AFT Pharmaceuticals — Hikma partnership expands to include Combogesic

AFT Pharmaceuticals (ASX: AFT)

Last close As at 09/08/2024

NZD3.21

0.01 (0.31%)

Market capitalisation

NZD337m

More on this equity

Research: Healthcare

AFT Pharmaceuticals — Hikma partnership expands to include Combogesic

AFT Pharmaceuticals has expanded its licensing partnership with Hikma in the US to include distribution of the recently launched Combogesic tablets (Maxigesic Rapid). We view this as a logical step, given Hikma’s established footprint in the US, with synergistic benefits likely on costs and sales uptake. Hikma already holds exclusive distribution rights to Maxigesic/Combogesic IV in the US and will now also market the tablet formulation in the same hospital and ambulatory setting. Management expects to book the first sales within CY24 and, while the deal economics have not been fully disclosed, the agreement includes a profit share for Hikma according to our understanding. Note that unlike the IV formulation, AFT’s sales strategy for the tablets entails having different distribution partners across sales channels. The first distribution agreement for the Combogesic tablets was signed with Alexso in June 2024.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

AFT Pharmaceuticals

Hikma partnership expands to include Combogesic

Partnership update

Pharma and biotech

9 August 2024

Price

NZ$3.2

Market cap

NZ$336m

NZ$0.61/US$

Net debt (NZ$m) at 31 March 2024

16.2

Shares in issue

104.9m

Free float

25.9%

Code

AFT

Primary exchange

NZX

Secondary exchange

ASX

Share price performance

Business description

AFT Pharmaceuticals is a specialty pharmaceutical company that operates primarily in Australasia but has product distribution agreements across the globe. The company’s product portfolio includes prescription and over-the-counter drugs to treat a range of conditions. and a proprietary nebuliser.

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

AFT Pharmaceuticals is a research client of Edison Investment Research Limited

AFT Pharmaceuticals has expanded its licensing partnership with Hikma in the US to include distribution of the recently launched Combogesic tablets (Maxigesic Rapid). We view this as a logical step, given Hikma’s established footprint in the US, with synergistic benefits likely on costs and sales uptake. Hikma already holds exclusive distribution rights to Maxigesic/Combogesic IV in the US and will now also market the tablet formulation in the same hospital and ambulatory setting. Management expects to book the first sales within CY24 and, while the deal economics have not been fully disclosed, the agreement includes a profit share for Hikma according to our understanding. Note that unlike the IV formulation, AFT’s sales strategy for the tablets entails having different distribution partners across sales channels. The first distribution agreement for the Combogesic tablets was signed with Alexso in June 2024.

Year end

Revenue (NZ$m)

PBT*
(NZ$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

03/23

156.6

16.7

11.0

1.10

29.1

0.3

03/24

195.4

23.0

15.8

1.60

20.2

0.5

03/25e

232.4

23.6

16.5

1.65

19.4

0.5

03/26e

278.3

40.8

28.3

2.83

11.3

0.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items, and share-based payments.

Maxigesic Rapid (marketed as Combogesic in the US) is a rapid release version of AFT’s flagship Maxigesic tablets, a patented combination of paracetamol (500mg) and ibuprofen (150mg). It uses the same combination, at 65% strength of the original tablet form (325mg paracetamol 97.5mg ibuprofen) and has been authorised for the treatment of mild-to-moderate acute pain. The tablet formulation was approved by the FDA in March 2023 and the first distribution partnership was finalised with Alexso in June 2024.

Hikma is the second distribution partner to sign up for the tablet formulation and will exclusively target the hospitals and ambulatory surgical centres channel. We believe this new deal is a good fit with the existing agreement between the two companies (signed in April 2021), under which Hikma is already marketing Combogesic IV in the US. The IV formulation is a double-strength intravenous version targeting post-operative pain (1,000mg paracetamol and 300mg ibuprofen), with distribution focused exclusively on the hospital setting. While we await further details on the deal economics of the recent agreement, we note that this deal is structured as a profit share agreement versus an outright licensing deal, as was the case for Combogesic IV (AFT received a NZ$6m licensing payment from Hikma under this agreement earlier this year).

International expansion remains an ongoing goal for AFT as its seeks to diversify away from its traditional domestic reliance. The US, in particular, is of strategic importance given its size (the largest pharma market globally) and scope. It is also the largest analgesics market globally, pegged at US$7.4bn, and estimated to grow at a CAGR of 4.9% in 2024–29. We expect AFT to launch other Maxigesic dose formats in the country on the back of initial uptake and consumer feedback on the IV and Rapid versions.

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by AFT Pharmaceuticals and prepared and issued by Edison, in consideration of a fee payable by AFT Pharmaceuticals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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