Currency in NZD
Last close As at 17/03/2023
NZD3.65
▲ 0.04 (1.11%)
Market capitalisation
NZD379m
Research: Healthcare
AFT Pharmaceuticals continues to strengthen its R&D pipeline with the announced in-licensing agreement with Latitude Pharmaceuticals (a US-based contract research organisation) to develop antibiotic eye drops to treat serious eye infections. The formulation is already approved to treat bacterial infections, including those caused by the antibiotic-resistant MRSA bacteria. The IP relates to an aqueous stable formulation of this treatment. Eye care is a key focus for AFT (contributing over 20% of the group’s revenue, per our estimate) and we expect this new asset to complement the existing portfolio. AFT plans to launch around 65 new products in Australasia before 2025 and a robust R&D pipeline will be key to delivering this. The development programme will be covered by AFT’s budgeted R&D expenditure of c NZ$12m per year for FY23 and FY24.
AFT Pharmaceuticals |
Portfolio expansion with new in-licensing deal |
R&D update |
Pharma and biotech |
2 February 2023 |
Share price performance Business description
Analysts
AFT Pharmaceuticals is a research client of Edison Investment Research Limited |
AFT Pharmaceuticals continues to strengthen its R&D pipeline with the announced in-licensing agreement with Latitude Pharmaceuticals (a US-based contract research organisation) to develop antibiotic eye drops to treat serious eye infections. The formulation is already approved to treat bacterial infections, including those caused by the antibiotic-resistant MRSA bacteria. The IP relates to an aqueous stable formulation of this treatment. Eye care is a key focus for AFT (contributing over 20% of the group’s revenue, per our estimate) and we expect this new asset to complement the existing portfolio. AFT plans to launch around 65 new products in Australasia before 2025 and a robust R&D pipeline will be key to delivering this. The development programme will be covered by AFT’s budgeted R&D expenditure of c NZ$12m per year for FY23 and FY24.
Year end |
Revenue |
PBT* (NZ$m) |
EPS* |
DPS |
P/E |
Yield |
03/21 |
113.1 |
8.2 |
7.1 |
0.00 |
53.4 |
N/A |
03/22 |
130.3 |
18.9 |
19.2 |
0.00 |
19.7 |
N/A |
03/23e |
152.2 |
17.6 |
13.4 |
2.57 |
28.2 |
0.7 |
03/24e |
189.7 |
31.3 |
21.7 |
4.22 |
17.4 |
1.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
AFT anticipates the patented aqueous formulation will take three to four years to develop into an antibiotic eye drop, suitable for global regulatory filings across major markets including the US, Europe, China and Japan. The underlying formulation is already approved in a broad range of bacterial infections. It is available off-label for eye infections through compounding pharmacies, although there are no regulatory approved ophthalmic versions yet. We believe this partially de-risk this development programme. AFT (along with Latitude) estimates the target addressable market is US$1bn globally.
We believe this new development programme complements AFT’s existing eye-care portfolio, which we estimate is the second-largest revenue-contributing category for the company (over 20% of sales per our estimates) after pain relief (including the flagship product, Maxigesic). AFT’s key eye-care brands include HYLO, NovaTears, Cromo-Fresh and Opti-Soothe. The Latitude agreement is AFT’s second R&D collaboration in FY23, following an in-licensing agreement with Massey Ventures and the Gillies McIndoe Research Institute in September 2022 to develop a topical treatment for strawberry birthmarks (infantile haemangiomas) in children. Both agreements are in line with the company’s plans to expand its R&D and product portfolio.
AFT plans to launch around 65 products in Australasia before 2025, in addition to several planned launches in global markets over the next two to five years. A robust R&D pipeline therefore remains key to achieving these objectives. Management has guided for the FY23 R&D expenditure to be NZ$12m (NZ$10m in FY22) and the new licensing/development programme will be included in this budget.
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Research: Healthcare
Cash flow figures from Paradigm Biopharmaceuticals’ latest update show that it remains funded past key near-term inflection points. In Q223, management reported a net cash outflow from operating activities of A$7.8m (A$17.8m for the first six months of FY23), including an A$7.4m R&D tax incentive rebate, and no capital expenditure. R&D expenditure increased 54% q-o-q to A$13.2m, corresponding with ongoing recruitment and site identification for the pivotal PARA_OA_002 Phase III trial of iPPS in knee osteoarthritis and an increase in other clinical activities. With cash of A$83.9m at end Q223 and at the current quarterly burn rate (adjusted for the non-recurring R&D tax incentive, A$15.2m), management estimates that operations are funded into 2024 (5.5 quarters), past important clinical milestones in Paradigm’s osteoarthritis programme in 2023.
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