Drug maker AFT climbs 11% in NZX debut

Tuesday 22nd December 2015

AFT Pharmaceuticals gained 11 percent on the Auckland based drug-maker's NZX debut after a $35.6 million initial public offering – only the fourth on the local bourse this year.

AFT’s shares first traded at $3.12, valuing the company at $302 million, after being sold in the IPO at $2.80 apiece. It has dual-listed on the NZX and ASX. It last traded at $3.10.

NZX boss Tim Bennett recently bemoaned the lacklustre number of IPOs this year with the four, which includes two compliance listings, comparing poorly with 40 in Australia despite both countries having similar market conditions.

Today Bennett said AFT had turned from operating in a garage into a phenomenal business and he was pleased it had chosen to list on the NZX when it would have had a range of capital raising options.

Founders Hartley Atkinson and his wife Marree Atkinson retain a 76 percent stake in the company and received $3 million of the money raised. The remaining $32.6 million will fund further global expansion and 60 percent will go towards drug development programmes including clinical trials.

Atkinson said the money raised would allow it to do more R&D quickly.

He said the IPO had support from institutional investors in New Zealand and Australia but had also brought new investors to the sharemarket. He cited the example of an employee's daughter who had worked for the company when she was 13 years old. Now a schoolteacher, she had bought into the float along with the Atkinson’s local dentist in Takapuna, he said.

AFT’s best known product in New Zealand is the heavily-promoted pain-killer Maxigesic, which was launched in 2009 and combines paracetamol and ibuprofen. It has a 6 percent share of the New Zealand pharmacy analgesic market. AFT markets more than 100 pharmaceutical products for retail, prescription and hospital use with all the drugs made by third-party manufacturers.

One of the key risks identified in the IPO prospectus was that 37 percent of sales in the 2015 financial year were by tenders to third-party payer organisations such as the government drug buying agency Pharmac.

AFT was established by Atkinson in his garage in 1997 with $50,000 in start-up capital after he was made redundant by Roche. Other key shareholders include US healthcare investor Capital Royalty Group which lifted it stake in the IPO to 11 percent and New Zealand fund manager Milford Asset Management with 3 percent.

The IPO prospectus says in the year ended March 31, AFT had revenue of $56.4 million and had a net loss of $12.9 million. In the first half of the 2016 financial year it had revenue of $29.5 million and a net loss of $6.3 million.

No estimates of future financial performance were provided in the prospectus because the board said it wasn’t “practicable to formulate reasonable assumptions”. That was mainly because it was difficult to predict when regulatory approvals will be obtained for key products in a number of jurisdictions and therefore, when operating revenues for those products would start, the board said.

AFT has had a compound annual growth rate of 21 percent over the past 10 years, and operating revenue CAGR in Australia, which it started selling into in 2005, has been 48 percent in the past decade.

BusinessDesk.co.nz

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