AFT Pharmaceuticals

[jimbo]

...AFT has proven products with a specific and patented combinations(more of x doesn’t mean it is better)...

I don't doubt that AFT put a decent amount of research into determining their combination, but that doesn't mean that a competitor with a different approved formulation and a recognisable brand can't sell just as well. Over-the-counter pain medication is all about sales.

All the PRs regarding new approvals and license agreements are important, but the next step of actually making sales is the most important. I really wouldn't mind to see some information from AFT about how they perceive their competitors and the extent to which they believe their IP should lock down the US market.

[RRR]

AFT and OHE are both over promising and under delivering (I am not comparing their businesses)! Their share prices are being duly punished.

Maxigesic is actually not a good pain killer. It has significant side effects, it can cause gastric ulcers and damage kidneys in certain patients! The main advantage is that it is an "over-the-counter" medication and has high margins. I hope they make money by selling millions of maxigesic tablets, so far not impressive financially.

Discl - holding a small parcel

[audiav]

Completely agree RRR, Maxigesic is not a good pain killer (great marketing name though!) as it doesn't allow flexibility in dosing with its fixed combination. And ibuprofen continues to get bad press for side effects. However the AFT generic side of their business has a lot of potential. (sigh, always wished Douglas Pharmaceuticals IPO'ed, that would have been awesome). I'm guessing if they keep their generic side of the business pumping, they will be snapped up by one of the larger international drug companies.

[RRR]

audiav - I actually bought at ipo considering their generic business! But management focus is on maxigesic and their sinusitis drug delivery business. I hope they succeed.

[trader_jackson]

https://www.nzx.com/files/attachments/256588.pdf

Interesting presentation, but also brief and to the point.

"expected total income for FY2017 [in the upper end of the range], up from $65.8m in FY2016" so lets say $70.5m.

Total Income analysis
1st half 15 was $24.2m ($24.2m of operating revenue, no Licensing Income and not sure on grants)
1st half 16 was $30.9m ($29.5m of operating revenue +21.9% on 1st half 15, 1m Licensing Income, $0.4m Research and development grant)
1st half 17 was [a weak] $30.8m ($29.8m of operating revenue + 0.7% $0.7m Licensing Income, $0.3m Research and development grant)

Therefore:
2nd half 15 was $33.3m ($32m of operating revenue, $0.3m Licensing Income, $1m Research and development grant)
2nd half 16 was $35.4m ($34.5m of operating revenue + 7.8% on 2nd half 15, $0.8m Licencing Income $0.1m Research and development grant)
2nd half 17 expected $39.7m (expect 96% of total income to be operating revenue: ie $38.1m + 10.4% on 2nd half 16)

It would appear growth is skewed towards the 2nd half, especially this year (with 2nd half operating revenue likely to be 23.7% higher than a bad first half)

I estimate 1st half 18 operating revenue will be only a bit less than the same as 2nd half 17, say 1st half revenue of 36m
2nd half 18, conservatively speaking, I estimate to be 25% higher than the first, meaning $45m
(1st to 2nd in 2015: 32.2%, 1st to 2nd in 2016: 16.9%, 1st to 2nd in 2017:27.9% [?] - average over 3 year period: 25.7%)
This reflecting increasing [expected] sales growth as development of products begins to 'flow through to sales'.

Total Operating Revenues:
48.9m 2014
56.2m 2015 (+13.0%)
64.0m 2016 (+13.9%
67.9m 2017 (+6.1%)
81m 2018 (+19.3%)

Maybe in 2019 growth will accelerate back to the good old days, when the 10 year CAGR (to 2015) was 21% (if not done in 2018!)... Total Income would be surely be over $100m including licensing income and grants, and turn a profit this [2019] year? (like the good old profitable days)

Will have to keep an eye on that cash burn... don't want another WYN (or OHE)

Edison have a revenue estimate of 99.1m operating revenue and a profit of 0.3m for 2018 so maybe I am a bit to cautious with my 81m estimate... then again they also have a price target that is more than double the current market price ($4.76)... winner69 you'd think the market would meet in the middle maybe somewhere between current market price ($2.30) and Edison's target ($4.76)... if that was the case, we'd be above $3.50... got to see the jump in growth first I suppose.

https://www.nzx.com/companies/AFT/announcements/301577

Actually ahead of what I expected with operating revenue up to $69.2m.

Key take outs:
- Very promising noises, and already showing in the numbers, with very good growth in Australia, and, well, anywhere else but in NZ (which has been the main drag on revenues increasing 8%, this and supply issues)
- Gross margin improving was nice surprise
- Cash position of 16m very solid
- Good to see General and administrative expenses aren't running out of control
- Back to profit (note the word back - as mentioned AFT has made profits before) in during the FY2018/FY2019 period
- Next 2 years will be interesting, although the board sound confident they can execute

[winner69]

Hey t_j whatsup - expenses growing at a much faster rate than revenues. Not good?

