Annual Report FY2018
Doing
Annual Report 2018
This Annual Report is dated 15 June 2018.
Signed on behalf of the Board of AFT Pharmaceuticals Limited by:
Hartley Atkinson
Chief Executive Officer
David Flacks
Chairman
Contents
2 AFT at a Glance
4 Key Highlights
6 Chairman and CEO’s Report
10 Full year financial results summary
14 Codeine rescheduling in Australia
16 New markets new opportunities
20 Directors and management team
24 Corporate Governance
25 Sustainability
27 Financial statements
58 Statutory disclosures
67 Directory
Full report available online at investors.aftpharm.com
Note: $ in this report are NZ$ unless otherwise stated.
Clinical development
programmes substantially
completed
Gross profit
growth 32%
–– MAXIGESIC NOW LICENSED
IN 125 COUNTRIES.
–– MAXIGESIC IV PIVOTAL STUDY
SUCCESSFULLY COMPLETED
IN THE USA.
–– MAXIGESIC PE LAUNCHED
IN NEW ZEALAND.
–– NASOSURF CLASS 1
REGISTRATION COMPLETED
ON SCHEDULE IN USA.
AND THERE’S MORE TO COME.
Achieving
AFT at a glance
REST OF WORLD
Operating revenue
$2.5m
Number of products
5
Growth drivers
Further increase sales of
Maxigesic through growth in
existing markets, additional
registrations followed by new
launches during FY2019 and
following financial years.
Additional regulatory filings
during FY2019 of new dose
forms of Maxigesic, registrations
and then additional sales.
Sales of Maxigesic are expected
to grow significantly over the
next few years driven by new
launches, but it is important
to note that there is a lag in
these sales from the time of an
out-licensing agreement due
to registration timelines which
vary widely country to country
and are difficult to estimate
with accuracy.
NEW ZEALAND
Operating revenue
$ 27.1 m
Number of products
104
Growth drivers
Ongoing growth of higher
margin OTC products to reduce
reliance of sales from lower
margin tender products.
Gross profit increased by 19%
with the gross profit margin
improving to 37%.
It is anticipated that sales will
be flat in New Zealand during
FY2019, with the divestment
of some non-core hospital
products, which will result
in improving margins as we
continue to grow the OTC
business.
AUSTRALIA
Operating revenue
$49.2m
Number of products
60
Growth drivers
Over the counter (OTC)
products: Maxigesic, Eyecare
Range, Ferro Range and Other
Pain Products Range. Additional
OTC launches to extend Ferro
Range such as Ferro Sachets
and selected new products such
as PipTaz in our hospital range.
The significant opportunity
for increased Maxigesic sales
offered by the rescheduling of
codeine on 1 February 2018 was
a key project with Maxigesic
achieving the largest market
share for Paracetamol-Ibuprofen
combination products in
the period immediately post
rescheduling. This will continue
to be an ongoing focus during
the FY2019 period and onwards.
Significant sales growth was
seen for the Eyecare range
with increased focus on the
optometry channel to drive sales
across all channels.
Margins grew as OTC product
sales increased and we expect
continued significant sales
growth and growth in profit
in Australia in FY2019 and
onwards.
SOUTHEAST ASIA
Operating revenue
$1.3m
Number of products
8
Growth drivers
Continued growth from
products launched during
FY2018.
Launch Maxigesic in Malaysia
and grow sales in Singapore and
Malaysia during FY2019.
Total operating revenue
$80.1m
Total operating revenue
(NZ$m)
FY17FY18FY16FY15FY14FY13FY12FY11FY10FY09FY08FY07FY06FY05FY04FY03FY02FY01FY00
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
Operating revenue growth
+16%
Australia revenue
+33%
our largest market
Gross profit
+32%
Gross profit margin up to
43%
OUR KEY PRODUCTS
Maxigesic
Successfully completed the
developments of existing dose forms
and additionally significantly advanced
formulation developments for the two
new formulations: dry powder sachet
and a novel proprietary fast acting
formulation which we believe will
result in additional clinical benefits.
Additional studies are underway this
FY2019 period to validate the clinical
benefits. The large pivotal Maxigesic
IV Phase 3 study in 276 bunionectomy
patients was successfully completed in
Baltimore, Maryland and Austin, Texas
which has allowed the first regulatory
filings to be completed and further
filings are underway. Regulatory
filings for both the existing tablet
formulation and new dose forms across
a significant number of countries to
complete registrations and start sales
in more territories is well underway.
NasoSURF
Initial Class I registration completed
on schedule Dec 2016 in USA. First
clinical studies are underway in
Australia and New Zealand and a
pre-IND (Investigational New Drug)
application has been made to the FDA
(Food and Drug Administration) in USA
with the intention of opening the IND
during FY2019 and then commencing
larger clinical studies. Filing of Class II
registration in USA is targeted for this
calendar year.
Maxigesic PE / Maxiclear PE
Development work is concluding and
we have recently made the first launch
for Maxigesic PE in New Zealand.
Further regulatory filings will be made
in selected territories.
Australia
New Zealand
Rest of World
Southeast Asia
Overall revenue by market
(Percentage)
33.8%
1.6%
3.1%
61.4%
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
23AFT AT A GLANCE
125 countries
Maxigesic currently licensed in or distributed.
10 countries
Maxigesic sold and launched in Australia, Brunei, Israel, Italy,
Malta, New Zealand, Serbia, Singapore, United Arab Emirates,
and United Kingdom.
MAXIGESIC
CLINICAL TRIAL PROGRAMME FY2018
FINANCIAL HIGHLIGHTS (NZ$)
Operating revenue
$80.1m
Licensing income
$1.8m
Operating loss
($10.1m)
Cash available at 31 March 2018
$6.8m
7 studies
900+ patients
7 countries
Australia, Jordan, Mexico, New Zealand,
Russia, United Kingdom, United States.
Total income
$81.9m
KEY HIGHLIGHTS54AFT PHARMACEUTICALS LIMITED
Annual Report 2018
Delivering
Maxigesic licensed in 125 countries
Global Maxigesic clinical
trial substantially completed
We remain highly
committed to
commercialising our
Key Innovative Products.
David Flacks
CHAIRMAN
Our key efforts are
now shifting towards
product launches in the
out-licensed territories.
Hartley Atkinson
FOUNDER AND CEO
Chairman and CEO’s Report.
CHAIRMAN AND CEO’S REPORT76AFT PHARMACEUTICALS LIMITED
Annual Report 2018
Maximising
Our Pascomer (previously Pascoderm) Key Innovative Product
project is progressing with initial development work and
pre-IND FDA meeting completed and we are now seeking to
open an IND with FDA in order to commence clinical studies.
A detailed market study with payors has refined a target
market of around $400-450m sales in USA/EU. Out-licensing
discussions with interested parties are underway although
timing remains difficult to predict with any degree of certainty.
In our combined local markets of Australia and New Zealand,
we have continued to improve sales of higher margin OTC
products. In the New Zealand market the top-line sales
declined due to the loss in sales of some lower margin tender
products such as metoprolol. However the gross profit in
New Zealand grew by 19% despite the decline in top-line
revenue. Furthermore we divested some lower margin hospital
products to Baxter in New Zealand and expect to complete the
same deal for Australia by June this current FY2019 year which
overall will contribute positively to our financial position.
Maxigesic sales have grown significantly in Australia following
the rescheduling of codeine which occurred on 1 February 2018.
The sales uplift was somewhat delayed as consumers had
stock-piled codeine ahead of the switch date. However sales
still lifted significantly and despite competitor Paracetamol-
Ibuprofen products spending very significantly on product
promotion, we achieved a market leading sales position in the
period following 1 February 2018 rescheduling. Although we
still have ongoing work to consolidate our position and further
expand sales, the initial progress has been pleasing and our
salesforce in Australia has worked with great passion to deliver
this result against large multinational competitors.
We have maintained continuing tight overhead control on fixed
costs such as staff numbers and completed the year with a
cash balance of around $7m and with many of our expensive
Research and Development (R&D) projects such as the
Maxigesic IV study completed.
Our R&D costs are now able to be significantly reduced given
that we have concluded much of the development work
outlined in our IPO documents. We will look to moderate our
R&D spend in order to achieve a clear path to profitability.
We had always targeted break-even in either the FY2018 or
FY2019 time periods with the former target dependent upon
a significant licensing agreement. The timing of licensing
agreements is always difficult to forecast with certainty.
Finalising with a suitable partner is paramount rather than
completing an agreement with an unsuitable partner in
order to make a pre-announced deadline. However with
the increasing sales, increasing gross profit and lower R&D
spend, we are confident of break-even in the FY2019 year
independent of licensing income from additional agreements.
We highly value the support of our shareholders, many of
whom we know personally or who are AFT customers that
we are able to speak with at the various trade displays in
Australasia. It is worthwhile to note that our main shareholders
(Atkinson Family Trust and CRG) and directors all maintain
significant exposure to AFT which we believe indicates
confidence in the Company’s prospects.
We remain highly committed to commercialising our
Key Innovative Products which, once achieved, will create
significant sales and profits and additionally improve healthcare
outcomes for patients around the globe. As with all
pharmaceutical development projects, there is a development
and regulatory phase prior to sales starting and then growing.
We would like to thank all stakeholders in our business and
reconfirm again that our company directors and staff are
working very hard to achieve our potential.
We are pleased to have completed our second full financial
year as a listed company and to have made further significant
progress on development and commercialisation of our
key innovative products in addition to expanding our
Australasian business.
Our operating revenues grew 16% to $80.1m, with our largest
market Australia growing at a significant 33%. Importantly,
our overall company gross profit grew by 32% as our margins
expanded from 38% in the prior year to 43% this financial year.
This has been driven by increases in sales of over the counter
(OTC) products consistent with our strategy.
Further important advancements in product development
and registrations were made during the year. While these
are not immediately apparent in FY2018 income, again
they are important building blocks for future sales growth
and profitability.
Additional out-licensing agreements were finalised for Maxigesic
during the year such that there are now 125 countries licensed
– a significant number for any pharmaceutical company.
Progress has been made on additional out-licensing
agreements for larger markets with discussions and diligence
underway, but these were not finalised during FY2018 which in
turn has impacted licensing income during this time period.
However, we are confident that additional deals will be closed
during the FY2019 time period.
Our key efforts are now shifting towards product launches in
the out-licensed territories. We have reorganised our internal
regulatory and development teams around this key task in
order to focus upon delivering these required results.
The timing of these product launches are dictated by
registration timelines and these vary considerably country by
country. Many are also dependent upon registering first in key
EU territories which creates an additional time lag. As a result,
the income flow from out-licensing deals is not immediate,
which has significantly impacted the international sales growth
(27%) during the FY2018 time period. Although we successfully
achieved registration across almost all of Europe, the process
was significantly delayed by referral to a committee of the
European Medicine Agency (EMA) called CHMP (Committee
for Medical Products in Humans). However we are now able
to get licences granted across Europe and further launches
will occur during FY2019 which will in turn drive more
significant growth in International sales.
Additionally, the granted Maxigesic registrations in Germany
and UK will allow filings in a significant number of secondary
markets such as Africa, CIS and Middle East which are also
underway during the FY2019 time period. The new market
launches are expected to continue and roll out over the next
four to five years which is important to drive a significant
increase in International sales.
Maxigesic IV development in adults has essentially been
completed with successful conclusion of the pivotal large
clinical study in USA. The first filings have already been made
as previously targeted and further filings will be completed
over this coming FY2019 year. Licensing agreements for this
product have the potential to deliver more significant licensing
payments and discussions and diligence now are underway
in order to achieve these goals.
