AFT Pharmaceuticals — Poised for international market expansion

AFT Pharmaceuticals (ASX: AFT)

Last close As at 18/05/2024

NZD2.84

0.18 (6.77%)

Market capitalisation

NZD298m

More on this equity

Research: Healthcare

AFT Pharmaceuticals — Poised for international market expansion

AFT continues to focus on expanding its product portfolio and broadening its geographical footprint (including increased investments in its affiliates), which we expect to translate into stronger market traction and an increased top-line for AFT over the medium term. The company has updated the market on its international growth efforts, announcing new manufacturing agreements for Maxigesic Rapid and Crystaderm (ahead of their expected launches in the US and Chinese markets, respectively) and partnership expansion with Hikma (its US licensee of Maxigesic IV) to commercialise Combogesic IV in Saudi Arabia, Iraq and Jordan. Concurrently, AFT has made inroads into the UK market through the recent launch of Combogesic tablets and IV.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

AFT Pharmaceuticals

Poised for international market expansion

Commercial update

Pharma and biotech

5 March 2024

Price

NZ$3.10

Market cap

NZ$325m

NZ$0.61/US$

Net debt (NZ$m) at 30 September 2023

30.6

Shares in issue

104.9m

Free float

25.9%

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

Jitisha Malhotra

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

AFT Pharmaceuticals is a research client of Edison Investment Research Limited

AFT continues to focus on expanding its product portfolio and broadening its geographical footprint (including increased investments in its affiliates), which we expect to translate into stronger market traction and an increased top-line for AFT over the medium term. The company has updated the market on its international growth efforts, announcing new manufacturing agreements for Maxigesic Rapid and Crystaderm (ahead of their expected launches in the US and Chinese markets, respectively) and partnership expansion with Hikma (its US licensee of Maxigesic IV) to commercialise Combogesic IV in Saudi Arabia, Iraq and Jordan. Concurrently, AFT has made inroads into the UK market through the recent launch of Combogesic tablets and IV.

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

16.1

N/A

03/23

156.6

16.7

11.0

1.10

28.2

0.4

03/24e

187.5

22.3

15.5

1.55

20.0

0.5

03/25e

223.5

26.3

18.2

1.82

17.0

0.6

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

AFT has secured a long-term (eight-year) supply agreement with Microsize (a US-based pharmaceutical manufacturer) to supply micronized active pharmaceutical ingredients (APIs), critical components in the formulation of its Maxigesic/Combogesic Rapid pain relief medicine. Management expects the partnership will enable AFT to secure sufficient supply to meet the demand for the Rapid tablets in several markets including the US and the EU. Maxigesic Rapid is a rapid-release version of AFT’s flagship Maxigesic pain relief medicines (325mg of paracetamol and 97.5mg of ibuprofen) and is authorised for the treatment of mild-to-moderate acute pain (US patent protection until 2039). The drug received FDA approval in March 2023, and is expected to launch in the US market in FY25 (12-month period ending March 2025), a milestone for the company, in our view.

AFT has also announced new manufacturing agreements with companies in Canada and Europe to expand its manufacturing capacity to support the China launch of Crystaderm later this calendar year. We note that this will be the first AFT product to be launched in China, a highly sought after OTC market, opening the door for further commercial launches and top-line traction. Additionally, management announced that its US partner Hikma has expanded its licensing agreement with AFT to commercialise Maxigesic/Combogesic IV in its domestic Middle East market (Saudi Arabia, Iraq and Jordan), further expanding the drug’s market outreach. Furthermore, the company is working on launching its products into the UK, Canada, EU and US markets through its affiliates. First product launches are earmarked for 2024 in all these markets, and the UK affiliate has already kickstarted the process by making inroads into Boots (Combogesic tablets) and UK hospitals (Combogesic IV). AFT has also in-licensed a niche drug on the EU essential drug list, for which sales are expected to commence within 2024.

International expansion (particularly of the Maxigesic franchise) remains a key strategic priority for AFT. After launching Maxigesic IV in the US, the company is now planning Maxigesic Rapid’s upcoming US launch. With a manufacturing partner secured, we now await finalisation of a distribution partner in the US.

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 2024 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 2024 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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