AFT Pharmaceuticals recently reported its H119 results. Operating revenue grew 4.1% compared to H118 and was negatively affected by the divestment of relatively low margin hospital products in New Zealand and Australia. Gross profit, however, grew 24.1% as gross margins improved to 46.7% from 39.1% a year ago thanks to reduced exposure to lower-margin products as well as high growth in the higher margin over-the-counter (OTC) segment. Sales outside of New Zealand and Australia, which are primarily driven by Maxigesic, grew 72.7% and now represent 10.2% of sales compared to 6.1% in H118.
Revenue in Australia was up 6.9% in H119 compared to H118 and was negatively affected by the hospital product divestments. The hospital segment as a whole was down 10% whereas OTC products grew 17% and the prescription channel grew 10%. The company expects newly launched hospital products to replace the lost revenue around the end of FY19 or early FY20 but at higher margins.
Maxigesic is sold and launched in 15 countries (with key recent launches in Malaysia and Ireland) and distribution agreements are in place in a total of 128 (Russia, South Korea, Taiwan and Hong Kong being recent additions). Launches in several countries such as France, Mexico, Spain, Portugal and the Nordics are expected by the end of FY19.
The company has a meeting with the FDA in which the regulatory agency asked for more clinical data prior to approval, although the company expects to be able to complete this quickly with a filing expected in the 2019 calendar year. We continue to view IV Maxigesic as a big opportunity as Mallinckrodt sells an IV formulation of paracetamol/acetaminophen in the US at a $350m annual run rate. Licensing discussions with US partners are ongoing.
We are maintaining our valuation of NZ$478m or NZ$4.91 per share as the impact of lower revenues due to divested products and a higher level of net debt was cancelled out by improved profitability and rolling forward our NPV. We continue to expect the company to be EBITDA breakeven for FY19.