Development has continued successfully for further dose
forms of Maxigesic. The Maxigesic Oral Suspension large clinical
study has been completed and further regulatory filings will be
made during this FY2019 year. Further work continues on
Maxigesic Sachets and Maxigesic PE formulations which will
be concluded in the FY2019 time period. Additionally,
technology has been licensed from a USA company to develop
a faster acting version of Maxigesic with the initial development
work concluded. Additional Intellectual Property (IP) has been
also developed around the new dose forms which will be useful
in protecting the overall Maxigesic brand.
Overall we have made significant progress with Maxigesic
but the contribution to sales will only become apparent as
launches are increased from the current 10 countries to at least
125 countries. Additionally the new dose forms will then further
drive sales growth.
Development work with other Key Innovative Products has
proceeded well with our NasoSURF pre-IND meeting held
with FDA for the first major indication. Following the FDA
meeting feedback which clarifies the development process,
we are targeting filing of an application for type IIa medical
device registration towards the end of this calendar year.
Once achieved, this allows initiation of formal out-licensing
negotiations. Market research in USA and UK identified
that our first targeted indication has a significant potential
income stream.
David Flacks
CHAIRMAN
Hartley Atkinson
FOUNDER AND CEO
Maxigesic IV
development in
adults has essentially
been completed with
successful conclusion of
the pivotal large clinical
study in USA.
Gross profit up
32%
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
89CHAIRMAN AND CEO’S REPORT
Full year financial
results summary
The FY2018 results reflect the ongoing strategy
of expanding our presence in our home markets of
Australia, New Zealand and Southeast Asia, while
succeeding in our key Research and Development
programmes for our innovative products to also
grow our international revenues.
Operating revenues grew 16% to $80.1m. Australia, our
largest market, grew by 33%. New Zealand declined by
7%. Southeast Asia grew 28% and Rest of World grew 27%.
Gross margin improved by 5% to 43%. The main driver was
from the growth in over the counter (OTC) revenues in
Australia and New Zealand.
Licensing income comprises the milestone payments received
from out licensing arrangements we have in our Rest of World
markets and the fees we have received from the divestment
of non-core hospital products. It is classified in the financial
statements as other income. This remained in the same range
as prior year at $1.8m (PCP $1.6m), with a combination of new
out licensing agreements commencing and milestone payments
on existing agreements, together with the divestment fees.
Research and development declined to 10% of revenues
as we completed the significant proportion of our current
development programme of our key products. Selling and
distribution declined to 36% of revenue supporting the
OTC products in Australia, New Zealand and Southeast Asia.
In total, operating expenses represented 58% of revenue
(PCP 63%).
These factors culminated in the reduction in the operating
loss for the year to $10.1m.
Operating revenue
Operating revenue grew 16% to $80.1m for the year
ended 31 March 2018 from $69.2m for the year ended
31 March 2017 due primarily to the growth in our
primary Australian market.
The following tables set out the revenues from our
four markets:
0
10
20
30
40
50
Rest of
World
South
East Asia
New
Zealand
Australia
Net revenue FY2017
(NZ$m)
Net revenue FY2018
(NZ$m)
0
10
20
30
40
50
Rest of
World
South
East Asia
New
Zealand
Australia
SUMMARY FINANCIAL RESULTS
(For the year ended 31 March 2018)
$NZ000’s 20182017
Revenue80,07169,205
Cost of sales(4 5,8 8 0)(4 3, 2 07 )
Gross profit34,19125,998
Other income2,235 2,659
Selling and distribution expenses(28,533)(25,964)
General and administrative expenses(8,308)(5,851)
Research and development expenses(8,230)(11,227)
Equity accounted loss of joint venture entity(1,494)(414)
Operating loss(10,139)(14,799)
Australia
New Zealand
Rest of World
Southeast Asia
33.8%
1.6%
3.1%
61.4%
42.1%
1.5%
2.8%
53.6%
Operating revenues
FY2018
$80.1m
16%
Overall revenue by market FY2017
(Percentage)
Overall revenue by market FY2018
(Percentage)
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
1011FULL YEAR FINANCIAL RESULTS SUMMARY
Australia revenue grew by 33% to $49.2m (PCP $37.1m) and
this market now makes up 61% of group operating revenue.
With strong growth in its main OTC channel, Maxigesic
revenues grew by 65% with significant growth from 1 February
2018 following the regulatory shift of codeine based painkillers
from OTC to prescription only. Other core products such as the
Ferro range, Eyecare range and other pain range also grew
well. The hospital channel again had strong growth and these
two channels drove the growth.
New Zealand revenue declined 7% down to $27.1m (PCP
$29.2m) and now represents 34% of the group operating
revenue. The decline was due to AFT ceasing the sole supply
tender product Metoprolol in FY2018. OTC sales recovered this
year following the small decline in the Pharmacy channel in the
previous year, which is pleasing given the higher margins in
OTC products. This assisted an increase of 19% in gross profit
compared with prior year. The hospital channel had good
growth over a wide range of products.
Southeast Asia revenue grew by 28% to $1.3m (PCP $1.0m) and
this market stays steady at 1.6% of group operating revenue.
Sales were predominantly in the Singapore market where
product registration is generally quicker to obtain. The hospital
channel still accounts for most of the revenue from this market.
That said, OTC grew at 48% and we expect more of the growth
to come from this channel going forward.
Rest of World revenue grew by 27% to $2.5m (PCP $2.0m)
and this market now makes up 3.1% of the group operating
revenue. Most of the revenues are from sales and royalties
of Maxigesic. For example, sales to the United Arab Emirates
have grown by 30%, while in Italy in market sales made by
the licensee have grown well. Launches are also dictated by
regulatory timelines which influence the new market timelines.
These were negatively impacted by slower than expected
registrations in the EU. However these registrations have now
been achieved and launches are anticipated to get back on
track this current financial year.
Gross margin
Gross margin of 43% for FY2018 improved by 5% from 38%
for FY2017. The main drivers for the improvement were from
the growth in OTC revenues primarily in Australia and to a
lesser extent by the OTC revenue recovery in New Zealand.
The OTC channel has the highest gross margin. The growth
in gross margin is expected to continue as the Australian and
Rest of World OTC revenues grow.
Other income
Licensing income comprises the milestone payments received
from out licensing arrangements we have in our Rest of World
markets and the fees we have received from the divestment
of non-core hospital products. It is classified in the financial
statements as other income. This remained in the same range
at $1.8m (PCP $1.6m), with a combination of new out licensing
agreements commencing and milestone payments on existing
agreements, together with the divestment fees.
Operating overheads
Total research and development investment reduced to
$9.7m (PCP $11.6m). This includes the $1.5m spend on
Pascomer which under IFRS accounting standards we are
required to record as joint venture equity accounted loss in
the consolidated income statement. A large portion of total
research and development spend was on the Maxigesic IV
clinical trial in the United States which has now concluded
with strongly positive results.
Selling and distribution expenses increased to $28.5m
(PCP $25.9m). However, these expenses declined as a
percentage of operating revenue to 36% (PCP 38%).
They comprise primarily the support of OTC products in
the Australia, New Zealand and Southeast Asia markets.
General and administration expenses increased to $8.3m
(PCP $5.9m) primarily due to one off legal costs incurred
relating to competitor legal action challenging certain
Maxigesic claims. AFT remains confident of its legal position
with the outcome of the claims due during FY2019.
Balance sheet
Total assets of $56.6m (PCP $58.3m) have reduced primarily
due to the investment made into research and development.
Working Capital requirements remained the same at $22.9m
with close management of inventory levels and debtor
management.
The cash position of $6.8m at 31 March 2018 (PCP $15.9m)
reflects primarily the $12.7m loss due to investment into
research and development, the US$5m drawdown under
the debt facility and the $1.1m equity raise from the share
placement in May 2017.
The balance sheet is primarily working capital driven.
Intangible assets are growing and are now $5.1m (PCP $2.5m).
This year, we have capitalised $2.5m of development costs
which relate to the new delivery forms of Maxigesic.
The balance of intangible assets comprise capitalised
patents and trademarks. The investment in the Pascomer
joint venture entity has increased to $2.1m (PCP $0.6m)
with spend of $3.0m on product development.
The Company is pleased to note that, given their satisfaction
with the progress of the company, CRG the holder of the
long term loan to AFT has removed the requirement for any
repayment of the loan prior to its maturity in March 2020
and has made available a further US$5m draw down at the
Company’s option prior to 30 September 2018.
OTC products already launched in FY2017 will continue to
drive sales growth in Australia. The codeine opportunity,
whilst being difficult to accurately forecast, is significant given
that 750 million tablets of codeine-based OTC products were
sold in Australia every year. In New Zealand, Medsafe have
announced a similar codeine rescheduling which will occur
in the 2020 year. This will again offer a further opportunity
to expand Maxigesic sales in our New Zealand market.
Australia revenue
grew by 33% to $49.2m
(PCP $37.1m) and this
market now makes
up 61% of Group
Operating Revenue.
Rest of World revenue
grew by 27% to $2.5m
(PCP $2.0m) and
this market now makes
up 3.1% of Group
Operating Revenue.
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
1213FULL YEAR FINANCIAL RESULTS SUMMARY
Australia’s Therapeutic Goods Association (TGA) confirmed
an interim decision that shifted codeine based painkillers
from being an over the counter (OTC) product in Australia
to a prescription only product. This change consequently
commenced on 1 February 2018 despite opposition from
incumbents and vested interest groups. We have also now
seen in New Zealand an announcement that Medsafe has a
similar codeine rescheduling which will occur in the 2020 year.
The switch in Australia offered a significant sales upside for
Maxigesic as consumers sought an alternative OTC analgesic
after the rescheduling of OTC codeine. Evidence of consumers
stock-piling codeine ahead of 1 February emerged which
delayed the uptake of alternatives such as Maxigesic. We
undertook careful evaluation of the market switch potential
and increased significantly our stockholdings of Maxigesic
which proved to be very important as sales increased
significantly around 1 February and have held up subsequently.
Our sales force in Australia has worked very hard and with
great passion to outline the benefits of Maxigesic to pharmacy
in Australia. This has resulted in great support at pharmacy
which translated to Maxigesic being the leading Paracetamol-
Ibuprofen combination after the switch date. Although there
is another combination of Paracetamol-Ibuprofen in the
market the Maxigesic combination cannot be copied as it
is patent protected in Australia until around mid-2028.
Consequently a number of different brands of the alternative
combination are available. However Maxigesic delivers a
greater maximum daily dose of active ingredients than
alternatives: Paracetamol 4000mg+ Ibuprofen 1200mg/day
compared with Paracetamol 1500mg+ Ibuprofen 600mg/day.
Promotion of our points of differentiation has and continues
to be important given that we do not have the promotional
budgets of some of our large multinational competitors.
However extensive work in pharmacy from our sales force
together with a different style of advertising featuring the
inventor of Maxigesic has helped us achieve significant
market share and sales on a limited budget. In fact even an
ex Australian Prime Minister was spotted purchasing a pack
of Maxigesic recently in a Melbourne pharmacy.
Growing OTC sales
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
1415
Codeine rescheduling switch in Australia
significantly lifts sales
AUSTRALIA
REVENUE
CODEINE RESCHEDULING IN AUSTRALIA
$31.2m
FY2016
$ 37.1 m
FY2017
$49.2m
FY2018
NEW MARKETS. NEW OPPORTUNITIES1716AFT PHARMACEUTICALS LIMITED
Annual Report 2018
Multiple
launches in
new markets
Europe and
Asia focus
Significant progress was made during
FY2018 in completing the Maxigesic
clinical trial programme with studies
around the world: Maxigesic IV in Austin,
Texas and Baltimore, Maryland USA;
Maxigesic Junior in Hamilton and Auckland
New Zealand, Melbourne, Australia and
Guadalajara and Morelia, Mexico.
