Last close As at 05/08/2026
NZD4.75
▲ −0.03 (−0.63%)
Market capitalisation
NZD499m
Research: Healthcare
AFT Pharmaceuticals has announced the first sale of its intravenous pain relief medicine, Maxigesic IV, through its US licensing partner, Hikma Pharmaceuticals, a material milestone for AFT’s portfolio expansion and geographic diversification. The NZ$6m milestone payment triggered a bump in FY24 operating profit guidance to NZ$23–25m (from NZ$22–24m previously). The upside was partially offset by slower than anticipated sales traction in Australasia. We adjust our FY24 and FY25 estimates to reflect the update and revised guidance, including the earlier than anticipated milestone payment (pulled forward to FY24 from FY25) and increased anticipated expenses (SG&A and R&D) to align with management’s portfolio and geographic growth aspirations. Our valuation resets to NZ$698m or NZ$6.65/share (from NZ$723m or NZ$6.90/share).
Written by
AFT Pharmaceuticals |
US milestone triggers upside and guidance bump |
Guidance update |
Pharma and biotech |
19 February 2024 |
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 has announced the first sale of its intravenous pain relief medicine, Maxigesic IV, through its US licensing partner, Hikma Pharmaceuticals, a material milestone for AFT’s portfolio expansion and geographic diversification. The NZ$6m milestone payment triggered a bump in FY24 operating profit guidance to NZ$23–25m (from NZ$22–24m previously). The upside was partially offset by slower than anticipated sales traction in Australasia. We adjust our FY24 and FY25 estimates to reflect the update and revised guidance, including the earlier than anticipated milestone payment (pulled forward to FY24 from FY25) and increased anticipated expenses (SG&A and R&D) to align with management’s portfolio and geographic growth aspirations. Our valuation resets to NZ$698m or NZ$6.65/share (from NZ$723m or NZ$6.90/share).
Year |
Revenue (NZ$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
03/22 |
130.3 |
18.9 |
19.2 |
0.0 |
18.3 |
N/A |
03/23 |
156.6 |
16.7 |
11.0 |
1.10 |
34.2 |
0.3 |
03/24e |
187.5 |
22.3 |
15.5 |
1.55 |
23.5 |
0.5 |
03/25e |
223.5 |
26.3 |
18.2 |
1.82 |
19.8 |
0.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Guidance updated in the run-up to full-year results…
The earlier than anticipated milestone receipt and unexpectedly slower domestic market performance in H224 (given the strong H124 performance with 20% and 8% y-o-y growth in Australia and New Zealand, respectively) have led to AFT revising guidance. The slower than anticipated launch activity and sales uptake for new products will push timelines back slightly and we expect these launches and commensurate sales to now be realised in FY25. Margins are also likely to be affected by the required upfront investments in sales and marketing and R&D activities to expand into new products across new geographies, which should translate to stronger traction in the medium term.
…triggering an estimate revision
We have adjusted our FY24 top-line and operating profit estimates to reflect the revised operating profit guidance and now estimate an operating profit of NZ$23.9m in FY24 (NZ$22.7m previously). Adjustments to our FY25 estimates are more substantial, where we remove the milestone payment benefit (now reflected in FY24) and raise expected investments in sales and marketing and R&D, given sales spend will likely remain high with roll-over of launch activity and the active search for attractive pipeline candidates. Our revised operating profit estimate for FY25 is NZ$28.3m, versus NZ$40.3m previously. Our longer-term assumptions remain unchanged for now.
Valuation: Adjusts to NZ$698m or NZ$6.65/share
We continue to use a discounted cash flow (DCF) method to value AFT. Following the revisions to our forecasts, our valuation is now NZ$698m or NZ$6.65/share, from NZ$723m or NZ$6.90/share previously.
Forecasts and financials
We adjust our FY24 and FY25 estimates (both revenue and expenses) based on AFT’s upgraded operating profit guidance for FY24, slower sales traction in the domestic market and the potential upside from the recent launch of Maxigesic IV in the US market.
For FY24, we have lowered our sales estimates in Australia and New Zealand to NZ$105.4m and NZ$46.2m, respectively (from NZ$112.9m and NZ$47.5m previously), to reflect launch delays and slower-than-anticipated sales for newly launched products in these markets. While we expect some of the launch activity to roll over to FY25, we slightly temper our estimates and now project domestic sales of NZ$176.9m in FY25 across Australasia (from NZ$181.0m). Furthermore, we revise our FY24 and FY25 sales estimates for international market to NZ$24.5m and NZ$29.7m, respectively (from NZ$18.1m and NZ$36.2m previously), to account for the recognition of the US$6m milestone payment from Hikma (of which AFT’s share is US$3.9m or c NZ$6m) in FY24, sooner than our previous estimate of FY25. Overall, we now estimate total sales growth of 19.7% and 19.2% y-o-y in FY24 and FY25, respectively.
