Last close As at 05/08/2026
NZD4.75
▲ −0.03 (−0.63%)
Market capitalisation
NZD499m
Research: Healthcare
AFT Pharmaceuticals recently reported its results for FY21. Operating revenue grew strongly by 7% year-on-year to NZ$113.1m, driven mainly by 11% growth in Australia, despite the impact of COVID-19 across the business (especially lower licensing income and higher costs, including freight). Reported group operating profit was NZ$10.7m compared to NZ$21.2m in the same period a year ago (NZ$11.4m if a one-time FY20 gain of NZ$9.8m is excluded). Importantly, AFT is guiding to operating profit of NZ$18–23m in FY21.
Written by
AFT Pharmaceuticals |
Growth in the face of a challenging environment |
Financial update |
Pharma & biotech |
26 May 2021 |
Share price performance
Business description
Next events
Analysts
AFT Pharmaceuticals is a research client of Edison Investment Research Limited |
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AFT Pharmaceuticals recently reported its results for FY21. Operating revenue grew strongly by 7% year-on-year to NZ$113.1m, driven mainly by 11% growth in Australia, despite the impact of COVID-19 across the business (especially lower licensing income and higher costs, including freight). Reported group operating profit was NZ$10.7m compared to NZ$21.2m in the same period a year ago (NZ$11.4m if a one-time FY20 gain of NZ$9.8m is excluded). Importantly, AFT is guiding to operating profit of NZ$18–23m in FY22.
Year end |
Revenue (NZ$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/20 |
105.6 |
3.4 |
0.03 |
0.0 |
N/M |
N/A |
03/21 |
113.1 |
8.2 |
0.07 |
0.0 |
67.1 |
N/A |
03/22e |
130.9 |
20.3 |
0.17 |
0.0 |
27.6 |
N/A |
03/23e |
151.0 |
33.2 |
0.23 |
0.0 |
20.4 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Maxigesic IV licensed to Hikma in the US
In April 2021, AFT announced a licence and distribution agreement for Maxigesic IV with Hikma Pharmaceuticals, the third largest US supplier of generic injectable medicines by volume, with US$2.3bn in total sales in 2020 (US$1.0bn of this was from injectables). The terms of the agreement include up to US$18.8m in upfront, regulatory and commercial milestones and a profit share.
Maxigesic launched in 43 countries
Maxigesic tablets are now sold and launched in 43 countries, up from 34 at the end of September 2020. The tablets are registered in 49 different countries and licensed in over 125. Maxigesic IV is launched in three countries but registered in 21, with over 100 licensing agreements.
Australia drives growth
Australia accounts for over 60% of group sales and grew 11% to NZ$68.3m despite significant disruptions due to COVID. The OTC channel (62% of total Australia revenue) was most hindered by COVID-19 lockdowns and restrictions but still grew 9%. The hospital channel grew 13%, partly due to higher antibiotic sales, while the prescription channel grew 21% with the launch of new products.
Valuation: NZ$644m or NZ$6.15 per share
We are increasing our valuation to NZ$644m or NZ$6.15 per share from NZ$629m or NZ$6.02 per share, mainly due to rolling forward our NPV. This was partially offset by lower near-term operating profit forecasts due to slower than expected sales in the rest of world region. The company reported NZ$3.2m in cash and NZ$38.4m in debt at the end of the year. Cash was negatively affected by a NZ$10.9m build in inventory to help weather COVID-19 disruptions.
