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Edited Transcript of AFT.NZ earnings conference call or presentation 20-Nov-19 9:00pm GMT

Interim 2020 AFT Pharmaceuticals Ltd Earnings Call

AUCKLAND Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of AFT Pharmaceuticals Ltd earnings conference call or presentation Wednesday, November 20, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Hartley Atkinson

AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director

* Malcolm Tubby

AFT Pharmaceuticals Limited - CFO & Company Secretary

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Conference Call Participants

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* Jack Crowley

Jarden Limited, Research Division - VP of Equity Research

* Joeri Sels;JS ALPHA LIMITED;Director

* Pattrick Smellie;BusinessDesk;Director

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and welcome to the AFT Pharmaceuticals half year results analyst briefing. (Operator Instructions)

With us today, we have Hartley Atkinson, CEO and Managing Director; and Malcolm Tubby, CFO. (Operator Instructions) Please be advised that this conference is being recorded.

I would now like to hand the conference over to your first speaker, Hartley Atkinson. Thank you. Please go ahead.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [2]

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Thank you very much. Welcome, everyone, to our half year investor presentation. So look, I'm assuming you've got the presentation. And what I'll do is I will go through the presentation, just to outline the highlights referring to the page numbers, and then we've got time for questions after that.

So we've got the cover page and then the disclaimer page on Page 2, so please be aware of that.

And then looking at Page 3, which is the half year highlights. Where we're currently at is we've increased the number of countries that Maxigesic is currently registered in to 44 and then we are currently selling in 24 of those countries. Basically, as you probably know, the process is usually we license then we apply for registrations and then after it's registered, we then launch the product. Sometimes, there can be a delay and there often is a delay between registration and sales as things get organized in the particular markets, especially from a regulatory perspective, but that is certainly still showing progress.

And then on the operating revenue side, we have achieved sales of $46.9 million for the first half. As you may recall or may be aware, we traditionally do, do greater sales in the second half of the year. So that was the figures we've made so far.

On an operating profit basis, we've made a $13.7 million profit for the first half. And importantly as well, the available cash that we have, I should actually say the 30th of September, I'm not sure there is a 31 September, but that is basically up at $7.3 million. So from the cash side of the business, we're also maintaining our cash as well or improving our cash, which is always a very important parameter.

So that's that page and then to move on to the next page, Page #4, entitled revenue growth. So what we can see if you look at the bar graphs at the top right-hand corner, we can see that in terms of market-by-market breakdown, we primarily have 4 main market areas. We talk about Australia, which is our major market, and that grew by 19% in the first half. Then we have New Zealand. New Zealand, you may recall, we did have some reduction in sales over the last couple of years, especially as we refocus that business more on over-the-counter products away from some of the prescription products. And we are pleased to say now that's returned to growth and contributing to growth with 9% growth in sales.

On the Rest of World side, which is primarily our out-licensing and distributors, we recorded sales growth of 64%. And then in our Southeast Asian markets, where primarily at this stage is Singapore and Malaysia, improved sales by 112%.

What you can see, probably if you look down at the bottom pie graphs, we talked about this a while ago and have talked about this where over time we see the share of sales increasing in the outside Australia, New Zealand market segments, and we're certainly starting to see that now. You can see basically sales at about 16% in Rest of World and Asia, and that compares with, say, the end of last financial year where they're really just over 10%, so 10.5%, something like that. So you can see, sales are starting to grow in the areas outside our local home markets.

And then if we turn to Slide #5, the financial performance region by region. What we had targeted on as being important was we wanted to make a positive contribution from every sector of our business, and we're seeing this driven by the sales growth. Australia still probably as expected at 54.7%, currently our major market. And you can see on the bottom too a sort of split. We normally talk about over-the-counter products. Products you would buy like Maxigesic over-the-counter. Then we have hospital products, and then we do have some niche prescription products. You can see if you look at the markets, overall, Australia, New Zealand, Rest of World is still very much dominated by over-the-counter sales, which is where we are primarily aiming to focus.

Asia, at this stage, though, is a lot of hospital sales. And we see over time we will further improve the over-the-counter or the prescription sales. But basically, and in terms of our company, overall, still the majority of sales are OTC, or over-the-counter products.