These studies require extensive
collaboration and are all managed by
AFT from New Zealand and our study
monitors visit the trial sites to ensure that
the study protocols are being followed
by the medical staff at the trial sites. Our
lead clinical trial monitor, Irenee Stewart,
has been with AFT for more than five
years and enjoys the challenge of
travelling to remote sites and interacting
with the site staff to ensure that all
aspects of the study are completed
according to tight regulatory rules of
Good Clinical Practice (GCP). Irenee was
previously an experienced nurse working
in ICU and Cardiac Care Departments at
Waikato Hospital. The importance of this
was recently emphasized when the
pivotal Maxigesic tablet study site in USA
at Austin Texas was audited by USA FDA
who unexpectedly arrived to conduct a
week long audit process reviewing all the
documentation. As expected the study
passed the audit procedure without any
major data queries but again this
emphasises the importance of good
GCP procedures.
On the formulation side, we are
collaborating with a French company
to develop a dry powder version of
Maxigesic that can be taken without
water. This is technically challenging
since the Paracetamol in Maxigesic
naturally has a bitter aftertaste and the
Ibuprofen component will result in an
irritating feeling to the throat.
Many different versions of coating have
been used and taste tested. The final
formulation has been chosen and
optimisation work is underway which has
also resulted in additional intellectual
property patent filings which is
important to protect the final product
from competitor copycat versions.
A similar approach was used for
Maxigesic IV where we partnered with a
European company to develop a stable
IV liquid formulation of Maxigesic.
Technically this was challenging as
Paracetamol tends to degrade in
solution and turns a bright yellow colour
with the formation of potentially toxic
oxidative by-products. The collaboration
was able to develop a stable Maxigesic
IV formulation which has resulted in a
further generation of IP to protect the
Maxigesic IV formulation in addition to
patents around Maxigesic IV.
A significant amount of development
work has been concluded and a key
requirement is now to complete
registration of both Maxigesic and the
line extensions globally, which is a
significant exercise. We have reorganised
our internal approach to this with the
creation of specialist regulatory
managers to drive this process.
Additionally a new Project Manager and
International QA Manager position has
been created and the position filled
through an internal promotion. Ongoing
evaluation of business requirements and
structure is of prime importance as the
process of registering and launching in
some 125 countries around the globe,
albeit with local licensees, is a significant
quantum shift for our business which has
traditionally been focused upon Australia
and New Zealand.
REGISTRATION
IN 23 EUROPEAN
COUNTRIES
ACHIEVED.
20+ PRODUCT
LAUNCHES IN
CENTRAL AMERICA
AND EUROPE.
NEW MARKET
LAUNCHES
WILL DRIVE
INTERNATIONAL
SALES OVER THE
NEXT THREE TO
FIVE YEARS.
FY2018 SAW
THE SUBSTANTIAL
COMPLETION OF
THE GLOBAL
MAXIGESIC IV
CLINICAL TRIAL
PROGRAMME.
A DRY POWDER
VERSION OF
MAXIGESIC BEING
FORMULATED.
A GLOBAL LINE
EXTENSION
FOR MAXIGESIC
PRODUCTS IS
UNDERWAY.
Development of AFT’s new nasal
delivery system, NasoSURF, is well under
way and on track for FDA and EU filings
for a Class II medical device registration
in this coming financial year.
Currently there are other ultrasonic and
mechanical nebulisers used in hospitals
but these are typically large, bulky,
requiring an external power source and
a pump or a fan to deliver generated
aerosols over a number of minutes.
The NasoSURF nebulizer in contrast
is a highly compact, efficient and
portable device driven by a cell phone
sized battery. It is used to deliver
medication to the patient via the
nose in literally a few breaths by virtue
of its patented ultrasonic transducer
and mesh technology.
Recently a Human Factor Evaluation
(HFE) study was performed in
Minneapolis (USA) involving healthcare
professionals and potential users.
The outcome of this study showed that
the general design and device
functionality was on track but a few
design enhancements were identified
that could both increase the user
experience and the clinical applicability
of the device. With this in mind, the AFT
design and technical team have used this
knowledge combined with feedback
from the FDA to further improve the
device and user experience as well as
ways to reduce the ongoing
manufacturing costs. Device
enhancement prototyping is well
underway and the manufacturing
development/commercialisation is on
schedule for the regulatory filings in the
USA and EU as planned.
We have also initiated a development
programme with a French company for a
specific formulation and dosage delivery
system that can be used together with
NasoSURF. This system will be used with
NasoSURF in the clinical development
studies for FDA which are expected to
occur this financial year.
Progressing Key
Innovative Products
NasoSURF nebuliser
An improved approach to
medicine delivery
Maxigesic development
and progress
The commercial realisation of our
licensing agreements in over 125
countries is a key focus for us in FY2019.
Registration progress was slower than
originally expected as the Maxigesic
regulatory application was considered
by CHMP, the European medicine
agency committee which resulted in a
delay of approximately nine months.
However we have achieved registration in
23 European countries with the goal to
achieve registrations in a further 12
countries this FY2019 year. This is an
important step towards achieving
revenue goals over the coming years as
Maxigesic registration must precede
product launches.
Attaining these registrations and
executing successful launches in core
markets, whilst maintaining growth in
established markets such as Italy and the
UAE will drive growth.
A key focus in FY2019 is Europe and Asia
where launches are confirmed for the
first half of this year in Malaysia,
Singapore (OTC Launch post re-
classification), and Ireland. Further
launches are planned in at least 20
countries in the Central American region
and multiple European countries.
Registration is imminent in Mexico with
our licensee partner Expanscience. We
aim to launch in the second half of this
financial year in this strong emerging
market where fast acting analgesic
combinations form a growing segment*
for the 123 million population.
Our German license has been granted
which aids registration submissions into
regions throughout CIS, MENA and
Africa as those countries rely upon this
license for the registration process.
Over the next year AFT will submit
Maxigesic line extensions for registration
with our key licensee partners to further
expand the product range and drive the
long term growth worldwide.
We expect a number of additional
licensing deals to be announced over
this FY2019 year which together with
growing Maxigesic tablet sales from
existing markets, new market launches
from existing licensees, new market
launches from new licensees and then
launches of additional dose forms, will
drive significant sales in the International
division over the next three to five years.
*Nicholas Hall report Nov 2017
International growth
for Maxigesic
AFT PHARMACEUTICALS LIMITED
Annual Report 2018
1819NEW MARKETS. NEW OPPORTUNITIES
David Flacks
CHAIRMAN AND
INDEPENDENT DIRECTOR
Appointed 22 June 2015
David has a number of
governance roles and is also a
corporate lawyer with boutique
corporate law firm Flacks &
Wong. David is chair of the
NZX Regulatory Governance
Committee, Harmoney Corp
and biotech start up Upside
Biotechnologies, and is a
director of the Vero NZ group
of companies and NZ Venture
Investment Fund.
David was chair of the NZX
Markets Disciplinary Tribunal until
June 2017 and was previously a
member of the Takeovers Panel.
He also holds a number of pro
bono directorships.
David was for many years a
senior corporate partner at Bell
Gully and was general counsel
and company secretary of
Carter Holt Harvey during the
1990’s. He is a law graduate from
Cambridge University.
Dr Hartley Atkinson
FOUNDER, EXECUTIVE DIRECTOR
AND CHIEF EXECUTIVE OFFICER
Appointed 4 September 1997
Hartley founded AFT in 1997.
Before founding AFT, Hartley
worked at Swiss multinational
pharmaceutical company, Roche,
for eight years where he held
positions as Sales & Marketing
Director, Medical Director,
Product Manager and Medical
Manager. Prior to his work at
Roche, Hartley was a Drug
Information Pharmacist and
Researcher at the Department
of Clinical Pharmacology,
Christchurch Hospital. Hartley
is the author of a number of
scientific publications. Hartley’s
work has been published in the
prestigious The New England
Journal of Medicine.
Hartley holds a Doctorate in
Pharmacology, a Masters in
Pharmaceutical Chemistry with
distinction, and a Degree in
Pharmacy, all from the University
of Otago.
Marree Atkinson
EXECUTIVE DIRECTOR
AND CHIEF OF STAFF
Appointed 4 September 2012
Marree has been involved in
all aspects of AFT’s business
since its establishment in
1997, including roles in sales,
regulatory affairs, customer
services and logistics. Marree’s
role as Chief of Staff sees her
involved in the day-to-day
running of AFT’s head office
including managing staffing
requirements and special
projects involving AFT’s head
and affiliate offices.
Marree is a registered nurse
previously practising at
Waikato Hospital.
Nathan (Nate) Hukill
NON-EXECUTIVE DIRECTOR
Appointed 14 May 2014
Nate is the President and
Chairman of CRG, a US-based
investment management firm
focused on the healthcare
industry. Mr. Hukill oversees
all aspects of the investment
process, including investment
sourcing, due diligence, portfolio
construction and portfolio
management. Mr. Hukill also
oversees the investor relations
process, including fund raising,
reporting and limited partner
relationship management.
Nate joined CRG in 2009,
bringing more than 16 years of
investing experience. Prior to
joining CRG, he was a Portfolio
Manager at Highland Capital,
where he invested and managed
approximately $4.5b in the
healthcare, consumer products,
and technology sectors.
Before Highland Capital, Nate
co-founded a pharmaceutical-
focused enterprise software
company called OpenQ, Inc.
He started his career as a credit
investor at Salomon Smith
Barney where he managed a
portfolio of approximately
$800m.
Nate holds a Bachelor of Science
in business administration from
the University of Colorado and
an M.B.A. from the Darden
Graduate School of Business at
the University of Virginia.
Jon Lamb
INDEPENDENT DIRECTOR
Appointed 4 September 2012
Jon has led the strategic
planning, marketing and
restructuring of various
companies throughout his
career. He has held various roles
at Beecham (a multinational
pharmaceutical company
that would later merge with
a predecessor company to
GlaxoSmithKline) including CEO
in New Zealand and Marketing
Manager in both Australia
and South Africa. He has also
held roles as CEO of Nylex in
New Zealand, Managing Director
within the Rural Division of
Fletcher Challenge, Director
of Southland Frozen Meats
and Marketing Director of the
New Zealand Kiwifruit Marketing
Board (where he was responsible
for creating the Zespri brand of
kiwifruit, and restructuring Zespri
into a retail focussed operation).
More recently, Jon was a Director
of Virionyx, a New Zealand
company that developed an
antiviral drug designed to
combat AIDS. He was Deputy
Chair of Australian diagnostic
company ATF Group that
developed a real time tool for
measuring the Hepatitis B virus in
individual patients.
Jon has been involved with
AFT since 2004, firstly as a
consultant, and then in his
current capacity as a director.
Jon is a Member of the Institute
of Directors and has a Diploma
from the Marketing Institute
of the UK (now the Chartered
Institute of Marketing).
Dr John Douglas (Doug) Wilson
INDEPENDENT DIRECTOR
Appointed 4 September 2012
Doug was an Associate Professor
at the Auckland Medical School
before taking a role as Senior
Vice President and Head of
Medicine and Regulatory Affairs
in the US for German drug
company Boehringer Ingelheim
Pharmaceuticals. He then carried
these same responsibilities to
Boehringer’s worldwide medical
research group in Germany,
overseeing all research and drug
development programmes. He
supervised sixteen drugs to
the US market through FDA
and many others into global
markets. Since his return to
New Zealand, Doug has been
a consultant to pharmaceutical
and biotech companies in New
Zealand, Australia, Italy, the
UK, Ireland and New York. He
has been a director of Neuren
Pharmaceuticals, of a drug
discovery company Phylogica
in Perth Australia, and until last
year a director of Adherium –
a medical device company.