FY21 results
AFT has reported revenue of NZ$113.1m for FY21, the period ending 31 March 2021. This represents a 7% increase over the prior year. Revenue in Australia was up 11% to NZ$68.3m and now represents 60.4% of group revenue. The OTC channel, which represents approximately 62% of revenue for Australia, grew 9% and was hindered by COVID-19 lockdowns and other restrictions. Maxigesic sales were especially affected although this was offset in part by strong growth in and sales of hand sanitizer and face masks. The hospital channel grew by 13% and was helped by antibiotic sales in response to the pandemic. The prescription channel grew 21% thanks to new product introductions. However, some products in this category, such as penicillin, were hampered due to a decline in visits to general practitioners (GPs) for non-COVID-19-related purposes. Despite these challenges, operating profits for Australia rose to NZ$7.9m from NZ$7.3m in FY20
New Zealand revenue was up a little over 1% at NZ$30.5m, representing 27% of group sales. The OTC channel fell 3% from FY20 to NZ$16.8m due to COVID-19 restrictions and reduced GP visits. The hospital channel grew 20% to NZ$4.8m due to strong antibiotic sales. The prescription channel grew by 2% to NZ$8.9m. Note this is a significant turnaround compared to the 9% contraction in sales we had seen in H121. That reduction had been due to restrictions on visits to GPs and governments preventing pharmacists from dispensing more than 30 days of medicine. The operating loss (including head office costs) for this region improved from NZ$205,000 last year to NZ$69,000 in FY21.
Asia revenue fell by 10% to NZ$4.4m. The OTC segment benefited from COVID-19 related stockpiling of Maxigesic in Singapore, while the hospital and prescription channels declined due to a transition to higher-margin products. This transition helped increase operating profit from NZ$0.1m in FY20 to NZ$1.5m in H121. Importantly, e-commerce sales have commenced in China and sales are expected to begin in South Korea in the near future.
Exhibit 1: 2021 results by region
NZ$000s |
Revenues FY21 |
Revenues FY20 |
Operating profit before tax FY21 |
Operating profit before tax FY20 |
Australia |
68,266 |
61,428 |
7,919 |
7,278 |
New Zealand |
30,526 |
30,108 |
(69)* |
(205)* |
Asia |
4,411 |
4,930 |
1,450 |
93 |
Rest of world |
9,902 |
9,131 |
1,408 |
14,040** |
Total |
113,105 |
105,597 |
10,708 |
21,206 |
Source: AFT Pharmaceuticals. Note: *New Zealand profit before tax includes head office expenses. **Rest of world profit before tax includes a non-recurring gain of NZ$9.8m; without this gain profit before tax for this region would have been NZ$4.3m.
Rest of world revenues grew by 8% to NZ$9.9m, a significant recovery from the 16% decline seen in the first half of FY21, which was due to an 88% reduction in licensing income thanks to delayed deal-signing as a result of COVID-19-related travel restrictions. For the full year FY21, licensing income was down 44% to NZ$2.1m due to the restrictions, but this was offset by a 47% increase in sales of products and royalties to NZ$7.8m. This increase was somewhat hampered due to supply disruptions in India where Maxigesic tablets are manufactured. The company has added manufacturing capability in China and will have additional manufacturing available soon in Europe, all of which should reduce the risk of supply disruptions. Sales were assisted by orders shipped to Germany, Belgium, Luxembourg, Ireland and Switzerland. Operating profit fell to NZ$1.4m in FY21 from NZ$14,040 (NZ$4.3m excluding a non-recurring gain of NZ$9.8m) mainly due to the drop in high margin licensing income.
Maxigesic tablets are now sold and launched in 43 countries, up from 34 at the end of September 2020. The tablets are registered in 49 different countries and licensed in over 125. Maxigesic IV has been launched in three countries but registered in 21, with over 100 licensing agreements. Importantly, the US rights to Maxigesic IV were licensing in April to Hikma Pharmaceuticals. Terms of the agreement include US$18.8m in upfront, regulatory and commercial milestones as well as a profit share. Of these milestones, US$3.6m will be earned following the signing of the agreement and filing for FDA approval. An additional US$7.5m in payments will be due upon reaching certain milestones leading up to and including the first commercial sale. The remainder of the milestones will be based on sales targets in the US. Also in the US, FDA approval for the Maxigesic tablet new drug approval application is pending as the manufacturing facility needs to be inspected. FDA inspections have been complicated due to travel restrictions.
