AFT Pharmaceuticals narrowed its losses in the latest first half year and says it’s on track to return to profitability

The Maxigesic painkiller manufacturer’s net loss for the six months ended September eased to $4.2 million from $6.9 million in the same six months last year.

It says the loss at the operating level – and before finance and other costs – was $109,000.

Net finance costs rose to $2.5 million compared with $1.6 million in the previous first half as interest-bearing liabilities jumped to $41.9 million from $30.7 million.

“The improvement in operating loss came from strong growth in gross profit – up 24 percent to $17.8 million and reduced research and development costs as clinical trial programmes identified at the time of AFT’s 2015 IPO are concluding,” the company said.

“The small operating loss during the first half of 2019 is positive progress and we expect the second half of the financial year to generate greater revenues and profitability than the first half.”

Sales of Maxigesic, a combination of paracetamol and ibuprofen, doubled in Australia after regulations restricting codeine-based painkillers to prescription only came into force from February this year.

Australia is the company’s largest market and sales there grew 7 percent to $21.6 million, 57 percent of total group sales.

Revenue in New Zealand fell 11 percent to $12.6 million, accounting for 33 percent of group operating revenue, reflecting lower sales to hospitals, particularly of beta-blocker Metoprolol after the company lost its sole supply tender.

However, gross margin in New Zealand rose 23 percent as its higher-margin over-the-counter sales rose 9 percent.

In both countries, the launch of AFT’s Novatears eye lubricant helped boost revenue.

Rest-of-the-world revenue rose 70 percent to $2.8 million, mostly reflecting Maxigesic sales and royalties in countries including Italy, Ireland, Israel and Iraq.

Overall, gross profit margin rose to 47 percent of sales, up from 39 percent in the same six month last year, reflecting the phasing out of lower-margin sales to hospitals and through the prescription channel and the growth of higher margin over-the-counter sales.

AFT’s loan from Houston-based private equity firm Capital Royalty Group, which also owns 13.4 percent of AFT’s shares, now $41.9 million, is due to be repaid in full on March 31, 2020.

But the company says it is working with Capital to extend the existing facility, which is denominated in US dollars, and to expand the existing facility to US$40-50 million.

Of the NZ$11.3 million increase in drawn debt from the facility, on which AFT is paying 13.5 percent interest, NZ$3.1 million was due to the unrealised foreign exchange loss as the New Zealand dollar fell against the US dollar.

AFT says it will have five clinical studies running through its 2019 financial year and it continues to work through US Food and Drug Administration requirements before it can market Maxigesic in that country.

The stock last traded at $2.25, having declined 2.2 percent so far this year. 

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