He is currently Chief Medical
Officer of Ferghana Partners,
an investment bank in the
health care space in New York
and London.
Doug has a medical degree
from New Zealand, is a Fellow
of the Royal Australian College
of Physicians, a Fellow of the
College of Pathologists of
Australia and has a PhD from the
University of London.
Dr James (Jim) Burns
INDEPENDENT DIRECTOR
Appointed 17 September 2015
Jim has extensive executive
experience in pharmaceuticals,
biotechnology, medical devices,
and diagnostics. Jim has served
in leadership roles at large
multinational corporations,
early-stage companies, venture
capital funds and private equity.
From 2009-2016, Jim served
as Chairman of the Board,
Executive Chairman and
Chief Executive Officer of
Assurex Health, a precision
medicine company focused
on neuropsychiatric and pain
disorders. Previous roles include
President and CEO of cancer
drug development company
CASI Pharmaceuticals; President
of MedPointe Pharmaceuticals,
a specialty pharmaceutical
company; President and CEO of
biotechnology company Osiris
Therapeutics; General Partner
of Healthcare Ventures; Group
President of Becton Dickinson, a
global medical device company;
and Partner at Booz & Company,
an international strategy
consulting firm.
Jim is a Board Leadership Fellow
of the National Association of
Corporate Directors (NACD), a
Director of Vermillion (NASDAQ),
and a Director of Precera
Bioscience. Jim earned B.S.
and M.S. degrees in biological
sciences from the University of
Illinois, an M.B.A. from DePaul
University, and a D.L.S. from
Georgetown University.
Governance
Directors and management team
AFT has an experienced and balanced Board with a diverse range of skills.
The Board comprises an independent Chairman, three other independent
directors, one non-executive director and two executive directors. Their
names and information about their skills, experience and background,
together with information about AFT’s management team, are set out below.
Board of Directors
21AFT PHARMACEUTICALS LIMITED
Annual Report 2018
20DIRECTORS AND MANAGEMENT TEAM
Malcolm Tubby
CHIEF FINANCIAL OFFICER
Malcolm is a qualified Chartered
Accountant in the United
Kingdom and New Zealand with
a wealth of senior corporate
governance expertise in the
commerce sector including roles
in significant public companies
as Chief Financial Officer. He has
experience in senior positions
in public and private companies
in pharmaceuticals, beverages,
insurance and aged care facilities
in Australia and New Zealand.
Malcolm has been involved in the
AFT board since its foundation.
Malcolm is also the CFO for
AFT Pharmaceuticals.
Ioana Stanescu
HEAD OF DRUG DEVELOPMENT
Ioana has overall responsibility
for the research and development
functions of the Company.
She has more than 20 years’
experience in the pharmaceutical
industry with previous positions,
including VP QA & Regulatory
Affairs, Head of Vaccine Business
Area at FIT Biotech Ltd, and
a World Health Organisation
adviser performing institutional
assessments of National
Regulatory Authorities within
Central and Eastern Europe.
She has coordinated a variety of
European FP6 and FP7 funded
research grants. In 1999 she was
selected as an Expert by the
European Health Committee –
Council of Europe to participate
in the coordinated research
study of viral inactivation of
labile blood products. She is
also a Member of the European
QP Association.
Vladimir Ilievski
REGULATORY AFFAIRS MANAGER
Vladimir was born and raised in
Macedonia. He holds a master’s
degree in Pharmacy from the
University of Ljubljana, Slovenia,
where he started his career as
a pre-clinical researcher before
moving to New Zealand. Prior
to joining AFT Pharmaceuticals,
Vladimir worked for Douglas
Pharmaceuticals in various
roles including as QC and QA
analyst and regulatory/senior
regulatory associate. He joined
AFT Pharmaceuticals in 2006
as Regulatory Affairs Manager.
Vladimir has responsibility for
product registrations in various
countries such as New Zealand,
Australia, South-East Asia
(Malaysia, Singapore, Hong
Kong, Philippines) as well as the
European Union and USA.
Louise Clayton
DIRECTOR INTERNATIONAL
BUSINESS
Louise has worked with brands
within the supplement, OTC,
Health, and Beauty Channels.
Her experience has given
her the opportunity to drive
international brands through a
variety of management roles
encompassing sales, brand
marketing, product sourcing/new
product development, and new
market expansion. She has over
20 years’ functional experience
with International business, key
accounts, sales and marketing
teams, with a core focus on
brand growth and development
within local and International
markets such as Australia, US,
Asia, UK, and ROW.
Calvin Mackenzie
GENERAL MANAGER AUSTRALIA
Calvin joined AFT in February
2010 and has since led
AFT’s Australian team and is
responsible for AFT’s business
in Australia. Calvin has over
20 years’ experience in the
pharmaceutical industry in a
diverse range of roles with a
pharmacy, medical and specialist
focus for brand originator and
generic companies including
Johnson & Johnson, Janssen
Cilag, Arrow and Sigma. Calvin
has significant experience in
building high-performing sales
teams.
Scott Crawford
GENERAL MANAGER –
PROMOTED PRODUCTS
AUSTRALASIA & SOUTHEAST ASIA
Scott joined AFT in March 2013
and is responsible for the OTC
sales in New Zealand across
all retail channels including
pharmacy, supermarkets
and petrol & convenience.
His role involves the account
management, field supervision
and trade marketing. Scott has
over 20 years’ experience in
fast-moving consumer goods in
both Australia and New Zealand
and has previously held roles with
Red Bull and Ferrero Rocher.
Murray Keith
GROUP MARKETING MANAGER
Murray joined AFT in October
2011 and has since been
responsible for managing the
marketing function of AFT, with
a primary focus on the Australian
and New Zealand markets.
His extensive marketing career
prior to joining AFT includes
roles within Nestlé, Lion Nathan,
Bay of Plenty Rugby, Nestlé
Purina, New Zealand Lotteries
and Fonterra Brands (Tip Top).
Management team
23AFT PHARMACEUTICALS LIMITED
Annual Report 2018
22DIRECTORS AND MANAGEMENT TEAM
Corporate GovernanceSustainability
CORPORATE GOVERNANCE2524AFT PHARMACEUTICALS LIMITED
Annual Report 2018
The Board and management of AFT Pharmaceuticals Limited
(AFT or the Company) are committed to ensuring that AFT
maintains corporate governance practices in line with best
practice and adheres to the highest ethical standards.
The Board has had regard to the NZX Listing Rules and a
number of corporate governance recommendations when
establishing its governance framework, including the latest
Australian Securities Exchange (ASX) Corporate Governance
Council Principles and Recommendations (notwithstanding
AFT is not required to follow these recommendations due to
its ASX Foreign Exempt Listing) and the revised NZX
Corporate Governance Code 2017 (NZX Code).
The NZX Listing Rules require AFT to formally report its
compliance against the recommendations contained in the
NZX Code. How AFT has implemented these recommendations
is set out in AFT’s Corporate Governance Statement.
The Board considers that AFT’s corporate governance
structures, practices and processes have followed all of the
recommendations in the NZX Code in the financial year to
31 March 2018.
AFT’s Corporate Governance Statement and governance
charters and policies can be found on the investor centre of
the Company’s website – investors.aftpharm.com/Investors/.
AFT’s corporate governance charters and policies have been
approved by the Board and are regularly reviewed by the
Board and amended (as appropriate) to reflect developments
in corporate governance practices.
STOCK EXCHANGE LISTINGS
AFT is listed on the New Zealand Stock Exchange (NZX Main
Board) and on the Australian Securities Exchange (ASX) as an
ASX Foreign Exempt Listing. As an ASX Foreign Exempt
Listing, AFT needs to comply with the NZX Listing Rules
(other than as waived by NZX) but does not need to comply
with the vast majority of the ASX Listing Rule obligations.
AFT is incorporated in New Zealand.
For us, sustainability means aligning our goals with the
interests of society. We believe that by acting sustainably we
contribute positively towards the development of the world.
The Sustainable Development Goals (SDGs) are a set of global
initiatives set up by the United Nations for everyone to
contribute to. For AFT, the SDGs are a way to see which areas
of sustainability we are directly contributing to and how our
community initiatives relate to a larger vision for positive
change. AFT’s Environmental, Social and Corporate
Governance (ESG) framework remains under development and
will continue to be progressed over time.
OVERVIEW OF AFT’S
GOVERNANCE STRUCTURE
The AFT Board of Directors has been appointed by
shareholders to protect and enhance the long-term value
of AFT and to act in the best interests of AFT and all of its
shareholders. The Board is the ultimate decision-making
body of the Company and is responsible for the corporate
governance of the Company. The role and responsibilities
of the Board are set out in the Board Charter, which can be
found on the investor centre of the Company’s website.
The Board currently comprises an independent non-executive
chair, three other independent non-executive directors, one
non-executive director and two executive directors, as detailed
on pages 20 and 21 of this Annual Report.
The Board has established three standing Board Committees
to assist in the execution of its responsibilities:
• an Audit and Risk Committee;
• a Remuneration and Nominations Committee; and
• a Regulatory and Product Development Oversight
Committee.
Details of the roles and responsibilities of these committees
are described in their respective charters, which can be found
on the investor centre of the Company’s website.
AFT has been committed to sustainability for many years and
contributes to a number of the 17 SDG’s identified by the United Nations.
Providing medicines
for a diverse range
of patients
• 29 AFT products on the World Health Organisation Model
list of essential medicines
• Products range from juvenile- to aged-specific
• Products distributed for use in hospitals, prescription and
general medicines
Innovating
medicines to
improve the
health of our
end customers
• Developing products that we genuinely believe will improve
the health of our end customers.
• Repurposing existing approved pharmaceuticals to minimise
risk to user of our products
• Innovating new delivery methods for improved delivery of
medication. For example, via the development of the NasoSURF.
Providing medicines
solutions for
under-privileged or
under-represented
groups
• Making medicines available for rare diseases, designated with
orphan status under the US Food and Drug Administration.
• Donate medicines to under-privileged groups, such as patients
in the Pacific Islands.
• Work with government agencies to make specific medicines
available to under-privileged groups.
Being a
trustworthy
partner
• All of our critical product suppliers have been risk assessed.
• 20 or so partnerships in Pharmaceuticals
Protecting the
environment
• Donating product that would otherwise be wasted to
charity organisations
• Working with suppliers (within regulatory guidelines) to
reduce packaging or use eco-packaging, wherever possible
while preserving the integrity of the product
Delivering
continued
growth
• 16% growth in operating revenues
• Significant reduction in operating losses
Providing a
great work
place
• Diversity in the workplace with 22 cultures represented
amongst the staff of 88
• 61% of staff are female with 40% of senior executives female
Enhancing lives in Fiji
An ESG case study
FINANCIAL STATEMENTS2726AFT PHARMACEUTICALS LIMITED
Annual Report 2018
June 2017, the New Zealand pharmacy sales team
went to Suva Fiji to assist our local Fiji distributor to
utilise some of our excess inventory from New Zealand
to enhance the lives of the less fortunate in Fiji.
Lice is a major issue in Fiji so we distributed lice
treatments to Fiji schools through the federal
government body. We also provided this to other
Fiji government institutions such as hospitals,
prisons and the military barracks.
The New Zealand sales team donated their time
to help educate healthcare professionals in Suva.
Tina Boyes, Jamie Lee Rummins
and Rebecca Rodonich with
women and children from the
poverty campaign.
Financial
Statements.