Exhibit 2: Maxigesic product country totals by status
Maxigesic tablets |
Maxigesic IV |
Maxigesic oral solution |
||||
March 2021 |
September 2020 |
March 2021 |
September 2020 |
March 2021 |
September 2020 |
|
Licensed |
125+ |
125+ |
100+ |
80 |
100+ |
100+ |
Registered |
49 |
44 |
21 |
3 |
||
Sold in |
43 |
28 |
3 |
|||
Source: AFT Pharmaceuticals
With regards to the NasoSURF nasal drug delivery device (intended for medications aimed at a patient’s sinus areas), engineering batches have been successfully completed and development work on a specific dose form has begun. Clinical studies are planned for late in calendar year 2021. The 120-patient Pascomer Phase II/III clinical study is continuing to enrol patients, although there have been delays in recruitment due to COVID-19. As a reminder, Pascomer is a topical treatment for facial angiofibromas. Study enrolment is expected to complete in the 2021 calendar year. In March, AFT announced a commercialisation and development agreement with Desitin Arzneimittel (which has an over 100-year history) covering the EU as well as Switzerland, Norway and the UK.
Valuation
We are increasing our valuation to NZ$644m or NZ$6.15 per share from NZ$629m or NZ$6.02 per share, mainly due to rolling forward our NPV. This was partially offset by lower near-term operating profit forecasts due to slower than expected sales in the rest of world.
Exhibit 3: DCF sensitivity table (NZ$/share)
Terminal EBIT margin |
||||||
Terminal revenue growth |
30% |
34% |
36% |
40% |
45% |
|
-2.0% |
4.13 |
4.48 |
4.66 |
5.01 |
5.45 |
|
-1.0% |
4.36 |
4.74 |
4.93 |
5.31 |
5.79 |
|
0.0% |
4.63 |
5.05 |
5.26 |
5.68 |
6.20 |
|
1.0% |
4.95 |
5.42 |
5.65 |
6.12 |
6.70 |
|
2.0% |
5.37 |
5.89 |
6.15 |
6.68 |
7.33 |
|
3.0% |
5.89 |
6.49 |
6.79 |
7.39 |
8.14 |
|
4.0% |
6.59 |
7.29 |
7.64 |
8.34 |
9.21 |
|
5.0% |
7.58 |
8.41 |
8.83 |
9.67 |
10.72 |
|
Source: Edison Investment Research
Financials
We have decreased our revenue estimate for FY22 to NZ$130.9m from NZ$139.4m mainly due to delays in additional licence agreements and launches of Maxigesic in the rest of world. We have also lowered our SG&A estimate for FY22 by NZ$1.2m to NZ$37.2m and our R&D estimate by NZ$0.1m to NZ$3.5m due to slightly lower run rates. After these changes, our FY22 operating profit estimate is now NZ$22.5m compared to NZ$28.2m previously. Note that the company is targeting an operating profit range of NZ$18m to NZ$23m for FY22. We are also introducing FY23 forecasts, including NZ$151m in sales (up 15% from our FY22 estimate) and NZ$35.1m in operating profit (up 56% from our FY22 estimate).
The company reported NZ$3.2m in cash and NZ$38.4m in debt at the end of the year. Cash was negatively affected by a NZ$10.9m build in inventory to mitigate the business impact of COVID-19-related supply and freight difficulties (net cash generated from operating activities fell from NZ$14.9m in FY20 to NZ$0.8m in FY21). We believe AFT will be able to pay down the debt from operating cash flow and does not need additional long-term financing (though some short term facilities may need to be used for working capital needs).
