AFT Pharmaceuticals reports FY17 loss but sees return to profit on the horizon

AFT Pharmaceuticals managing director Hartley Atkinson with wife Maree Atkinson.

AFT Pharmaceuticals, which manufactures the Maxigesic painkiller, reported a full-year loss in the year to March 31 but expects to significantly narrow those deficits this year and return to profitability in the 2018/19 period.

The company reported a net loss of $18.4 million, or 19 cents per share, in the 12 months ended March 31, from a loss of $13.3m, or 48 cents per share, in the prior year. Operating revenue rose to $69.2m, meeting guidance and up from $64m in the prior year as Maxigesic tablet sales have increased from 22 million tablets to 74 million tablets.

"The FY2017 results reflect the ongoing strategy of expanding our presence in our home markets of Australia, New Zealand and Southeast Asia, while continuing the investment in research and development of our key products to also grow our international revenues," said chief executive Hartley Atkinson.

The company said the timing of a return to profit will depend on sales growth in Australia, new launch dates and additional licensing agreements in larger territories. Australia will continue to be key with the regulatory change restricting all medicines containing codeine to prescription-only from February 1, 2018.

The codeine switch "will drive sales growth in Australia," AFT said. "Whilst being difficult to accurately forecast is significant given that 750 million tablets of codeine based OTC (over the counter) products are currently sold in Australia every year."

Australian sales grew 19 per cent to $37.1 million and the market now makes up 54 per cent of operating revenue. New Zealand revenue recovered a little in the second half to end the year 6 per cent down at $29.2m and now represents 42 per cent of group operating revenue, AFT said.

Southeast Asia revenue jumped by 55 per cent to $1m and the market makes up 1.5 per cent of its group operating revenue, with sales predominantly in Singapore where product registration is generally quicker to obtain.

Revenue in its remaining markets - which account for 2.8 per cent of group operating revenue - doubled to $2m. AFT said sales in the United Arab Emirates trebled, and sales to Italy increased sixfold. Sales to the UK stalled due to the delayed launch by licensees, but have now launched and are ahead of expectations. The company made its first sales to Serbia and said further launches will occur in the current financial year.

The wider loss was due to higher research and development investment, which increased to $11.2m from $8m in the prior year and increased selling and distribution expenses, which lifted to $25.9m from $19.6m.

Separately, AFT invited shareholders to participate in a share purchase plan that opens today and closes June 12. AFT intends to raise $1.25m through the plan to provide additional balance sheet capacity for its current and planned R&D programme, as well as taking advantage of the codeine rescheduling decision in its key Australian market, and expanding its distribution channels internationally.

The company said the Maxigesic development programme will be substantially completed during the current financial year. Additional development work will then switch to its other products: NasoSURF and Pascomer, but this will be funded by existing cash flows or development contributions from licensing partners.

Maxigesic is now licensed or under distribution agreements in 112 countries. It is currently sold and launched in eight countries (Australia, Brunei, Italy, New Zealand, Serbia, Singapore, United Arab Emirates and the United Kingdom).

AFT shares last traded at $2.34, and have dropped 15 per cent so far this year.