Company Interview / Pain-free future: AFT Pharma's global expansion

Dr Hartley Atkinson, CEO of AFT Pharmaceuticals (ASX: AFP) states that China is a high-priority market as it's the world's second largest pharmaceutical market. He says AFT (ASX: AFP) has concluded a deal with Zhejiang Weixin, aiming to meet regulatory requirements. The US market is also vital, with Hikma as a partner.

Hartley explains AFT (ASX: AFP) is expanding its global reach, with products approved in nearly 30 countries. He mentions their fast-acting nanotechnology product, Metamizole, is up for launch. AFT's (ASX: AFP) financial growth is highlighted, with a 25% sales increase to nearly $200M and substantial debt reduction.

From humble beginnings in a garage, Hartley details growing AFT (ASX: AFP) into a global player. The company funds its extensive R&D pipeline from profits and refrains from diluting shareholder value by avoiding capital raises. Institutional investors show interest, with New Zealand investor schemes being a significant shareholder.

Full unedited transcript below:

0:00

Yeah. Look, I think China clearly is the second largest pharmaceutical market in the world. So after the United States, it's certainly the next target. So we were very pleased to conclude a deal with Shanghai listed company Zhejiang Weixin Kang Um, which is listed on the uh, on the Shanghai Stock Exchange. Tell us a little more about your product and metaphysic. For what? What is it, exactly?

0:26

Yeah. Look, it's, uh, an IV analgesic. Use perioperative li. So during or post and free operations where someone can take an oral medicine. Uh, in a lot of countries, what they do use is opioids, and people are trying to avoid opioids due to, you know, some quite serious problems. In fact, just very quickly, studies show, uh, patients that are discharged on an opioid after being in hospital, 10% of them are still on an IPO about six months later, which is pretty serious. Potential health issue. All right. I was referring to it as messages for was that actually mean Intravenous I.V.. Yeah. Intravenous. All right. Yeah. Got it. Okay, so as I mentioned, there at the top, you're in nine of the top ten markets. Then clearly the US very important to you as well. Yes. Correct. Craig. So the US we licensed that to a company called Hikma which is the

1:26

third largest supplier of injectables to the US market. So we think they're a good partner. Um, and recently they were able to get what's called a J code. And that makes funding, uh, and claiming back a lot simpler. So that's something they were really excited about. And obviously we can see the advantage it should and will help in time. The US sales of Mexico's HIV. All right. And have you satisfied all the regulatory requirements in these countries.

1:56

Uh, certainly in the US we've launched, uh, China, we've signed the agreement. But what has to be done now is to meet with the Chinese regulator. Uh, and probably there'll be some sort of clinical study required before we actually get the product registered and approved in China. But pretty much most of the other markets around the world were getting approvals. Brazil was another market we still have to file in, but, you know, it's now approved and almost 30 countries around the world. Now you've also got matches like rapid. What's that?

2:32

Yeah. Look, that's the fast acting nanotechnology oral version of Mexico music. Um, and we've got that approved by us, FDA, and we're just preparing to launch that at the moment. I'm actually over here in the United States working on that presently. So that's something that's very much an, uh, in progress. And one of the other points is that when a patient comes off the intravenous, they have to go on to an oral painkiller. And there's a very nice IV to oral switch story, uh, as well, within the hospital market. Can you just, uh, give us an idea of how you're actually tracking in terms of your financials at the moment, I gather. You recently had an AGM. What did you reveal?

3:20

Yeah. Look, basically, um, last year we were reporting on that we grew sales about 25% to just a tad under $200 million. We've roughly quadrupled sales over the last ten years. Uh, we've doubled them over the last four years. So, you know, we're very much pushing to grow our business, uh, and, uh, you know, to make investments and R&D. And also, we've now got, uh, offices in 18 countries around the globe. So this is something we're working on as well to really work on expanding, uh, the global business outside of Australia and New Zealand, which have been our, uh, traditional home markets. Uh, so how well funded are you? How much debt are you carrying? And obviously, um, what's there in terms of developing your R&D pipeline at the moment? Yeah. Look, um, in terms of debt, um, Time last year or a year ago we were about 30 million debt, which, you know, we're

4:20

pretty comfortable with. Um, but we actually reduced it to 16 million last year. So we sort of had some good cash inflows, which we use to pay down debt. We're not particularly worried, though, to be frank. You know, round about the 30 million level. It may go up a little bit. Um, so we're profitable. We fund all our research and development out of, uh, out of profits from existing sales. Uh, so we're not going back to the market for cash, uh, or capital raises. That's going to dilute shareholders. So really, you know, we've got a pretty extensive R&D pipeline, actually, of about ten different projects, uh, which are various stages of development and all of those we run ourselves and we fund out of existing profits. So, Hartley, I gather you started this in this company in your garage. Um, just tell us a bit about that backstory of how you managed to grow since then.

5:19

Yeah. Look, I mean, what would have happened is, um, uh, actually was made redundant. Um, and I had a very small, like, $50,000 startup fee as a result of that, uh, and basically took that, uh, capital and started, uh, the long trek of a pharmaceutical company in, first of all, in New Zealand. And then we expanded to Australia a few years later. And, you know, we've been expanding to other markets since. So we're kind of used to running a business and kind of bootstrapping it. But we did, uh, float on the stock exchange in December 2015 and raised a small amount of capital. Um, yeah, really. And we're now looking at kind of really carrying on, growing and expanding our business, uh, which is a work in progress. But, um, our next target is definitely 300 million. And after that, we'll have another target.

6:14

And, uh, look, you're clearly a true believer, given you founded the company, and I gather you, uh, you own 69% of the company at this stage.

6:23

Yeah, look at something like that. Um, I guess I mean, one of the challenges is that, um, we're pretty confident in what our growth and success can be. So given that, you know, I don't really want to be selling down large chunks of it because I honestly really believe, you know, this is an opportunity, uh, with our pipeline, which, you know, I think often the share market doesn't even look at. Um, I think it's really an opportunity to tackle things and really grow our business over the next kind of 5 or 10 years. What what sort of interest have you had from institutional investors?

6:57

Yeah. Look, we've got a reasonable amount of institutional investors. Um, our largest one is actually the New Zealand and Vista SEC. Uh, and they actually really export, um, and, um, then the farming area, they have got quite a lot of internal, uh, expertise. And they're the sort of people that really run the ruler over everything and want to know lots of things. So, yeah, you know, look, I think, uh, they're a very good, um, you know, second largest shareholder.