Exhibit 4: Financial summary
NZ$000 |
2020 |
2021 |
2022e |
2023e |
||
March |
NZ GAAP |
NZ GAAP |
NZ GAAP |
NZ GAAP |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
105,597 |
113,105 |
130,917 |
151,042 |
Cost of Sales |
(57,332) |
(64,364) |
(68,349) |
(73,720) |
||
Gross Profit |
48,265 |
48,741 |
62,567 |
77,322 |
||
EBITDA |
|
|
12,522 |
11,813 |
23,613 |
36,195 |
Operating Profit (before amort. and except.) |
|
|
11,708 |
10,994 |
22,794 |
35,376 |
Intangible Amortisation |
(286) |
(286) |
(286) |
(286) |
||
Exceptionals |
9,784 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
21,206 |
10,708 |
22,508 |
35,090 |
||
Net Interest |
(8,329) |
(2,821) |
(2,476) |
(2,137) |
||
Profit Before Tax (norm) |
|
|
3,379 |
8,173 |
20,318 |
33,239 |
Profit Before Tax (reported) |
|
|
12,877 |
7,887 |
20,032 |
32,953 |
Tax |
(185) |
(105) |
(2,804) |
(9,227) |
||
Profit After Tax (norm) |
3,194 |
8,068 |
17,514 |
24,012 |
||
Profit After Tax (reported) |
12,692 |
7,782 |
17,228 |
23,726 |
||
Average Number of Shares Outstanding (m) |
97.3 |
103.3 |
104.7 |
104.7 |
||
EPS - normalised (c) |
|
|
3.3 |
7.1 |
16.7 |
22.9 |
EPS - (reported) (NZ$) |
|
|
0.12 |
0.07 |
0.16 |
0.23 |
Dividend per share (c) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Gross Margin (%) |
45.7 |
43.1 |
47.8 |
51.2 |
||
EBITDA Margin (%) |
11.9 |
10.4 |
18.0 |
24.0 |
||
Operating Margin (before GW and except.) (%) |
11.1 |
9.7 |
17.4 |
23.4 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
31,716 |
37,230 |
42,526 |
47,862 |
Intangible Assets |
26,984 |
32,720 |
37,918 |
43,116 |
||
Tangible Assets |
315 |
305 |
403 |
541 |
||
Investments |
4,417 |
4,205 |
4,205 |
4,205 |
||
Current Assets |
|
|
55,336 |
67,902 |
72,432 |
88,231 |
Stocks |
22,734 |
33,654 |
37,019 |
40,721 |
||
Debtors |
25,969 |
31,039 |
22,410 |
24,170 |
||
Cash |
6,119 |
3,209 |
13,003 |
23,340 |
||
Other |
514 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(25,102) |
(32,102) |
(23,003) |
(24,411) |
Creditors |
(22,993) |
(26,404) |
(23,003) |
(24,411) |
||
Short term borrowings |
(2,000) |
(5,161) |
0 |
0 |
||
Other |
(109) |
(537) |
0 |
0 |
||
Long Term Liabilities |
|
|
(44,695) |
(36,442) |
(32,442) |
(28,442) |
Long term borrowings |
(41,200) |
(33,200) |
(29,200) |
(25,200) |
||
Other long term liabilities |
(3,495) |
(3,242) |
(3,242) |
(3,242) |
||
Net Assets |
|
|
17,255 |
36,588 |
59,513 |
83,240 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
21,999 |
4,292 |
25,475 |
32,140 |
Net Interest |
(6,936) |
(3,437) |
(2,476) |
(2,137) |
||
Tax |
(185) |
(105) |
(2,804) |
(9,227) |
||
Capex |
(6,562) |
(6,231) |
(6,400) |
(6,440) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
3 |
11,673 |
0 |
0 |
||
Dividends |
(566) |
(188) |
0 |
0 |
||
Net Cash Flow |
7,753 |
6,004 |
13,794 |
14,336 |
||
Opening net debt/(cash) |
|
|
34,834 |
37,081 |
35,152 |
16,197 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
(10,000) |
(4,075) |
5,161 |
0 |
||
Closing net debt/(cash) |
|
|
37,081 |
35,152 |
16,197 |
1,860 |
Source: company reports, Edison Investment Research
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