So just -- I'll flick now to Slide #6, which is pure finance. So I will hand it on to our financing expert and CFO, Malcolm Tubby.

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Malcolm Tubby, AFT Pharmaceuticals Limited - CFO & Company Secretary [3]

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Thanks, Hartley. Yes. So Slide 6. Revenue growth of 22%, up to $46.9 million. Gross profit grows at 18%, up to $21.3 million. That's with the revenue growth in all markets. The margin comes off by 1.7 points, and that's primarily a result of the strong hospital sales in the first half. Those hospital sales correspond -- have a correspondingly lower selling and distribution cost, so if you move down to that line, you see it's now 27.6% of revenue. And that's a combination of those hospital sale growth, efficiencies we are getting in our selling and distribution expenses.

And thirdly, as Rest of the World revenues grow, they attract very little, if any, selling and distribution expenses. So that's what's driving that ratio down.

General and admin expenses, they were relatively flat apart from the -- there is an extra $1 million in there, which is competitor, legal action on certain Maxigesic claims. The claims we're using have kept our position of #1 in the combination category, and we are confident of our claims.

Research and development expenses. They've benefited from a $1.7 million one-off contribution that we've received from joint venture partners on the successful development results. So if you put that back in, it's around about the same as for the first half last year.

Then the big item, the gain of $9.8 million. This arises from the recognition of the acquisition of the Pascomer assets. And we've put them in at a conservative fair value of $12.5 million. The main effect of that is that we now own all of the intellectual property assets. And then the further future development costs will be borne by the North American licensee. So what that means is the line above equity accounting loss that will be -- become $0 because it would be -- the expenses will be incurred by the licensee.

So that generates an operating profit of $13.7 million. Finance costs have gone up for a variety of reasons. We borrowed the last $5 million from Capital Royalty in August of '18. So there's the interest cost on that. In May this year, we have refinanced NZD 15 million with the BNZ. So there was a break fee that we incurred or prepayment premium we had to pay on that. The change of accounting now for right-of-use assets, which are the leases we had, primarily for us it's vehicles, and the 2 offices we've got one in Takapuna, the big ones, and the other one in Sydney. And we have to put the interest element of that down in interest now. With the $15 million facility we got from BNZ in May, there has been good savings already in this number.

So that moves us down to a profit attributable to shareholders of $9.9 million, an improvement in equity.

So if you move to Slide 7, the abbreviated balance sheet, and you can see that improvement there in the equity. The other key highlights for us here are the cash is increasing now, we're at $7.3 million. Working capital, which is inventories, receivables, less current liabilities, that remains unchanged from the full year at about $28 million. Intangible assets, you'll see that increase there, up to $23.4 million, $12.5 million of that is the -- is our conservative fair value of the Pascomer assets, which are heavily risk-adjusted to get to that valuation.

And then you can see -- the next, so the investment in the joint venture equity, that now disappears. And then the interest-bearing liabilities $45 million, they mature at year-end. We're in vast discussions with local banks for a new long-term facility, which would generate significant savings for us in interest costs from March next year.

Moving on to the cash flow, Slide #8. You can see we've generated $6 million from operating activities. The $2.7 million that's gone out for investing activities is primarily the development on clinical trials for Maxigesic IV. And then the $2.8 million of financing activities is interesting -- interest, sorry, those -- the premium repayment and then the right-to-use assets that now have to show in that line.

If we move on to Slide #9, which is where we see how we've been progressing our operating profit. You can see in those early years out to '14, with the profit there, what we were doing was funding our R&D out of our operating activity surpluses. And then at the end of '14 is where we embarked on the biggest spends on development of products in our markets. And then the turnaround in FY '19. So we're now projecting $18.8 million to $21.8 million operating profit for the full year, and that's up from the previous advise of $9 million to $12 million.

I'll hand back now to Hartley for Slide #10 on development progress.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [4]

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Right. Thank you, Malcolm. So looking at this slide on development progress, which is important because it's obviously part of our future engine room of our growth. The Maxigesic tablets, as we mentioned before, is definitely very important in place, we've registered across the whole of EU, which is always challenging because some of the regulators in the EU, different countries do have different viewpoints, but we've been able to show our team can basically achieve that. As well with our line extensions starting to come online, the Maxigesic IV, we've completed our first 2 registrations presently, Australia and New Zealand. What's particularly important about this is Australia counts as a reference country around the world. So it means that many of the other countries such as the Middle East, Southeast Asia, Latin America, a lot of countries, you can file immediately off the back of an Australian registration. So that is obviously underway.

