AFT Pharmaceuticals — FDA nod for opioid alternative, upside anticipated

AFT Pharmaceuticals (ASX: AFT)

Last close As at 26/04/2024

NZD3.07

0.00 (0.00%)

Market capitalisation

NZD322m

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Research: Healthcare

AFT Pharmaceuticals — FDA nod for opioid alternative, upside anticipated

AFT Pharmaceuticals announced FDA approval for Maxigesic IV, an intravenous form of its flagship pain relief prescription medicine. The FDA approval of the post-operative pain alternative to opioids marks a material win for AFT, given the US is the largest analgesic market (estimated at nearly $7bn) and the current US regulatory hurdles in addressing pain in light of the opioid abuse epidemic. The launch at end FY24 or early FY25 is anticipated to trigger a US$6m milestone payment from Hikma Pharmaceuticals, the US licensee for Maxigesic IV. AFT’s 65% share of this milestone has the potential to provide upside to its NZ$22–24m FY24 operating profit guidance if Maxigesic IV is launched in FY24. We note that Maxigesic IV is already registered in 43 countries and is available in 21 countries (including key markets of Germany, France and Italy). The US approval is a key addition to the AFT portfolio, providing further confidence in the company’s ability to reach its previously stated near-term rolling 12-month stretch revenue target of NZ$200m, which we anticipate to be achieved on an annual basis by FY25.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

AFT Pharmaceuticals

FDA nod for opioid alternative, upside anticipated

Regulatory update

Pharma and biotech

19 October 2023

Price

NZ$3.40

Market cap

NZ$357m

NZ$0.63/US$

Net debt (NZ$m) at 31 March 2023

29.9

Shares in issue

104.9m

Free float

26.8%

Code

AFT

Primary exchange

NZX

Secondary exchange

ASX

Share price performance

Business description

AFT Pharmaceuticals is a specialty pharmaceutical company that operates primarily in Australasia but has product distribution agreements across the globe. The company’s product portfolio includes prescription and over-the-counter drugs to treat a range of conditions and a proprietary nebuliser.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Nidhi Singh

+44 (0)20 3077 5700

Jitisha Malhotra

+44 (0)20 3077 5700

AFT Pharmaceuticals is a research client of Edison Investment Research Limited

AFT Pharmaceuticals announced FDA approval for Maxigesic IV, an intravenous form of its flagship pain relief prescription medicine. The FDA approval of the post-operative pain alternative to opioids marks a material win for AFT, given the US is the largest analgesic market (estimated at nearly $7bn) and the current US regulatory hurdles in addressing pain in light of the opioid abuse epidemic. The launch at end FY24 or early FY25 is anticipated to trigger a US$6m milestone payment from Hikma Pharmaceuticals, the US licensee for Maxigesic IV. AFT’s 65% share of this milestone has the potential to provide upside to its NZ$22–24m FY24 operating profit guidance if Maxigesic IV is launched in FY24. We note that Maxigesic IV is already registered in 43 countries and is available in 21 countries (including key markets of Germany, France and Italy). The US approval is a key addition to the AFT portfolio, providing further confidence in the company’s ability to reach its previously stated near-term rolling 12-month stretch revenue target of NZ$200m, which we anticipate to be achieved on an annual basis by FY25.

Year end

Revenue (NZ$m)

PBT*
(NZ$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/22

130.3

18.9

19.2

0.00

17.7

N/A

03/23

156.6

16.7

11.0

1.10

30.9

0.3

03/24e

184.0

21.7

15.2

1.43

22.4

0.4

03/25e

214.0

39.2

27.3

2.64

12.5

0.8

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Following the announced FDA approval for Maxigesic IV, management expects to launch the product in the US with its partners by the end of FY24 (which ends in March) or in early FY25. The launch will trigger two near-term payments: 65% of the US$6m milestone payment from Hikma Pharmaceuticals with the commercial launch and US$2.9m in FDA regulatory fee reimbursement (expected in FY24). The US FDA approval for Maxigesic IV is AFT’s second FDA approval within a year, with the first approval of Maxigesic Rapid tablets (a rapid dissolving tablet version of Maxigesic) in March 2023; management is evaluating its market entry approach for Maxigesic Rapid tablets. We note that the US is an as yet untapped market for AFT and it is the largest analgesics market globally, valued at US$6.8bn (and estimated to grow at a CAGR of 4.9% during 2023–28). In light of the US opioid abuse epidemic, physicians have had limitations in addressing patients’ post operative pain and in our view Maxigesic IV can provide a needed alternative. The launch is anticipated to generate incremental revenues for the company and aligns with management’s Maxigesic international expansion plan.

As a reminder, Maxigesic IV (developed in collaboration with Hyloris Pharmaceuticals) is a hospital-based product. The IV formulation’s US approval was delayed because AFT had to initiate additional studies to address the FDA’s concerns related to the leachable packaging compounds. Based on a potential CY24 US launch, we believe the company’s rolling 12-month revenue stretch target of NZ$200m is achievable (we estimate in FY25), and the company could potentially record FY24 milestones if Maxigesic IV is launched in this fiscal year, potentially providing upside to FY24 operating profit guidance of NZ$22–24m.

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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