consultation, I received unequivocal advice from Treasury and FIRB that no conditions could be put in place to adequately mitigate national interest risks, particularly unique risks to the supply of critical medicines," Dr Chalmers said in a statement on Friday.

"This advice incorporated views from the Department of Health and Aged Care, the Therapeutic Goods Administration and the South Australian Government."

The decision will come as good news for Cosette, a New Jersey-based private equity firm that has been trying for months to exit the $7.40-a-share deal struck in February, after Mayne's financial performance soured and its share price tumbled below $5.

After a Supreme Court bid to extricate itself failed, Cosette's final gambit ultimately proved successful - to force the FIRB's hand by threatening to shut down the profitable Salisbury plant and shed its 200-odd jobs.

Dr Chalmers in late October told Cosette his preliminary view was not to allow the deal, because of the risk to jobs and Australia's sovereign research and development capabilities if it went ahead with closing the factory.

Mayne went into a trading halt shortly after the ASX opened on Friday morning.

Shares in the company fell more than 20 per cent to $4.60.

The FIRB was initially due to make its final ruling on Thursday, but Mayne released a statement to the share market that day notifying that the review board had extended the approval deadline until Friday.