Contents
28 Independent Auditor’s Report
31 Consolidated Income Statement
32 Consolidated Statement
of Comprehensive Income
33 Consolidated Statement
of Changes in Equity
34 Consolidated Balance Sheet
35 Consolidated Statement
of Cash Flows
36 Notes to the Financial Statements
58 Statutory Disclosures
67 Directory
FY18
Independent Auditor’s Report
To the Shareholders of AFT Pharmaceuticals Limited
OpinionWe have audited the consolidatedfinancial statementsof AFT Pharmaceuticals Limitedand
its subsidiaries (the ‘Group’), which comprise the consolidated balance sheet as at 31
March 2018, and the consolidatedincome statement, statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and
notes to theconsolidatedfinancial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 31to 57,
present fairly, in all material respects, theconsolidatedfinancial position of the Group as
at 31 March 2018, and itsconsolidatedfinancial performance and cash flows for the year
then ended in accordance with New Zealand Equivalents toInternational Financial
Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (‘ISAs’)
and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing
and Assurance Standards Boardand the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor and the provision of taxation advice, we have no
relationship with or interests in the Company or any of its subsidiaries. These services
have not impaired our independence as auditor of the Company and Group.
Audit materialityWe consider materiality primarily in terms of the magnitude of misstatement in the
financial statements of the Groupthat in our judgement would make it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced
(the ‘quantitative’ materiality). In addition, we also assess whether other matters that
come to our attention during the audit would in our judgement change or influence the
decisions of such a person (the ‘qualitative’ materiality). We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $1 million.
Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
2829AFT PHARMACEUTICALS LIMITED
Annual Report 2018
INDEPENDENT AUDITOR’S REPORT
Key audit matterHow our audit addressed the key audit matterand
the results of our work
Research and development costs
As disclosed in note 6 and note 12, the Group is involved in
the research and development of new products and variants of
existing products.
During the year ended31 March 2018, research and
development costs of $8,986million were incurred. Of this
total, $6,521million was expensed through profit or loss and
$2,465million has beencapitalised as intangible assets.
Judgement is required in assessing whether research and
development costs for each project should be capitalised or
expensed in accordance with the relevant financial reporting
framework.
A key consideration that impacts whether costs should be
capitalised is the technical feasibility of completing the
development of a new product, which generally includes
demonstrating approval of the product by the relevant market
regulatory authority.
In performing our procedures we:
a)understoodmanagement’s processes and controls
to assess the appropriate accounting treatment for
each project;
b)determined
whether the Group’s accounting policies
are consistent with requirements of the relevant
accounting standards;
c)obtainedan analysis from management as to the
status of each individual project and corroborated
with operational management;
d)testeda sample of costs expensed to supporting
documentation to verify the amounts being
expensed and the status of the project;
e)determined whetherthe coststested as part of our
samplein (d) should have been capitalised;
f)testeda sample of costs capitalised to supporting
documentation to verify the amounts being
capitalised and the status of the project;
g)determined whetherthe expenses tested as part of
our sample in (f) should have been expensed;
h)challenged whether management’s
treatment of the
costs is appropriate.
Other informationThe directors are responsibleon behalf of the Groupfor the other information. The other
information comprises the information in the Annual Report that accompanies the
consolidated financial statements and the audit report.
Our opinion on the consolidated financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and consider whether it is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If so, we are required to report that
fact. We have nothing to report in this regard.
Directors’ responsibilities for
the consolidated financial
statements
The directors are responsible on behalf of the Group for the preparation and fair
presentation of the consolidatedfinancial statements in accordance with NZ IFRSand
IFRS, and for such internal control as the directors determine is necessary to enable the
preparation of consolidatedfinancial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidatedfinancial statements, the directors are responsible on behalf
of the Group for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations,
or have no realistic alternative but to do so.
3031AFT PHARMACEUTICALS LIMITED
Annual Report 2018
FINANCIAL STATEMENTS
Consolidated Income Statement
For the year ended 31 March 2018
$NZ000’s Note 20182017
Revenue480,07169,205
Cost of sales(4 5,8 8 0)(4 3, 2 07 )
Gross Profit
34,19125,998
Other income
52,2352,659
Selling and distribution expenses
6(a)(28,533)(25,964)
General and administrative expenses
6(a)(8,308)(5,851)
Research and development expenses
6(a)(8,230)(11,227)
Equity accounted loss of joint venture entity
13(b)(1,494) (414)
Operating Loss
(10,139)(14,799)
Finance income125347
Finance costs
6(a)(2,652)(3,878)
Loss before tax
6(12,666)(18,330)
Tax expense
7(58)(58)
Loss after tax attributable to owners of the parent(12,724)(18,388)
Basic and diluted loss per share ($)
25(0.13)(0.19)
Independent Auditor’s Report
To the Shareholders of AFT Pharmaceuticals Limited
OpinionWe have audited the consolidatedfinancial statementsof AFT Pharmaceuticals Limitedand
its subsidiaries (the ‘Group’), which comprise the consolidated balance sheet as at 31
March 2018, and the consolidatedincome statement, statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and
notes to theconsolidatedfinancial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements, on pages 31to 57,
present fairly, in all material respects, theconsolidatedfinancial position of the Group as
at 31 March 2018, and itsconsolidatedfinancial performance and cash flows for the year
then ended in accordance with New Zealand Equivalents toInternational Financial
Reporting Standards (‘NZ IFRS’) and International Financial Reporting Standards (‘IFRS’).
Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (‘ISAs’)
and International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1
(Revised) Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing
and Assurance Standards Boardand the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor and the provision of taxation advice, we have no
relationship with or interests in the Company or any of its subsidiaries. These services
have not impaired our independence as auditor of the Company and Group.
Audit materialityWe consider materiality primarily in terms of the magnitude of misstatement in the
financial statements of the Groupthat in our judgement would make it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced
(the ‘quantitative’ materiality). In addition, we also assess whether other matters that
come to our attention during the audit would in our judgement change or influence the
decisions of such a person (the ‘qualitative’ materiality). We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
We determined materiality for the Group financial statements as a whole to be $1 million.
Key audit mattersKey audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
3233AFT PHARMACEUTICALS LIMITED
Annual Report 2018
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2018
$NZ000’s 20182017
Loss after tax(12,724)(18,388)
Other comprehensive income
May be subsequently reclassified to profit and loss:
Foreign currency translation reserve74356
Other comprehensive income/(loss) for the year, net of tax74356
Total comprehensive loss for the year
attributable to owners of the parent(12,650)(18,032)
Consolidated Statement of Changes in Equity
For the year ended 31 March 2018
$NZ000’s Note
Share
capital
Redeemable
preference
shares
reserve
Share
options
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
equity
Balance 31 March 201653,902 - 65(100)(25,637) 28,230
Loss after tax - - - -(18,388)(18,388)
Other comprehensive income -- -356 -356
Total comprehensive income---356(18,388)(18,032)
Issue of redeemable preference shares
179,124 - - - -9,124
Movement in share options reserve - -230 - -230
Capital raising expenses
17(82) - - - -(82)
Balance 31 March 201762,944 - 295256 (4 4,025)19,470
Loss after tax - - - -(12,724)(12,724)
Other comprehensive income - - -74 -74
Total comprehensive income---74(12,724)(12,650)
Preference dividends accumulated
17-483---483
Issue of share capital1,065----1,065
Capital raising expenses
17(266)----(266)
Movement in share options reserve - -135 - -135
Preference dividends paid or
accumulated
17----(895)(895)
Balance 31 March 201863,743483430330( 57, 6 4 4)7, 3 4 2
3435AFT PHARMACEUTICALS LIMITED
Annual Report 2018
FINANCIAL STATEMENTS
Consolidated Balance Sheet
As at 31 March 2018
$NZ000’s Note 20182017
Assets
Current assets
Inventories
824,41222,198
Trade and other receivables
916,95416,051
Cash and cash equivalents
106,77015,905
Derivative assets
20176-
Total current assets
48,31254,154
Non-current assets
Property, plant and equipment
11330386
Intangible assets
125,1182,548
Deferred income tax assets
7708610
Investment in joint venture entity
13(b)2,135 627
Total non-current assets8,2914,171
Total assets
56,60358,325
Liabilities
Current liabilities
Trade and other payables
141 7, 3 9 114,549
Provisions
151,098564
Current income tax liability118112
Derivative liabilities
20-204
Total current liabilities18,60715,429
Non-current liabilities
Interest bearing liabilities
1630,65423,426
Total liabilities49,26138,855
Equity
Share capital1763,74362,944
Retained earnings( 5 7, 6 4 4 )(44,025)
Share options reserve
19(b)430 295
Redeemable preference shares reserve483-
Foreign currency translation reserve330256
Total equity
7, 3 4 219,470
Total liabilities and equity
56,60358,325
Net tangible assets per ordinary share $0.02 $0.17
For and on behalf of the Board who authorised these financial statements for issue on 23 May 2018.
Consolidated Statement of Cash Flows
For the year ended 31 March 2018
$NZ000’s Note 20182017
Cash flows from Operating Activities
Receipts from customers79,27866,491
Interest received125347
Payments to suppliers and employees(88,296)(83,043)
Tax (paid) / received(149)16
Interest and finance cost paid(1,862)(2,873)
Net cash used in operating activities
18(10,904)(19,062)
Cash flows from Investing Activities
Purchases of property, plant and equipment(70)(122)
Purchases of intangible assets(2,783)(620)
Investment in joint venture(3,002)(856)
Net cash used in investing activities
(5,855)(1,598)
Cash flows from Financing Activities
Proceeds from issue of share capital1,0659,124
Share issue costs(188)(82)
Dividends paid(41 2)-
New borrowings
167, 1 3 5-
Net cash generated from financing activities
7, 6 0 09,042
Net decrease in cash(9,159)(11,618)
Impact of foreign exchange on cash and cash equivalents24(4 57 )
Opening cash and cash equivalents15,9052 7, 9 8 0
Closing cash and cash equivalents6,77015,905
Hartley Atkinson
Managing Director and
Chief Executive Officer
David Flacks
Chairman
3637AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements
For the year ended 31 March 2018
(c) Critical accounting estimates and judgements
In preparing these financial statements the Group made estimates and assumptions concerning the future. These estimates
and assumptions may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations or future events that are believed to be reasonable
under the circumstances. The recognition of deferred tax (detailed within note 7) and treatment of research and development
costs (detailed within note 12) are considered critical estimates and judgements. It is not expected that these estimates and
judgements will have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the subsidiaries’ operations are measured using the currency of the primary
economic environment in which they operate (the ‘functional currency’). The consolidated financial statements are presented
in New Zealand dollars (NZ$), which is the Company’s functional currency and the Group’s presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised
in the income statement.
(iii) Foreign operations
The results and balance sheets of all foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from New Zealand dollars are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
• income and expenses for each income statement and statement of comprehensive income are translated at average
exchange rates, unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions.
• exchange differences arising are recognised in other comprehensive income and accumulated in equity.
(e) Revenue recognition
Revenue comprises the fair value for the sale of goods, excluding Goods and Services Tax (GST), rebates and discounts.
• The sales of goods are recognised when the product is delivered to the customer.
• Royalties are recognised when licencees have made sales of product which attract royalties to the Company.
(f) Other income recognition
Other income comprises research and development grant and licensing income:
• Research and development grant
Research and development grant income is recognised when eligible research and development expenses are incurred and
conditions relating to the grant are satisfied.
• Licencing income
Licencing income comprises milestone payments due under licencing agreements. Milestone payments represent a minor
portion of the economic benefits of the licencing agreements (the primary benefits being the sale of product and royalties
earned on licensee sales). The milestones are recognised as income according to the terms of each licencing agreement.
(g) Finance income recognition
Finance income comprises interest income that is recognised on a time-proportion basis using the effective interest method.