The Maxigesic Oral Liquid. We have filed that in a number of countries and busy starting to work through that registration as well. The Maxigesic Hot Drink. So that's the sort of cold and flu product that you put into a hot drink. That has basically been completed, the development. And we're just preparing at the moment to file the first regulatory filings in December.

Maxigesic Rapid was a product we had mentioned before. So it's a very fast-dissolving formulation of Maxigesic. We have successfully completed the development work for that. That involved originally in-licensing technology from an American company that we deal with. But basically, the first filing for that product will occur within the 2020 calendar year. So that is also progressing well and on track.

We are also developing a further Maxigesic Cold & Flu development, and the first filing for that will occur in 2020. So that project is also progressing well.

Now also, importantly, as Malcolm has talked about the Pascomer product that we have completed our licensing deal for North America and that resulted, as Malcolm mentioned, taking control of the whole of the development partnership. But what's important about that, though, is a very innovative deal we did with our partners that they are paying for all of the development work. They pay for some of their staff costs. So basically, it means that we gain potential to all the upside, and if the worse came to the worst in terms of development, it means that we're insulated from any downside because we haven't paid for any ongoing R&D.

So the process with this one, this is a large global study, and it is underway with patients being entered right now in the United States. So right across the U.S., including prestigious clinics such as the Mayo Clinic. And Australia, in New Zealand and also quite a lot of sites in Europe as well, which are due to start up, they literally got approval for them right now, and we're starting up as well. So that program is well underway.

The NasoSURF or the drug delivery system. We identified and we did detailed human factor studies, which is the new U.S. FDA requirement. We did identify that there was some redesign to make the product even easier to use and simple to use. So we have completed this work and the engineering batches presently are under manufacture. And then that will allow us to start to accelerate again this program and go into clinical studies next year. So that is progressing well.

So we've literally got -- all those programs are all going ahead, and we're making good progress on them.

So that's that slide. And looking on next Maxigesic global update, primarily at this stage, mostly oral dose forms. You can see that the yellow is where the product has been launched. So we're gradually getting more and more yellow. The blue is where we have licensed that, and we are still working on launches. The only bit we couldn't change in time because literally we just completed the German license deal. You'll note there's a bit of white still sitting there in Europe. So we have recently, literally on Monday licensed in Germany as well. So that is -- also currently will turn yellow kind of early next year for Germany.

And in terms of other large territories, there's actually a lot of work going on, having a lot of discussions, advanced discussions in the United States, in Canada and Brazil, and Indonesia, China and Japan. So certainly, some of these territories, when we first started off this project, to be frank, we hadn't envisaged necessarily being able to license Maxigesic to the Chinese or Japanese markets. And these after all are the second and third largest pharma markets in the world. So they're not inconsequential. So we are making good progress. And that's a lot of focus currently at our side is going on with work in both -- in all of those territories. So that's that page.

And then to flick across to Page #12, which is Maxigesic countries sold or we have orders for. You can see that the progression is continuing with this year. We've got growth in a number of countries, we've launched or got sales orders for. The one where it really, really takes off is still probably a couple of years away, and that's when we would expect to see a significant ramp-up in the global sales. So we will obviously see progress this year. And we are seeing progress. We'll see progress next year. But there will be a more -- we foresee a more rapid escalation, which corresponds very much with the increased number of countries you can see in this graph here in FY '22.

And then if we look at the next slide, just entitled Maxigesic around the world. So look, this just gives you a bit of a snapshot of some of the countries and some of the packs. You can see, what we've essentially done, as we've explained before, is we have, in some countries, licensees. We've also got almost an even amount of distributors now as well where recently, we signed, for example, a distribution deal in Pakistan. And certainly, look, there's a large population in Pakistan, 200 million people and a reasonable-sized analgesic market. So we have got a good number of distributors in the Middle East and in Asia and countries like that. And then more of the European countries, we basically got extra licensees. So this just gives you an idea of some of different packs and what they look like.