With the earlier-than-expected recognition of the NZ$6m milestone payment (AFT’s share) from Hikma, we revise our gross margin estimates for FY24 (46.0% vs 45.0% previously) and FY25 (47.0% vs 48.0% previously). This is because we now expect the full flow-through impact of the milestone payment to benefit the gross margin in FY24, as opposed to FY25. We note that the company plans to use this licence fee income to accelerate investments in new product launches in Australasia, Europe, the UK (Maxigesic/Combogesic tablets), the US (Maxigesic Rapid) and Canada alongside supporting other R&D projects. This includes the formation of AFT Pharmaceuticals USA and AFT Pharmaceuticals Canada along with continued investment into AFT Pharm Europe.
We raise our selling and distribution expense estimates for FY24 (to NZ$50.6m from NZ$49.3m previously) and FY25 (to NZ$53.6m from NZ$49.0m previously) to reflect the delayed product launches and incremental investments by the company. We also raise our R&D expense estimates for both FY24 and FY25 to reflect the company’s increased R&D efforts (recent investments in strawberry birthmarks, burning mouth syndrome and vulvar lichen sclerosus), resulting in an increase in our opex estimates. Our FY24 operating profit estimate is now NZ$23.9m (management guidance: NZ$23–25m) and includes c NZ$6m in licence income from Hikma, as discussed earlier. For FY25, we estimate operating profit at NZ$28.3m, from NZ$40.3m previously.
With these changes, we estimate that the company will end FY24 with a net debt position of NZ$25.6m, which translates into a net debt/EBITDA ratio of 1.0x, in line with management’s target.
Valuation
We value AFT using a DCF valuation methodology, projecting free cash flows over a 10-year explicit forecast period (FY24–33e) and thereafter ascribing a terminal growth value (assuming a conservative 2% ongoing top-line growth and an EBIT margin of 36%).
We have incorporated the above-mentioned estimate changes in our model, which results in our valuation for AFT changing to NZ$698m or NZ$6.65/share, from NZ$723m or NZ$6.90/share previously. We note that the company continues to expect to declare a dividend for FY24, which is reflected in our model (assuming a 10% payout ratio, in line with the 11% paid in FY23). We see this announcement of consecutive dividend payouts as a sign of strengthening business operations and improving cash flow expectations, a positive boost to investor sentiment in our opinion.
Exhibit 1: AFT DCF valuation
NZ$'000s |
2024e |
2025e |
2026e |
2027e |
2028e |
2029e |
2030e |
2031e |
2032e |
2033e |
||||||||||
Revenue |
187,465 |
223,490 |
282,539 |
310,793 |
334,102 |
350,808 |
368,348 |
386,765 |
406,104 |
426,409 |
||||||||||
Growth (%) |
19.7% |
19.2% |
26.4% |
10.0% |
7.5% |
5.0% |
5.0% |
5.0% |
5.0% |
5.0% |
||||||||||
EBIT |
23,907 |
28,314 |
51,083 |
66,550 |
74,059 |
95,922 |
109,053 |
127,443 |
135,534 |
144,424 |
||||||||||
Margin (%) |
12.8% |
12.7% |
18.1% |
21.4% |
22.2% |
27.3% |
29.6% |
33.0% |
33.4% |
33.9% |
||||||||||
Tax |
(6,027) |
(7,138) |
(13,513) |
(17,844) |
(19,946) |
(26,068) |
(29,745) |
(34,894) |
(37,159) |
(39,649) |
||||||||||
Rate (%) |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
28.0% |
||||||||||
D&A |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
1,696 |
||||||||||
Working capital |
(1,965) |
(5,169) |
(4,797) |
(5,584) |
(5,724) |
(5,867) |
(5,867) |
(5,867) |
(5,867) |
(5,867) |
||||||||||
Capex |
(9,725) |
(9,761) |
(11,107) |
(10,995) |
(10,638) |
(10,053) |
(9,500) |
(8,978) |
(8,484) |
(8,017) |
||||||||||
Free cash flow |
7,886 |
7,942 |
23,363 |
33,823 |
39,447 |
55,630 |
65,637 |
79,401 |
85,720 |
92,588 |
||||||||||
Value |
Value/share (NZ$) |
|||||||||||||||||||
DCF for forecast period (2024 to 2033) |
252.7 |
2.41 |
||||||||||||||||||
Terminal value |
475.7 |
4.54 |
||||||||||||||||||
Enterprise value |
728.3 |
6.95 |
||||||||||||||||||
Net cash (debt) at end September 2023 |
(30.6) |
(0.29) |
||||||||||||||||||
Equity value |
697.7 |
6.65 |