1. General information
AFT Pharmaceuticals Limited (the “Company”) is a company that is incorporated and domiciled in New Zealand. It is
registered under the Companies Act 1993. These financial statements comprise AFT Pharmaceuticals Limited and its
subsidiaries (together referred to as the “Group”). The Group is a pharmaceutical distributor and developer of
pharmaceutical intellectual property.
The financial statements of the Group have been prepared in accordance with the requirements of the Companies Act 1993,
Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013. As Group financial statements are prepared and
presented for AFT Pharmaceuticals Limited and its subsidiaries, separate financial statements for AFT Pharmaceuticals
Limited are not required to be prepared under the Companies Act 1993.
These financial statements are authorised for issue on 23 May 2018 by the directors.
2. Statement of accounting policies
The financial statements have been prepared under the historical cost convention with the exception of derivative
instruments revalued to fair value.
(a) Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (NZ GAAP). The Group is a for-profit entity for the purposes of complying with NZ GAAP.
The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards
(NZ IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply
NZ IFRS. The consolidated financial statements also comply with International Financial Reporting Standards (IFRS), and
interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.
The accounting policies presented below have been applied consistently to all periods presented in these consolidated
financial statements.
The reporting currency used in the preparation of these consolidated financial statements is New Zealand dollars,
rounded where necessary to the nearest thousand dollars.
(b) Principles of consolidation
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities and the results of the parent and its subsidiaries
controlled at year end.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for the subsidiaries of the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date
of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of
the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the
Group’s share of the fair value of the identifiable net assets of the subsidiary acquired, the difference is recognised
in profit or loss.
Inter-company transactions, balances and unrealised gains on transactions between subsidiary companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Joint venture
Where the Company has joint control in a joint venture, the principles of equity accounting are adopted. In these cases, the
Company’s investment is recognised in the balance sheet and its share of after tax profits less losses of the joint venture are
recognised in the profit and loss, with the value of the Company’s investment carrying value adjusted accordingly.
3839AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
2. Statement of accounting policies (continued)
(h) Property, plant and equipment
All plant and equipment is stated at historical cost less depreciation and any impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Company and Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation of property, plant and equipment is calculated using the diminishing value method which apportions the cost of
the assets over their useful lives. The Group has the following classes of property, plant and equipment and depreciation rates:
Category Depreciation rate (%)
Plant and machinery 21% to 80%
Furniture and fixtures 9% to 60%
Vehicles 26% to 36%
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing proceeds to carrying amounts and are included in the
income statement.
(i) Intangible assets
Finite useful life
Acquired patents, capitalised development costs and software have a finite life and are carried at cost less accumulated
amortisation. Patents are amortised over a useful economic life of 20 years, capitalised development costs over the life of
the relevant patent or period of expected benefit, and software over 3 – 4 years.
Indefinite useful life
Acquired trademarks are considered to have indefinite useful lives whilst they continue to protect revenue streams.
Trademarks are carried at cost less accumulated impairment. Indefinite useful life assets are tested for impairment annually
or when impairment indicators exist. The asset’s carrying amount is written down immediately to its recoverable amount if
its carrying amount is greater than its estimated recoverable amount.
(j) Goods and services tax (GST)
The income statement and the statement of comprehensive income have been prepared so that all components are stated
exclusive of New Zealand, Australian and Malaysian GST. All items in the balance sheet are stated net of GST, with the
exception of accounts receivable and payable, which include GST invoiced. All components of the statement of cash flows
are stated exclusive of GST.
(k) Income tax
The income tax expense recognised for the period is based on the accounting profit or loss, adjusted for non-taxable and
non-deductible differences.
Current tax is calculated by reference to the amount of income tax payable, calculated using tax laws that are enacted or
substantively enacted at balance date.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax
asset or liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
(l) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
(m) Leased assets
Operating leases are those in which all the risks and rewards are substantially retained by the lessor. Lease payments are
charged in the income statement on a straight line basis over the term of the lease.
(n) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts and provision for customer rebates. Bad debts are written off in the year in which they are identified.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off.
A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect
all amounts due according to the original terms of receivables. The amount of the provision is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.
The amount of the provision is recognised in the income statement.
(o) Trade payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period
which are unpaid. These amounts are incurred and are usually paid within 30 days of recognition.
(p) Borrowings
Borrowings are initially recognised at fair value plus transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (plus transaction costs) and the redemption amount is recognised
in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date. Borrowing costs are expensed as incurred.
(q) Share capital
Ordinary shares, and the now-converted preferred shares, are classified as equity. Both carried equal voting rights.
Preferred shares attracted a dividend yield. Redeemable preference shares also form part of share capital.
(r) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term investments
with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet.
(s) Employee entitlements
Liabilities for wages and salaries, including non monetary benefits, annual leave, and accumulating sick leave expected to be
settled within 12 months of the reporting date are recognised in trade payables or provisions in respect of employees’ services
up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for
non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. The liability
for employee entitlements that are not expected to be settled within 12 months is carried at the present value of estimated
future cash flows. Staff share options are valued at fair value as calculated independently using the Black Scholes model.
(t) Impairment of non-financial assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (cash generating units). Indefinite useful life assets are tested for impairment annually and whenever there are indicators
of impairment while finite useful life assets are tested only when there are indicators of impairment.
(u) Derivative financial instruments
The Group benefits from the use of derivative financial instruments to manage foreign currency exposures. The fair value
of forward exchange contracts is calculated using discounted cashflows by reference to contractual exchange rates for
contracts in place and the forward exchange rate at year-end, considered level 2 of the fair value hierarchy.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
4041AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
2. Statement of accounting policies (continued)
(v) Research and development
Research is the original and planned investigation undertaken with the prospect of gaining new knowledge and understanding.
This includes: direct and overhead expenses for research, pre-clinical trials and costs associated with clinical trial activities.
All research costs are expensed when incurred.
Development is the application of research findings to a plan or design for the production of new or substantially improved
processes or products prior to the commencement of commercial production. When a project reaches the stage where it is
reasonably certain that future expenditure can be recovered through the process or products produced, expenditure that is
directly attributable or reasonably allocated to that project is recognised as a development asset. The asset will be amortised
from the date of commencement of commercial production of the product to which it relates on a straight line basis over
the life of the relevant patent or period of expected benefit. Development assets are reviewed annually for any impairment
in their carrying value.
(w) Earnings per share
Basic earnings per share is computed by dividing net earnings by the weighted average number of ordinary shares
outstanding during each period. Preferred shares are considered to be anti-dilutive for the earnings per share calculation.
(x) Change in classification
During 2018, the Group modified the classification of provisions for customer rebates from “Provisions” to “Trade and
Other Receivables” to reflect more appropriately the receipts expected from customers.
Comparative amounts in the Balance Sheet were restated for consistency. As a result, for FY2017, $3,386k was reclassified
from “Provisions” to “Trade and Other Receivables”. Additionally, $75k which is held on term deposit for an NZX bond has
been reclassified from “Cash” to “Prepayments”.
(y) Correction of error
During 2018, the Group determined that goods in transit should be accounted for according to Incoterms, other than for
specific ownership terms in the contracts. Previously, the Group recognised inventory once it had inspected and accepted
the goods as per its rights under the contracts. As a result of this change, as at 31 March 2017 there was $3,480k of goods
in transit which had not been recorded. As a consequence, inventories and trade and other payables were understated.
The change has been recorded in these financial statements by restating each of the affected financial statement line items
for prior periods.
The following table summarises the impact on the Group’s consolidated financial statements, of items (x) and (y).
Consolidated Balance Sheet
For the year ended 31 March 2017
Impact of correction of error
$NZ000’sAs previously reportedAdjustmentsAs restated
Inventories18,7183,48022,198
Trade and other receivables19,362(3,311)16,051
Cash15,980(75)15,905
Total current assets54,0609454,154
Total assets58,2319458,325
Trade and other payables11,0693,48014,549
Provisions3,950(3,386)564
Total current liabilities15,3359415,429
Total liabilities38,7619438,855
There is no impact on the Group’s total equity, basic or diluted earnings per share, net tangible assets per ordinary share,
total comprehensive loss or cash flows for the year ended 31 March 2017.
3. Standards or interpretations not yet effective
No new standards that have been issued and are effective for the periods beginning 1 April 2017 are considered to materially
impact the recognition, measurement or disclosure of these financial statements. Below are new standards and amendments
that have been issued that are not yet effective:
NZ IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial
liabilities. The complete version of NZ IFRS 9 was issued in September 2014. It replaces the guidance in NZ IAS 39 that relates
to the classification and measurement of financial instruments. NZ IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other
comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to
be measured at fair value through profit or loss with the irrevocable option at inception to classify equity instruments that
are not held for trading at fair value through comprehensive income. There is now a new expected credit losses model that
replaces the incurred loss impairment model used in NZ IAS 39.
For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own
credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. NZ IFRS 9 relaxes the
requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship
between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually
uses for risk management purposes. Contemporaneous documentation is still required but is different to that currently
prepared under NZ IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early
adoption is permitted. The Group intends to adopt NZ IFRS 9 in the period beginning 1 April 2018, however, no material
impact is expected as no derivatives used by the Company currently qualify for hedge accounting.
NZ IFRS 15 ‘Revenues from Contracts with Customer’
The Group will implement the new standard effective 1 April 2018. The new standard will replace NZ IAS 18 ‘Revenue’ and NZ
IAS 11 ‘Construction Contracts’. NZ IFRS 15 establishes a comprehensive framework for determining whether, how much and
when revenue is recognised and also contains new requirements related to presentation. The core principle in that framework
is that revenue should be recognised dependent on the transfer of promised goods or services to the customer for an
amount that reflects the consideration which should be received in exchange for those goods or services. The objective of
the standard is to provide a five-step approach to revenue recognition that includes identifying contracts with customers,
identifying performance obligations, determining transaction prices, allocating transaction prices to performance obligations,
and recognising revenue when or as performance obligations are satisfied. Judgement will need to be applied, including
making estimates and assumptions for multiple-element contracts in identifying performance obligations, in constraining
estimates of variable consideration and in allocating the transaction price to each performance obligation and to lease
components (if any). The new standard will result in an increased volume of disclosure information in the Consolidated
Financial Statements.
Changes introduced by the standard relevant to AFT
The new standard provides new requirements and additional guidance that are relevant to the AFT Group, notably in the
following areas:
• the Group’s “Sale of goods” are derived from the sale of pharmaceuticals where control transfers to our customer and
our performance obligations are satisfied at the time of shipment to or receipt of the products by the customer. We do
not expect NZ IFRS 15 to significantly change the timing or amount of revenue recognised under these agreements.
• the Group’s “Royalty income” consists of royalty income from the out-licensing of intellectual property (IP), which is
recognised as earned. We do not expect NZ IFRS 15 to significantly change the timing or amount of revenue recognised
on these royalty arrangements as the standard’s royalty exception will apply to these revenues.
• out-licensing contracts may be entered into with no further obligations or may include commitments to late-stage
development, regulatory approval or manufacturing. These may be settled by a combination of up-front payments,
milestone payments, and reimbursement for services provided. Whether to consider these commitments as a single
performance obligation or separate ones, or even being in scope of NZ IFRS 15, is not straight forward and requires some
judgement. Depending on the conclusion, this may result in all revenue from the contract being estimated at inception
and either recognised at a point in time or spread over the time. The outcome under the new standard may differ to the
Group’s current treatment. The new standard provides an exemption for sales-based royalties for licences of intellectual
property which will continue to be recognised as revenue as underlying sales are incurred. Based on the Group’s current
out-licencing contracts, the impact of the new standard is however not considered to be material.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
4243AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
3. Standards or interpretations not yet effective (continued)
Transition approach and use of practical expedients
The Group will apply the full retrospective method for the transition. Certain practical expedients permitted by the standard
during the transition will also be used, notably the relief to not restate contracts that began and were completed in FY2018 or
were completed before 1 April 2017 and to not provide in FY2019 the disclosure requirement as per NZ IFRS 15 paragraph 120
for the comparative FY2018 period (‘amount of the transaction price allocated to the remaining performance obligations’).