And then to flick on to the next Slide #14, Maxigesic going forward. You can see from the table, we are just trying to track progress that we are making, so this will change over time as we roll out launches and as we roll out registration. So what we can see with the tablets is we still got licensing agreements in over 125 countries. Registrations, we've picked up another couple of countries. It's moved from 42 to 44. We've launched in another 4. There are -- generally, in this particular financial year, there's a disproportionate number of countries are loaded into the second half of this financial year. Sometimes, you do get some regulatory things that you have to sort out. And for example, our French launch was delayed by around about 6 months due to a labeling change and warnings of paracetamol. And currently, we're having to repack our French launch stock. So that does cause a delay. But look, overall, it's still progressing roughly on track. And I guess just flagging there, we will see a lot more launches in the second half of this financial year.

With Maxigesic IV, the middle column. Licensing work is kind of underway in earnest now. And we -- we've got a lot of countries under discussions, so we would expect ongoing announcements over the next 6 months. And what we've also seen too is we've registered in our first 2 countries, as we talked about before, and we will be also rolling out our launches. So Australia, we would plan to launch at the start of next year and New Zealand soon after that. Oral solution at the moment is licensed in 122 countries, and the key focus at this stage is more upon product registration. And after that, we'll follow on with some launches. So hopefully, that gives you a bit of an overview of the Maxigesic pathway around the world.

So then just to move on to the final slide. Just an overview, Slide #15, of our medium-term plans. So what we're looking at really is to keep on driving and improving international sales. So as we've mentioned and showed you slides on this, we would want to accelerate and keep growing the number of countries that we've launched Maxigesic in because literally we see each country will then add sales. That's doing that. And then also starting to launch the new line extensions. We've had good feedback and good forecasts from parties on sales potential, especially for Maxigesic IV. And therefore, that's going to be a key project as well on top of the standard Maxigesic rolling that out over the next few years as well.

Part of this also is extending our international licensing. So we have got work underway to finalize licensing or distribution agreements in the United States, Canada and also Latin America. So all of these are underway. That takes some time. So we would be hoping to be able to conclude some of those in the second half of this financial year.

We've also had our advanced discussions underway at the moment in basically large territories, which previously we had not considered prime targets, China and Japan. There are always some different doctors required for these territories and that is part of the process. So that will be something that we will work on with a local partner once we find and sign up a partner. We have added some additional new territory side in the last few months. Certainly, we've added Chile, Colombia, Germany, Pakistan, Peru and Vietnam. So we're basically carrying on just adding territories, which is also important. There's lots of room to do that still.

Then as well the other important thing is to drive some increased upfront payments. Now larger markets do attract larger upfront payments. So we've obviously banked some during the first half. But we want to work hard to sign-up some larger territories such as United States, Japan or China. And then that would result in larger upfront payments, which is something that we're working on and would hope to achieve.

Then not to be remiss to ignore our local markets. In fact, we did recently pick up maybe a sort of miscomprehension. I know we talk a lot about our international markets. But really, we put a huge amount of work into our local markets after we divested other products last year, the low-margin hospital products to Baxter. We went on a major push to in-license additional hospital products. And literally, if we look at our pipeline in Australia, New Zealand, I mean we have very significant sales that will -- should accrue, we believe, will accrue from new product launches over the next 5 or 6 years. So certainly, we've got a lot of registrations, a lot of licensing deals. We've actually had to hire a new person to help with the process as well just because there are so many new in-licensed products. So this is a big push. So we still see that -- strongly see that Australia, New Zealand are not sunset markets. There's a lot of upside, and we're pushing that hard, especially Australia.

So we will also work on driving Maxigesic sales in Australia and New Zealand. We do want to do new OTC launches. For example, we in-licensed a very nice patent in the Australian market, and that's enabled us to do a new product. And we purchased the license off another company. And we say, we'll be able to launch that in March or April next year. So we are pushing hard with these sort of processes.

You can see in the past, we said that we believe it was possible to double Southeast Asian sales. And I guess at this stage, we're pleased to note sales at the moment are up 112%. So we thought that was possible, and we basically followed through.

