AFT Pharmaceuticals is a New Zealand-based specialty pharmaceutical company that currently sells 130 prescription specialty generics and OTC products through its own salesforce in New Zealand, Australia and South-East Asia and has been expanding its geographic footprint. AFT now has agreements in 109 countries to distribute Maxigesic, its combination paracetamol (acetaminophen)/ibuprofen product. We value AFT at NZ$458m or NZ$4.73 per basic share.
Founded in 1997, AFT Pharmaceuticals has grown to a large regional specialty pharmaceutical company selling over 130 proprietary and in-licensed products, covering a wide range of therapeutic categories in the hospital, prescription and OTC markets. AFT lowers its overall risk by steering away from drug development of new chemical entities and instead focuses on improving existing treatments.
Maxigesic is a proprietary formulation combining acetaminophen with ibuprofen, which has demonstrated significantly superior pain control compared to either component by itself. The pill version has been launched in four countries with distribution agreements in 109 countries in total. According to IMS, the global market for pharmacy-based acetaminophen and ibuprofen tablets is around US$10.4bn. If Maxigesic achieves the 6% market share it has in New Zealand that would equate to US$624m (NZ$917m) in sales, from which AFT will receive a royalty or a licence fee.
AFT is developing a handheld device called SURF Nebuliser, which is able to deliver therapies intranasally, with a main focus on the conscious sedation market (though initially it is targeting the smaller sinusitis surgery market). It expects to meet with the FDA later this year with clinical studies initiating soon thereafter. The addressable market for conscious sedation in the US alone is US$3bn.
We value AFT at NZ$4.73 a share, based on a DCF model with a WACC of 10%. AFT reported NZ$28m in cash and NZ$23m in debt on the balance sheet for FY16, after cash burn of approximately NZ$15m. We expect the company to return to profitability in 2018 and achieve a 25% CAGR of revenues through FY20, which is up from its historical 19% CAGR.