AFT Pharmaceuticals is a New Zealand-based specialty pharmaceutical company that has grown its revenues at an average annual rate of 20% over the past decade. AFT raised an estimated NZ$33m in its December 2015 public offering, which it will use to accelerate new product development and move into new geographies including the EU and US. The company trades at a still relatively modest 4.2x EV/sales based on TTM revenues to September 2015.
Founded in 1997, AFT Pharmaceuticals has grown to a large regional specialty pharmaceutical company selling more than 100 proprietary and in-licensed products, covering a wide range of therapeutic categories in the hospital, prescription and OTC markets. The company’s lead products include Maxigesic, a non-opioid analgesic, and Crystaderm, a topical cream for skin infections that avoids problems associated with antibacterial creams and antibiotic resistance.
AFT has a solid track record of new product approvals. Over the next three years, AFT will seek approval for a number of new products, most notably its SURF nebuliser, a hand-held intranasal drug delivery device to treat chronic sinusitis; the device could potentially be used to deliver drugs into the circulatory system as an alternative to oral or intravenous administration. AFT plans to complete clinical trials for SURF as a Class I medical device in 2016 and to begin selling in some markets in 2017. The company marketed 63 products in 2008 and now sells 109 products through its own sales force in New Zealand, Australia and South-East Asia. Outside its key markets, AFT will work with distribution partners. By 2018, AFT aims to market its products in more than 100 countries, including the EU and US.
Following its offering, AFT has an estimated EV of NZ$259m, including postoffering net cash of NZ$12.5m (cash of NZ$37.2m and debt of NZ$24.7m). Although it has been profitable in the past, investment to develop and launch new products has resulted in losses in recent years. However, revenues have grown at an average annual rate of 15% in FY10-15. Using TTM revenue (to September 2015) of NZ$61.6m implies an EV/sales ratio of 4.2x, which we believe is modest given the current and expected growth rates.