And then of course off the back of this, and very important, is to drive improving financials, improving returns. So we said last year as well that we saw it's important that every division was making profit. And we targeted, certainly, one of the last remaining ones that wasn't at that stage was Southeast Asia. We targeted to breakeven in Southeast Asia, and we were pleased that we've now achieved that. And basically, every division at the moment is contributing positively towards our bottom line.

Profit projections, we see that, as Malcolm has mentioned, to be on target. And obviously, a key thing as well, we're looking at financing as we are looking at to lower interest costs which we're working on. We've got a number of interesting offers, attractive offers from local financing institutions where we see that, clearly, at the moment, we've been able to -- we've been paying the interest rate at 13.5% on the CRG debt. So we see there's potential for good savings upon refinancing and that will help further improve our profitability. We also see over time as we build sales and earnings, we also want to pay debt down as well. So it's something that we're not ignoring, which we sometimes picked up at almost -- people maybe thought we were. We are acutely aware of these things. And it's all part of a plan that rolls out, and that's really what we're doing.

And then clearly, out of that as well is maintaining and improving our cash position. Cash is king. We're very aware of that. And I think as you've seen, our cash position over the last period has been stable or slightly improving. So we are happy with that as well.

So look, hopefully, that gives you a bit of an overview of the progress that we are making.

I'm happy now to pass it back to answer any questions. So I'll try to answer any burning questions that you may have. Thank you very much.

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Questions and Answers

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Operator [1]

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[Operators Instructions) Your first question today comes from the line of Jack Crowley from Jarden.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [2]

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Congratulations on a good result. Just a few questions from me, if I may. The first one is thinking about that gross margin and the way that's tracked down slightly in the first half of this fiscal year. I guess there was a reference to that partly being driven by hospital kind of mix, which obviously you guys are focusing on OTC in the long run. So I would expect that one to reverse. But then also I think you might have touched on, Malcolm, the kind of lower gross margin but lower OpEx or cost-to-serve structure and the kind of Rest of World out-licensing model. Could you just kind of walk us through, again, I guess where you see the kind of gross margin tracking as you guys -- there would be the out-licensing kind of or distribution kind of agreement-type model and really kind of the international mix of sales grows and whether that kind of high 40-type percent margin that we've kind of previously been observing is still a realistic kind of long-term outcome? Or if we're likely to see a different kind of gross margin OpEx mix in the business?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [3]

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Yes. Thanks, Jack. So the first piece of that is the sales are roughly 45 55 between the first half and the second half. And a lot of that, that's due to seasonality, which does affect the OTC more than hospital and prescription, which tend to be more static. So we are -- in our forecast, we're seeing a lift back up again in the margin through the second half as we get a bigger concentration of OTC. And then going forward into the future year, we're still looking into the late-40s for the margin. And the OTC growth, what would change in the out years as Maxigesic IV grows that will actually -- that will come under hospitals. So we'll see OTC growing for a while and then when Maxigesic IV comes in, we'll see some hospital growth there. I think that was -- was there anything else, Jack?

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [4]

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No, no. That actually -- that covers it off perfectly. So I'll kind of shift on if we can. I'm just really wanting to understand, I guess there's been a few more references to distribution agreements as opposed to out-licensing in this particular kind of result. Is the difference between those 2 that distribution is kind of actually occurring under the Maxigesic label as opposed to I guess who was in-licensing it from your own brand? And is there a margin difference between kind of signing up a licensee versus partnering with a distributor?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [5]

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Yes. Look, we're not seeing a lot of margin difference really between the 2. I mean primarily, often, it's -- it's often dictated as well by which part of the world. So traditionally, I think more Europe and North America and stuff has been more maybe of a licensing market. But I know in markets in Asia and the Middle East, we have more of a distributor market, so the good existing distributor in the Middle East is selling lots and lots of Maxigesic. And then we went to places like Pakistan. It made a lot of sense to the distribution agreement. So financially, there's not a lot of difference. You do forego maybe an upfront licensing fee in summer when you have a distributor. But I guess the advantage is we get more use of the Maxigesic name, especially in our local Asian region, which we see as important to keep on building our presence and making progress there. So yes, that's hopefully -- but I mean from a financial point of view, margin-wise, it shouldn't really have an impact.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [6]