But 8% revenues increase is pretty pathetic isn't it? To echo your own words about EVO 'I hought this was a growth company'

Sorry, couldn't resist this - but has some truth eh

[trader_jackson]

Hey t_j whatsup - expenses growing at a much faster rate than revenues. Not good?

But 8% revenues increase is pretty pathetic isn't it? To echo your own words about EVO 'I hought this was a growth company'

Sorry, couldn't resist this - but has some truth eh

When excluding NZ, as mentioned, growth is actually pretty solid... and unlike EVO, at least AFT tell it like it is... not try hide the fact EPS went up barely 1%

No worries, AFT will be profitable next year (or the year after), and hopefully have annual EPS growth a bit better than 1%

[trader_jackson]

https://www.nzx.com/files/attachments/256588.pdf

Total Income analysis
1st half 15 was $24.2m ($24.2m of operating revenue, no Licensing Income and not sure on grants)
1st half 16 was $30.9m ($29.5m of operating revenue +21.9% on 1st half 15, 1m Licensing Income, $0.4m Research and development grant)
1st half 17 was [a weak] $30.8m ($29.8m of operating revenue + 0.7% $0.7m Licensing Income, $0.3m Research and development grant)

Therefore:
2nd half 15 was $33.3m ($32m of operating revenue, $0.3m Licensing Income, $1m Research and development grant)
2nd half 16 was $35.4m ($34.5m of operating revenue + 7.8% on 2nd half 15, $0.8m Licencing Income $0.1m Research and development grant)
2nd half 17 expected $39.7m (expect 96% of total income to be operating revenue: ie $38.1m + 10.4% on 2nd half 16)

It would appear growth is skewed towards the 2nd half, especially this year (with 2nd half operating revenue likely to be 23.7% higher than a bad first half)

I estimate 1st half 18 operating revenue will be only a bit less than the same as 2nd half 17, say 1st half revenue of 36m
2nd half 18, conservatively speaking, I estimate to be 25% higher than the first, meaning $45m
(1st to 2nd in 2015: 32.2%, 1st to 2nd in 2016: 16.9%, 1st to 2nd in 2017:27.9% [?] - average over 3 year period: 25.7%)
This reflecting increasing [expected] sales growth as development of products begins to 'flow through to sales'.

Total Operating Revenues:
48.9m 2014
56.2m 2015 (+13.0%)
64.0m 2016 (+13.9%
67.9m 2017 (+6.1%)
81m 2018 (+19.3%)

Maybe in 2019 growth will accelerate back to the good old days, when the 10 year CAGR (to 2015) was 21% (if not done in 2018!)... Total Income would be surely be over $100m including licensing income and grants, and turn a profit this [2019] year? (like the good old profitable days)

Will have to keep an eye on that cash burn... don't want another WYN (or OHE)

Edison have a revenue estimate of 99.1m operating revenue and a profit of 0.3m for 2018 so maybe I am a bit to cautious with my 81m estimate... then again they also have a price target that is more than double the current market price ($4.76)... winner69 you'd think the market would meet in the middle maybe somewhere between current market price ($2.30) and Edison's target ($4.76)... if that was the case, we'd be above $3.50... got to see the jump in growth first I suppose.

Looking very breifly through the annual report I believe operating revenue will still come in around 81m for FY18... however Australia could provide 'exceptional growth' (ie beat my estimate below) as AFT look to be doing a big push (with alot of expenses incurred this financial year)

Australia was 37.1m (31.2m 2016) - I believe there will be very strong growth of 25%... 46.4m FY18 with margins improving
New Zealand was 29.2m (31.1m 2016) - I believe there will be a minor drop... 28.5m FY18 with margins improving
Southeast Asia was 1.0m (0.6m 2016) - I believe this will double... 2m FY18, not sure on margins
Rest of World was 2.0m (1.0m 2016) - management noted hard to estimate growth, although growth should be significant... 4.0m 2018

I also note Mr Atkinson took not even 3k more in Base Salary (including benefits, ie car allowance) than FY17... and his bonus fell from 127k to 75k... at least he's not milking it... looks to be very aware of the task in front of him: significant sales growth + profitability (which will = a happy share price, happy shareholders, and a bigger bonus for him I'm sure)

I would have liked to have participated in the SPP, but did not have the cash at the time... will be interesting to see who does (the founder still owns over 75% of the shares so will be interesting to see what he does, if anything!). I also note about 40 more retail shareholders may have joined the list (shareholders between 1 and 5000 shares)... still only 870 odd shareholders

[winner69]

Looks all honky dory if ASM presos anything to go by

[trader_jackson]

Sounds even better if you were there

So good I am tempted to buy more... I also noted the sellers dried up