AFT Pharmaceuticals recently reported its FY20 results. Operating revenue grew by a strong 24.0% year-on-year to NZ$105.6m as there was at least double-digit growth across all regional segments and triple-digit growth in South-East Asia. Importantly, the company reported operating profit of NZ$21.2m (including a NZ$9.8m non-recurring gain), up from a reported NZ$6.1m the year before, and is guiding for operating profit of NZ$14–18m in FY21.
Revenue in Australia was up 22.1% in FY20 compared to the prior year. The overthe-counter (OTC) channel grew by 25% thanks to Maxigesic as well as AFT’s eye care products and natural medicines. New Zealand grew by 12.4% in FY20. This compares very favourably to the 1.1% decline (5.4% growth after adjusting for divested products) in FY19. The OTC channel was the main driver, which grew by 24% thanks to the pain, eyecare, natural medicine and allergy categories.
Maxigesic is now sold and launched in 28 countries, up from 20 in the prior year thanks in part to launches in Spain, Portugal and the Nordics. Launch orders for an additional 10 countries were delayed due to a temporary paracetamol export ban announced by the Indian government. Maxigesic is licensed in more than 125 countries and registered in 44 countries. AFT expects Maxigesic to be sold in around 125 countries by the end of FY22.
Apart from some clinical trial delays and the temporary issue with paracetamol product supply, AFT has seen a limited negative impact from COVID-19. If anything, it may be benefiting as AFT’s sales of the Maxigesic family of products, vitamins and hospital antibiotics have all increased. Additionally, the company has commented that the first month of FY21 (April 2020) was significantly ahead of the prior year.
We are increasing our valuation to NZ$596m or NZ$5.94 per share, from NZ$539m or NZ$5.53 per share, mainly due to rolling forward our NPV and increased revenue estimates as sales were stronger than expected. This was partially offset by lower near-term gross margin. The company reported NZ$6.1m in cash and NZ$43.2m in debt at the end of FY20. We believe the company will be able to pay down the debt from operating cash flow and is not in need of additional financing.