Since the new standard, including the use of practical expedients, is not expected to materially modify the timing or amounts
of revenue recognised for FY2018, no restatement is expected to be necessary.
Presentational changes
As a result of implementing NZ IFRS 15, the Group will make a presentational change to the consolidated income statement
in FY2019 and will create new notes for Revenue and Other Income to include the increased volume of required disclosure
information.
NZ IFRS 16 Leases
Under adoption of the new NZ IFRS 16, a portion of the annual operating lease costs, which are currently fully recognised as a
functional expense, will be recorded as interest expense. The capitalised value of the leases will be amortised as depreciation,
while the lease liability will be amortised as ongoing lease payments are made.
In addition, a portion of the annual lease payments recognised in the cash flow statement as a reduction of the lease liability,
will be recognised as an outflow from financing activities. These are currently fully recognised as an outflow from operating
activities.
The Group does not expect the changes to significantly affect overall cashflow nor expenses and net profit, however the
costs will be recognised in different classifications (interest, depreciation and liability reduction).
There are no other NZ IFRS or NZ IFRIC interpretations that are not yet effective that would be expected to have a material
impact on the Group.
4. Revenue from operations
$NZ000’s 20182017
Sale of goods79,88269,047
Royalty income189158
Total revenue80,07169,205
5. Other income
$NZ000’s 20182017
Research and development grant409512
Licensing income1,8261,597
Other income -550
Total other income2,2352,659
In FY2017, the Company purchased emergency supplies of Metoprolol at a cost of $823,000, which was damaged in transit
and written off as part of Cost of Sales during the year. An insurance recovery of $550,000 was made against this cost,
which was reported as other income.
6(a). Net operating profit
$NZ000’s Note 20182017
Loss before tax (12,666)(18,330)
After charging the following specific expenses:
Finished goods material component of cost of goods sold45,40441,671
Inventory write off4761,536
Audit fees and review of financial statements
6(b)193149
Rental expense – premises528502
Operating leases – motor vehicles and equipment450422
Share options expense135 230
Short-term employee emoluments:
Selling and distribution expenses6,6836,233
General and administrative expenses1,8991,594
Research and development expenses1,2821,362
9,8649,189
Research and development expenses:
Product development6,5219,222
New market development1,7092,005
8,23011,227
Depreciation:
Plant and machinery8899
Furniture and fixtures2729
Vehicles1115
126143
Amortisation (included in General and Administration expenses):
Patents11599
Software9984
214183
Finance costs:
Interest3,4963,186
Foreign exchange losses/(gains)(818)710
Other financing costs(26)(18)
2,6523,878
Research is the original and planned investigation undertaken with the prospect of gaining new knowledge and understanding.
This includes: direct and overhead expenses for research, pre-clinical trials and costs associated with clinical trial activities.
All research costs are expensed when incurred.
Development is the application of research findings to a plan or design for the production of new or substantially improved
processes or products prior to the commencement of commercial production. When a project reaches the stage where it is
reasonably certain that future expenditure can be recovered through the process or products produced, expenditure that is
directly attributable or reasonably allocated to that project is recognised as a development asset. The asset will be amortised
from the date of commencement of commercial production of the product to which it relates on a straight-line basis over the
period of expected benefit. Development assets are reviewed annually for any impairment in their carrying value.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
4445AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
6(b). Fees paid to auditors
$NZ000’s 20182017
Audit of financial statements
Audit of annual financial statements – Deloitte (2017: PwC)129126
Review of half year financial statements - PwC6423
Total fees for audit and review services193149
Other services
Tax due diligence services – Deloitte19-
Total fees paid to auditors212149
Deloitte 148-
PwC64149
7. Income tax
The income tax expense recognised for the period is based on the accounting profit or loss, adjusted for non-taxable and
non-deductible differences.
Current tax is calculated by reference to the amount of income tax payable, calculated using tax laws that are enacted or
substantively enacted at balance date.
Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax
asset or liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
$NZ000’s 20182017
(a) Tax expense
Loss before tax(12,666)(18,330)
Tax calculated at domestic tax rates applicable*(1,862)(5,049)
Expenses not deductible4384
Current year losses not recognised2,3235,094
Previous year losses now utilised(603)(197)
Non resident withholding tax160121
Prior year adjustment(3)5
Tax expense/(benefit)5858
Comprising:
Current tax(4 0)117
Deferred tax
98(59)
5858
* Calculated using the pre tax profit / loss and tax rate in New Zealand (28%) and Australia (30%)
$NZ000’s 20182017
(b) Deferred tax balance
Provisions708610
708610
Deferred tax assets relating to unused tax loss carry-forwards and to deductible temporary differences are recognised if it is
probable that they can be offset against future taxable profits or existing temporary differences. As at 31 March 2018, the
Group recognised deferred tax assets on temporary differences totalling $708,000 (2017: $610,000) since it was foreseeable
that temporary differences could be offset against future taxable profits. On the basis of the approved business plans of
subsidiaries, AFT Pharmaceuticals Limited considers it probable that temporary differences can be offset against future
taxable profits. There is no expected change in capital structure in the near future which is expected to affect the
recoverability of the recognised deferred tax assets.
The amount of tax losses carried forward that is available for future utilisation is $45,964,000 (FY2017: $39,815,000).
No deferred tax asset has been recognised in relation to these losses.
$NZ000’s 20182017
(c) Imputation and franking credits available for use
NZD252600
AUD319319
8. Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average cost basis.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
$NZ000’s 2018
Restated
2017
Finished goods25,66422,526
Provision for obsolescence(1,252)(328)
24,41222,198
Inventory on hand comprises pharmaceutical goods ready for resale.
The value of inventory is transferred to cost of sales in the income statement when sold.
9. Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
doubtful debts and provision for customer rebates. Bad debts are written off in the year in which they are identified.
Collectibility of trade receivables is reviewed on an on-going basis. Debts which are known to be uncollectible are written
off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate.
The amount of the provision is recognised in the income statement. Customer rebates are based on the customer’s ability to
achieve certain sales targets and are computed using the expected rebate percentage for sales made during the period.
$NZ000’s 2018
Restated
2017
Trade receivables 19,8231 7, 4 0 3
Less provision for customer rebates(5,044)(3,386)
Prepayments2,1752,034
16,95416,051
Ageing of overdue trade debtors but not considered impaired
$NZ000’s 1-30 Days31-60 Days61-90 Days90+ DaysTotal
31 March 20182,79743324143,268
31 March 2017323 1673- 493
All balances are expected to be settled within the next 12 months.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
4647AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
10. Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term
investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
$NZ000’s 2018
Restated
2017
Cash at bank6,74515,876
Cash on hand2529
Total cash6,77015,905
Cash at bank earns, on average, less than 1% of interest.
11. Property, plant and equipment
All plant and equipment is stated at historical cost less depreciation and any impairment losses. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Company and Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the income statement during the financial period in which they are incurred.
Depreciation of property, plant and equipment is calculated using the diminishing value method that apportions the cost of
the assets over their useful lives. The Group has the following classes of property, plant and equipment and depreciation rates:
Category Depreciation Rate (%)
Plant and machinery 21% to 60%
Furniture and fixtures 9% to 60%
Vehicles 26% to 36%
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds to carrying
amounts and are included in the income statement.
$NZ000’s
Plant and
machinery
Furniture
and fixturesVehiclesTotal
(a) Cost
Balance 31 March 2016694 396 218 1,308
Additions104 18 - 122
Disposals ----
Balance 31 March 2017798 414 218 1,430
Additions43121570
Disposals--(32)(32)
Balance 31 March 20188414262011,468
(b) Depreciation
Balance 31 March 2016(537)(192)(172)(901)
Depreciation(99)(29)(15)(143)
Disposals -- - -
Balance 31 March 2017(636)(221)(187)(1,044)
Depreciation(88)(27)(11)(126)
Disposals--3232
Balance 31 March 2018(724)(248)(166)(1,138)
(c) Carrying amounts
Balance 31 March 2017162 193 31 386
Balance 31 March 201811717835330
12. Intangible assets
Capitalised development costs
Development projects are regularly reviewed throughout the year by a staff committee comprising the CEO, CFO, GM
Development and Financial Controller. The status of each project is measured against the requirements of NZ IAS 38
and where projects are probable to generate economic benefits, the relevant costs incurred during the financial year are
capitalised. The Group considers technical feasibility, resources required and intention of completing the project in making
this assessment.
Finite useful life
Acquired patents, capitalised development costs and software have a finite life and are carried at cost less accumulated
amortisation. Patents are amortised over a useful economic life of 20 years, capitalised development costs over the life of
the relevant patent or period of expected benefit, and software over 3 – 4 years.
Indefinite useful life
Acquired trademarks are considered to have indefinite useful lives while they continue to protect revenue streams.
Trademarks are carried at cost less accumulated impairment. Indefinite useful life assets are tested for impairment annually
or when impairment indicators exist. The asset’s carrying amount is written down immediately to its recoverable amount if
the asset’s carrying amount is greater than its estimated recoverable amount.
$NZ000’s Trademarks
Capitalised
development
costsPatentsSoftwareTotal
(a) Cost
Balance 31 March 2016439 -1,978 260 2,677
Additions171 -204 254 629
Disposals -- (9) - (9)
Balance 31 March 2017610 -2,173 514 3,297
Additions842,46523412,784
Disposals-----
Balance 31 March 20186942,4652,4075156,081
(b) Amortisation
Balance 31 March 2016 --(338)(228)(566)
Amortisation--(99)(84)(183)
Disposals -- - - -
Balance 31 March 2017 --(437)(312)(749)
Amortisation --(115)(99)(214)
Disposals -----
Balance 31 March 2018 --(552)(411)(963)
(c) Carrying amounts
Balance 31 March 2017610 -1,736 202 2,548
Balance 31 March 20186942,4651,8551045,118
Trademarks are acquired to protect the current and future revenue streams of the Group.
They are considered to have an indefinite useful life while they continue to protect revenue streams.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
4849AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
13(a). Investment in subsidiaries
Interest held
2018
%
2017
%
Country of
incorporationPrincipal activities
AFT Pharmaceuticals (AU) Pty Ltd100%100%AustraliaDistribution of pharmaceuticals
in Australia
AFT Pharmaceuticals Singapore Pte Ltd100%100%SingaporeRegistration of pharmaceuticals
in Singapore
AFT Pharmaceuticals (S.E. Asia) Sdn Bhd100%100%MalaysiaDistribution of pharmaceuticals
in Malaysia
AFT Orphan Pharmaceuticals Limited65%65%New ZealandNo activity
AFT Limited Partner Limited100%100%New ZealandPartner in Dermatology
Specialties LP
AFT Dermatology Limited100%100%New ZealandDistribution of pharmaceuticals
All subsidiaries have a balance date of 31 March.
13(b). Investment in joint partnership
$NZ000’s 20182017
Interest in joint venture company at cost4,345 1,343
Equity accounted earnings of joint venture partnership(2,210) (716)
Net equity investment in joint venture partnership2,135 627
The joint venture partnership of the Group and its activities are as follows:
2018
% Interest
held
2017
% Interest
held
Dermatology Specialties LP (incorporated in New Zealand)50% 50%
Principal activities: Development and distribution of pharmaceuticals
$NZ000’s 20182017
Balance at start of year 627 185
Investment during the year3,002 856
Share of current year loss(1,494) (414)
Dividend received- -
Balance at end of year2,135 627
13(b). Investment in joint partnership (continued)
The following table summarises the financial information relating to the Group’s joint venture partnership and represents
100% of the joint venture partnership net assets, revenues and net profits.
