AFT reported H117 results on 24 November 2016, which marked a slowdown in its previously aggressive growth in preceding periods, largely due to supply issues and a slowdown in demand in New Zealand (NZ$13.5m sales). Despite this, supply issues with partners appear to be resolved, as underlying demand in Australia increased 17% (NZ$14.6m sales), and the demand for Maxigesic in Europe and the Middle East exceeds the expectations of licensing partners (NZ$1.2m sales).
Revenue for the first half of FY17 was NZ$29.8m, or a 0.8% increase year-on-year. The slowdown in growth was due to disruption in the supply of two products, one in Australia and one in New Zealand, which had negative impacts on sales of 11% and 4% respectively. This was compounded by a reduction in demand in the pharmacy market as a whole of an estimated 4-8%, likely due to seasonal variability.
Outside New Zealand, the underlying demand for AFT products is growing significantly. Australian demand is up 17%, and sales of Maxigesic (NZ$1.2m) from licensing partners in Europe and the Middle East is up 181%. Demand has been high enough for the Italian partner to run out of stock and for the UK partner to delay the launch because of a higher than expected number of orders.
AFT increased R&D spending 77% to NZ$4.28m during the period to support the clinical study of the NasoSURF nebulizer and the IV formulation of Maxigesic. Maxigesic IV is now in Phase III clinical studies (n=275) in the US for the reduction in pain following bunionectomy with results expected in CY17. NasoSURF is in biodistribution studies expected to be completed by the end of the fiscal year, and AFT is planning to submit a class I device application by the end of 2016.
We are increasing our valuation to NZ$461m or NZ$4.76 per share from NZ$458m or NZ$4.73 per share. We have reduced our FY17 revenue projection to NZ$72.5m (including grants and licensing revenue) from NZ$77.4m with some carry-forward in later years, but the effect of this reduction is offset by advancing our NPVs to the most recent period. We expect to update our valuation following clinical results from the NasoSURF and Maxigesic IV clinical studies.