AFT Pharmaceuticals recently reported its FY18 results. Operating revenue grew 15.7% compared to FY17, approximately double the 8.1% growth seen the year before. The Australian market, which now represents over 61% of revenues at N$49.2m, was leading the way with 32.7% growth, thanks to patients switching from codeine-containing products. Revenues in New Zealand fell by 7% from NZ$29.2m to NZ$27.1m due to the company no longer being the sole supplier of Metoprolol. Maxigesic continues to do well internationally and is now launched in 10 countries.
Revenue in Australia was up 32.7% in FY18 compared to FY17, thanks in large part to Maxigesic sales increasing by 65%. Growth is expected to continue to be robust as patients switch from codeine-containing products (which are no longer available over the counter after 1 February 2018 due to re-scheduling) to Maxigesic.
Maxigesic is currently sold and launched in 10 countries and distribution agreements are in place in a total of 125. New launches were negatively affected by slower than expected registrations in the EU, but the company believes that regulatory delays are behind it, with launches in countries such as Spain, Portugal, France, Ireland and the Nordics expected by the end of CY18.
In January, the New Zealand Medicines Classification Committee announced a recommendation that all codeine combination medicines be upscheduled from over-the-counter to prescription-only status from 2020. This should boost Maxigesic sales in AFT’s home market considerably once it takes effect.
We are increasing our valuation to NZ$478m or NZ$4.91 per share from NZ$460m or NZ$4.73 per share, mainly due to increased expectations for Australian revenues due to higher Maxigesic sales and rolling forward our NPV. This was partly mitigated by slight reductions in expectations for New Zealand and Rest of World (RoW), and a higher net debt balance. We continue to expect that AFT will achieve EBITDA break-even in FY19.