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Okay. Got it. And then just I guess kind of looking at the nature of some of those larger territories that could potentially deliver quite significant upfront milestone payments. Places like the U.S., Japan and China, likely to be kind of more distributor markets or kind of more licensee markets.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [7]

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No. Those zones would be licensee markets, just I guess due to the sort of quantum of size and the fact we're dealing with large multinational type of corporations in most of those markets in terms of having discussions. So I think we said this -- and I mean we are saying, we've got progress at the moment in the United States with at least 3 parties, got progress in Japan with 1 strong party, and I mean they've had a site visit here with quite a significant team. So certainly, that's positive and things are progressing.

Japan is always fairly -- I guess doesn't proceed normally that quickly. But it's all progressing fine. And in China, we've actually got quite a lot of interest. And at the moment, we're having ongoing discussions with 1 strong multinational there, which we would hope would come to fruition. It all just takes time, really, but it's all licensing. And we're all making progress on those 3 fronts.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [8]

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Got it. And it's all very encouraging. Just a final question from me would be just kind of hoping to get a little bit more color in terms of your local presence in ANZ. And I guess you've identified a number of kind of different areas such as kind of natural and digestive in New Zealand and eye kind of pain in hospital and in Australia, where you think there's opportunities to do in-licensing deals. Are you -- is there any kind of quantum you could provide us about, I guess what you think the addressable opportunities are in those target segments? And then maybe kind of build a little upon that, are there kind of niche pockets where you think there's kind of growth opportunities there. Or do you see yourself as kind of over a long-run period being able to continually kind of add more and more in-licensed products across a relatively diverse portfolio?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [9]

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Yes. I mean our portfolio is relatively diverse as you note. We're still working primarily though on trying to focus on areas of strength. So in Australia, we actually now sell the #1 eye lubricant product. And we are #2, overall, in eye lubricant products in the whole market. And it's attractive market because in Australia, as you know, it's hot and dry. Population if anything is aging, which causes more dry eyes. So we've worked hard now then on in-licensing more eye care products. So we have about 4 or 5 products that we've in-licensed and getting close to launching, things like that.

Pain is another area, clearly, with Maxigesic. But you know, we've in-licensed, as I was mentioning before, a patent around painkillers. So we're working on that. So we're sort of like what we're doing is more trying to pick existing areas of strength and then trying to further strengthen them than, say, looking too broad or looking broad-brush across the whole market. And then the other area we've worked real hard on is hospitals in terms of injectable products, where that is more broad-brush, but hospital is still kind of defined and tight segment.

So we've in-licensed a lot of hospital products. And they are all starting to come into the registration queue. And I mean this -- the last 12 months ago, we launched a hospital product that's growing quite significantly, and that certainly helped starting to grow our hospital business again, especially in Australia, after we did the divestment.

So it is the -- like I was saying, it's strengthening up existing areas. And we really do see a significant potential in Australia and in New Zealand, especially Australia. I mean we are working hard in the next sort of few years, maybe 5 years to double our Australian sort of sales and markets. So that's an aspirational target for something that we are definitely working on because we got a good position in Australia. We got a lot of sales force, well regarded, good connections with customers. So yes, we see a lot of potential in the Australian market.

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [10]

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Got it. Excellent. And just as a follow-up to that, Hartley, does it take a couple of years before you have an opportunity to I guess scale the kind of upfront kind of milestone or kind of -- or upfront licensing kind of registration and staff cost like issues, should we think about the opportunity here as being one that's initially both kind of higher revenue and cost growth and then the kind of cost side of things fades away and operating leverage emerges over time? Or do you think the platform that you've already started to establish thus far kind of provides a compelling level of earnings growth from here?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [11]

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So it depends what we're talking about. So whether it's local markets or whether it's international, I mean I think both of those we...

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Jack Crowley, Jarden Limited, Research Division - VP of Equity Research [12]

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For the local markets. For the local markets, I guess you guys are on the other side, kind of conducting some of the -- or making the upfront licensing payments and then kind of moving out your sales force and potentially even doing some registration. Does that kind of I guess introduce a meaningful level of cost over the next couple of years? And then I guess get to a point of inflection through time or is the platform going to see...