||||||||||||||||||
Source: Edison Investment Research
Exhibit 2: Financial summary
NZ$000 |
2022 |
2023 |
2024e |
2025e |
||
Year end 31 March |
NZGAAP |
NZGAAP |
NZGAAP |
NZGAAP |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
130,314 |
156,641 |
187,465 |
223,490 |
Cost of Sales |
(68,539) |
(83,658) |
(101,323) |
(118,540) |
||
Gross Profit |
61,775 |
72,983 |
86,142 |
104,950 |
||
Operating Expenses |
(40,567) |
(51,590) |
(65,353) |
(74,940) |
||
Other Operating Income |
225 |
- |
4,814 |
- |
||
EBITDA |
|
|
21,433 |
21,393 |
25,603 |
30,010 |
Depreciation |
(784) |
(808) |
(914) |
(914) |
||
Operating profit (before amort. and excepts.) |
|
|
20,649 |
20,585 |
24,689 |
29,096 |
Intangible Amortisation |
(260) |
(916) |
(782) |
(782) |
||
Exceptionals |
- |
- |
- |
- |
||
Other |
- |
- |
- |
- |
||
Operating Profit |
20,389 |
19,669 |
23,907 |
28,314 |
||
Net Interest |
(1,704) |
(3,870) |
(2,384) |
(2,822) |
||
Profit Before Tax (norm) |
|
|
18,945 |
16,715 |
22,305 |
26,274 |
Profit Before Tax (reported) |
|
|
18,685 |
15,799 |
21,523 |
25,492 |
Tax |
1,163 |
(5,145) |
(6,027) |
(7,138) |
||
Profit After Tax (norm) |
20,108 |
11,570 |
16,279 |
19,136 |
||
Profit After Tax (reported) |
19,848 |
10,654 |
15,497 |
18,354 |
||
Average Number of Shares Outstanding (m) |
104.7 |
104.8 |
104.9 |
104.9 |
||
EPS - normalised (c) |
|
|
19.2 |
11.0 |
15.5 |
18.2 |
EPS - (reported) (NZ$) |
|
|
0.19 |
0.10 |
0.15 |
0.18 |
Dividend per share (c) |
0.00 |
1.10 |
1.55 |
1.82 |
||
Gross Margin (%) |
47.4 |
46.6 |
46.0 |
47.0 |
||
EBITDA Margin (%) |
16.4 |
13.7 |
13.7 |
13.4 |
||
Operating Margin (before GW and except.) (%) |
15.8 |
13.1 |
13.2 |
13.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
44,218 |
53,463 |
66,954 |
75,020 |
Intangible Assets |
38,093 |
45,627 |
53,652 |
61,677 |
||
Tangible Assets |
3,360 |
3,365 |
3,370 |
3,410 |
||
Investments |
2,765 |
4,471 |
9,933 |
9,933 |
||
Current Assets |
|
|
77,542 |
93,142 |
103,350 |
120,294 |
Stocks |
33,500 |
42,397 |
48,757 |
53,632 |
||
Debtors |
36,002 |
46,718 |
46,217 |
54,794 |
||
Cash |
7,940 |
3,291 |
7,640 |
11,132 |
||
Other |
100 |
736 |
736 |
736 |
||
Current Liabilities |
|
|
(29,050) |
(38,317) |
(47,673) |
(55,956) |
Creditors |
(23,845) |
(36,376) |
(40,270) |
(48,553) |
||
Short term borrowings |
(4,000) |
(1,000) |
(1,000) |
(1,000) |
||
Other |
(1,205) |
(941) |
(6,403) |
(6,403) |
||
Long Term Liabilities |
|
|
(35,966) |
(35,020) |
(35,020) |
(35,020) |
Long term borrowings |
(33,200) |
(32,200) |
(32,200) |
(32,200) |
||
Other long term liabilities |
(2,766) |
(2,820) |
(2,820) |
(2,820) |
||
Net Assets |
|
|
56,744 |
73,268 |
87,611 |
104,338 |
CASH FLOW |
||||||
Operating Cash Flow |
19,848 |
10,654 |
15,497 |
18,354 |
||
Movements in working capital |
(7,472) |
(6,947) |
(1,965) |
(5,169) |
||
Depreciation and amortisation |
1,044 |
1,724 |
1,696 |
1,696 |
||
Net Interest |
2,084 |
2,625 |
2,886 |
2,822 |
||
Taxes |
(1,175) |
3,742 |
- |
- |
||
Other adjustments |
(177) |
(169) |
- |
- |
||
Cash flow from operating activities |
|
|
14,152 |
11,629 |
18,114 |
17,703 |
Capex |
(329) |
(197) |
(187) |
(223) |
||
Acquisitions/disposals |
(5,256) |
(8,980) |
(9,538) |
(9,538) |
||
Cash flow from investing activities |
|
|
(5,585) |
(9,177) |
(9,725) |
(9,761) |
Financing |
295 |
475 |
- |
- |
||
Dividends |
- |
- |
(1,154) |
(1,628) |
||
Net Borrowings |
500 |
(4,593) |
- |
- |
||
Other adjustments |
(4,709) |
(2,860) |
(2,886) |
(2,822) |
||
Cash flow from financing activities |
|
|
(3,914) |
(6,978) |
(4,039) |
(4,450) |
Cash and cash equivalents at the beginning of the period |
3,209 |
7,940 |
3,291 |
7,640 |
||
Increase/(decrease) in cash and equivalents |
4,653 |
(4,526) |
4,349 |
3,492 |
||
Effect of FX on cash and equivalents |
78 |
(123) |
- |
- |
||
Cash and equivalents at end of period |
7,940 |
3,291 |
7,640 |
11,132 |
||
Closing net debt/(cash) |
|
|
29,260 |
29,909 |
25,560 |
22,068 |
Source: Company reports, Edison Investment Research
|
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