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [13]

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Yes. Look, I think you've seen though. You hopefully see by looking at the individual costs for this last half year in Australia. I mean look, we certainly paid some upfronts and made some payments like that. Our regulatory costs have gone up a little bit but nothing stupid, just a gradual progression. We work very hard to control cost. And I think you see, overall, our sales and distribution costs have actually decreased a lot as a percentage. So we always work the business very hard to run -- to keep a close eye on costs. And we often do quite innovative deals that are a bit different from the standard norm as well to keep our costs down. So I guess that -- there will always be some cost, but I mean we believe they're pretty much under control. And if you look at our figures, even for the last 6 months, you'll see there's nothing out of the ordinary. There's some small increases in regulatory fees and stuff maybe a little bit in business development, which is up licensing. But it's not that bad. It's -- we see it as being under control, really.

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Operator [14]

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Moving on to our next question, we have from Pattrick Smellie from BusinessDesk.

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Pattrick Smellie;BusinessDesk;Director, [15]

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I do apologize for missing your call earlier, which I have sent you a text about.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [16]

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No problem.

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Pattrick Smellie;BusinessDesk;Director, [17]

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Quite a lot of work to do. And I was interested in -- you've just discussed actually with respect to Australia and New Zealand. But I just wanted to check the CRG debt, how significant is that? And what kind of interest rate might you be looking at on refinancing?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [18]

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Sure. Look, probably the best person to answer that is our CFO. And Malcolm, do you want to comment you on that?

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Malcolm Tubby, AFT Pharmaceuticals Limited - CFO & Company Secretary [19]

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Yes. Sure. So it's NZD 30 million, matures on 31st of March. Current cost on that is $13.5 million. The BNZ facility, the current one is 8, but we'd expect to be lower than that when we renew -- when we get that new facility at the end of the year.

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Pattrick Smellie;BusinessDesk;Director, [20]

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So what will that take out and put straight to the bottom line? (inaudible)

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Malcolm Tubby, AFT Pharmaceuticals Limited - CFO & Company Secretary [21]

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5% on for the $2 million.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [22]

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We should be able to say that, yes, we would hope or anticipate to be able to say, at least a couple of million maybe, maybe $3 million, so somewhere between there. So I mean they are still working on. We've got a number of term sheets from existing -- from New Zealand banks and finance institutions. So that's a key thing obviously for us to work on over the next couple of months.

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Operator [23]

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[Operators Instructions) Our next question comes from the line of Joeri Sels from JS Alpha.

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Joeri Sels;JS ALPHA LIMITED;Director, [24]

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Congratulations for these good numbers from my side. Only one question left. As you have managed to reaccelerate growth to 23% after the 4% and 8% in the previous semesters. Can you please confirm that your last 6 months reported revenue did not include any one-off? I'm thinking of a revenue one-off, say that, from one country or a distributor in one country. You got an order that was exceptionally high and cannot be repeated in the next 2 years or anything like that. Or was the composition of the revenues you have shown kind of normal according to your view?

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [25]

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Yes. Look, it's pretty much business as usual. What we did see, and I think we did say, is we did receive a sales milestone from one of our licensees. But to be frank, ongoing milestones is part of our business model, we have written into a lot of our agreements, be it sales milestones, regulatory milestones and the like. So we see an ongoing influx anyway of those over the next 5, 6 years or something. So there's nothing really that -- Malcolm, there's nothing that stands out to me.

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Malcolm Tubby, AFT Pharmaceuticals Limited - CFO & Company Secretary [26]

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Right.

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Operator [27]

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We have no further questions from the telephone lines. I would now like to turn the conference back to presenters for closing remarks. Thank you, and please continue.

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Hartley Atkinson, AFT Pharmaceuticals Limited - Founder, CEO, MD & Executive Director [28]

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Thank you very much. Appreciate everyone's attendance. We continue to work hard. We want to deliver our results to our shareholders. And we hope as shareholders in the market will start to recognize the progress that we are making on the plans that we've said, and we hope also people will be able to see that we are delivering on what we promised and what we said.

So thank you very much, and we'll continue to work hard at our end.

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Operator [29]

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Ladies and gentlemen, that does conclude our conference for today. Thank you for your attendance. You may all disconnect.