$NZ000’s 20182017
Extracts from joint venture partnership balance sheet (unaudited)
Current assets- -
Non-current assets2,189 2,175
Current liabilities(96) (95)
Non-current liabilities- -
Net assets2,093 2,080
Extracts from joint venture partnership income statement (unaudited)
Revenue- -
Net profit after taxation(2,989) (828)
The joint venture did not have any contingent liabilities or capital commitments at balance date (2017: nil).
14. Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period
which are unpaid. These amounts are incurred and are usually paid within 30 days of recognition.
$NZ000’s 2018
Restated
2017
Trade payables7, 3 3 510,828
GST payable1,1891,161
Employee entitlements932615
Other payables7, 9 3 51,945
1 7, 3 9114,549
15. Provisions
$NZ000’s 2018
Additional
provisionsUtilised2017
Additional
provisionsUtilised2016
Supplier rebates1,0981,098(564)564 564 (661)661
1,0981,098(564)564564 (661)661
Supplier rebates are based on profit sharing arrangements with suppliers which are estimated on achieving expected set
margin targets and are expected to be utilised within the next 12 months.
16. Interest bearing liabilities
Borrowings are initially recognised at fair value plus transaction costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (plus transaction costs) and the redemption amount is recognised in
the income statement over the period of the borrowings, using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date. Borrowing costs are expensed as incurred.
$NZ000’s 20182017
CRG (Capital Royalty Partners) loans30,65423,426
30,65423,426
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
5051AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
16. Interest bearing liabilities (continued)
$NZ000’s
Opening balance of CRG loan 1 April 201723,426
Capitalised interest1,139
Additional loans drawn down7, 1 3 5
Gain on FX translation(1,046)
Closing balance 31 March 201830,654
The term loan agreement with CRG commenced in May 2014 and had a facility draw down of up to USD$30 million by
October 2016. USD$15 million was drawn down. Initially this facility was for a six year term with the first four years being
interest only, and the principal to be repaid in equal quarterly instalments in years five and six.
In September 2017, a new loan facility of USD$10 million was entered into, which includes a minimum mandatory drawdown
of USD$5 million on or before 31 March 2018. This was drawn down in December 2017. A second drawdown for the balance is
available at the Company’s option on or before 30 September 2018.
The repayment terms for all facilities were amended in September 2017 to interest only until maturity, and the principal to be
repaid in full on 31 March 2020.
The loans have a general security over the assets of the Group together with a group guarantee. Interest is fixed at 13.5%
p.a. The loans are denominated in United States dollars (USD) and during the period NZD$1,046,000 (FY2017 $260k) was
recognised as unrealised foreign exchange gains. The carrying amount of the CRG loans are substantially in line with the fair
market value as at balance sheet date.
All covenants relating to the loan and BNZ facility have been complied with during the year (refer note 24).
17. Share capital
Ordinary shares are classified as equity. Preferred shares are classified as equity, they attract a dividend yield and do not
have ordinary share voting rights.
SharesShares
2018
Number
2017
Number
2018
$’000
2017
$’000
Ordinary share capital97,308,01996,834,838 5 7, 0 5 855,994
Less capital-raising costs--(2,439)(2,174)
Redeemable preference shares3,330,0003,330,0009,1249,124
100,638,019100,164,838 63,74362,944
$NZ000’s 20182017
Share capital at beginning of the year62,94453,902
Issue of Redeemable preference shares-9,124
Issue of Ordinary shares1,065-
Less capital raising costs(266)(82)
63,74362,944
FY2017
On 24 March 2017, the Company issued 3,330,000 redeemable preference shares at $2.74 each. These shares attract a
dividend of 9.4% accruing quarterly, which may be satisfied in cash either in full or in part or deferred indefinitely at the
Company’s absolute discretion.
They do not carry any right to vote except at meetings of an ‘interest group’ of holders of redeemable shares.
They may be redeemed at the option of the Company at any time two years or more after issue. On redemption, the Company
would pay the issue price plus unpaid dividends accrued to the date of redemption. The redemption can only be settled in cash.
After three years from issue, they may be converted to ordinary shares at the option of the holder in multiples of 100,000.
The holder would receive one ordinary share for every redeemable share held and a number of ordinary shares calculated by
dividing the amount of any accumulated dividends by the issue price. Conversion of the redeemable preference shares may
only be settled through the issuance of shares. Once the holder has elected to convert, neither the issuer not the holder can
be obligated to settle in any other manner.
Optional conversion events arise if one of a number of conditions occur. These conditions were notified to NZX and ASX at
the time of issue of the redeemable preferences shares and are available on the Company website (www.aftpharm.com).
FY2018
In May 2017, a share purchase plan was issued to existing shareholders, who could elect to purchase shares @NZ$2.25 per
share (AUD$2.11) which was a 3% discount to the volume weighted average price of an AFT share on the NZX main board for
the 5 day period ending on 23 May 2017. Shareholders could subscribe for a minimum of $1,000 and maximum of $15,000
worth of shares at that price. Shareholders subscribed for 473,181 ordinary shares, raising $1,064,657.
18. Reconciliation of loss after tax with net cash flow from operating activities
$NZ000’s 2018
Restated
2017
Loss after tax(12,724)(18,388)
Non-cash items:
Depreciation126143
Amortisation214183
Impact of foreign exchange on cash and cash equivalents24456
Share options expense135230
Interest expense capitalized to loan principle1,139525
Unrealised gain on USD denominated loan(1046)(260)
Share in loss of JV entity1,494414
Movement in working capital:
(Increase)/decrease in inventories(2,214)1,261
(Increase)/decrease in trade and other receivables(1,080)(5,273)
Increase/(decrease) in trade and other payables3,1711,509
Increase/(decrease) in income tax(143)138
Net cash used in operating activities(10,904)(19,062)
19(a). Related parties
The Group had related party relationships with the following entities:
Related party Nature of relationship
CRG (Capital Royalty Partners) Shareholder of both ordinary shares and redeemable preference
The following transactions were carried out with these related parties:
(i) Loans
$NZ000’s 20182017
Capital Royalty Partners (refer note 16)30,65423,426
Total loan balances30,65423,426
(ii) Key management compensation
$NZ000’s 20182017
Directors fees286289
Executive salaries1,0841,092
Short term benefits127238
Options expense2981
Key management compensation1,5261,700
Key management includes external directors, the Chief Executive Officer, the Chief of Staff, the Chief Financial Officer and
the Director of International Business Development. These positions are mainly responsible for the planning, controlling and
directing the activities of the business. The Chief of Staff is the spouse of the Chief Executive Officer.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
5253AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
19(b). Staff share options
Staff share options are valued at fair value as calculated independently using the Black Scholes model. The options vest over
up to four years from date of issue.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2018 2017
Average
exercise price
$ per share
Options
‘000’s
Average
exercise price
$ per share
Options
‘000’s
Balance at beginning of year2.80850 2.80861
Issued-- - -
Forfeited-(157) - (11)
Exercised-- - -
Lapsed- - - -
Balance at end of year2.80693 2.80 850
Weighted average share price for options exercised during the period $nil (2017: $nil).
Of the 693,000 outstanding options, 135,969 are currently exercisable (2017: nil).
Share options outstanding at the end of the year have the following expiry dates, exercise dates and exercise prices:
Expiry month
Exercise
month
Exercise
price20182017
April 2020December 20172.80135,969 151,629
April 2020December 20182.805 5 7, 0 3 1 698,371
Total share options outstanding693,000850,000
The weighted average remaining contractual life of options outstanding at the end of the period was 2 years (2017: 3 years).
Share options reserve
$NZ000’s20182017
Balance at beginning of year(295)(65)
Current year amortisation(135) (230)
Balance at end of year(430) (295)
20. Financial risk management
(a) Managing financial risk
The Group’s activities expose it to various financial risks as detailed below.
• Market risk
Management is of the opinion that the Group’s exposure to market risk at balance date is defined as:
Risk factor Description Sensitivity
(i) Currency risk Exposure to changes in foreign exchange rates on
assets and liabilities of the subsidiary, and USD
denominated borrowings As below
(ii) Interest rate risk Exposure to changes in interest rates on borrowings As below
(iii) Other price risk No commodity securities are bought, sold or traded Nil
• Foreign exchange risk
The Group benefits from the use of derivative financial instruments to manage foreign currency exposures.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates at year end and
the contract exchange rates, considered level 2 of the fair value hierarchy.
The Group purchases goods and services from overseas suppliers in a number of currencies, primarily AUD, USD, EUR and
GBP and has borrowings that are denominated in US dollar amounts. This exposes the Group to foreign currency risk. The
Group manages foreign currency risk through use of derivative arrangements, in particular forward exchange contracts.
The exposure is monitored on a regular basis based on Group foreign exchange policies. Future revenues from markets
outside Australasia will be denominated primarily in USD and EUR which will provide a natural hedge against these costs.
In the current year (FY2018) Foreign Exchange gains totalled $817,992 (2017: $710,000 gain) of which $1,046,000
(2017: $260,000 gain) were unrealised gains on the USD denominated CRG loan. Future revenues from markets outside
Australasia will be derived in USD which will be used towards repaying this debt as it falls due. The balance of the losses are
derived from the restatement of the cash balances at the spot rate on the year end balance date of 31 March 2018 and the
change in spot rates during the time between when expenses are recorded in the general ledger and when they are paid.
In total, the Group had assets and liabilities denominated in the following currencies:
Assets
NZ$000’s
CurrencyLiabilities
NZ$000’s
12,960AUD4,366
134USD33,596
202MYR62
251SGD24
30EUR2,897
-GBP64
A 1% increase or decrease in foreign exchange rates on assets and liabilities will reduce/increase equity by $111,000
(2017: $53,000) and reduce/increase the profit or loss by $354,000 (2017: $341,000).
The following forward foreign exchange contracts were held at the end of the 2018 financial year:
Forward Foreign Exchange Contracts
Buy currency
Buy currency
amount (‘000)
Sell amount
$NZ000’s
Buy amount
31-Mar-18
$NZ000’s
Fair value
$NZ000’s
EUR2,5504,2904,394104
GBP19736538722
USD6,0008,2688,31850
Total benefit as at 31 March 2018176
All contracts mature within one year from 31 March 2018.
The following forward foreign exchange contracts were held at the end of the 2017 financial year:
Forward Foreign Exchange Contracts
Buy currency
Buy (sell) currency
amount (‘000)
Sell (buy) amount
$NZ000’s
Buy (sell) amount
31-Mar-17
$NZ000’s
Fair value
$NZ000’s
EUR3,0124,8064,656(150)
GBP5441,027979(4 8)
USD2,7303,9023,9097
AUD(750)(807)(820)(13)
Total exposure as at 31 March 2017(204)
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
5455AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
20. Financial risk management (continued)
• Interest rate risk
Borrowings are at a fixed interest rate, which exposes the Group to fair value interest rate risk. There are no specific
derivative arrangements to manage this risk.
• Credit risk
Financial instruments, which potentially subject the Group to credit risk, principally consist of accounts receivable.
Regular monitoring is undertaken to ensure that the credit exposure remains within the Group’s normal terms of trade.
The Group has one significant concentration of credit risk at 31 March 2018 with the largest debtor being $3,510,000 (2017:
$7,640,667). There has been no past experience of default and no indications of default in relation to this debtor. There are
no impaired receivables at 31 March 2018 (2017: nil).
The Group’s cash and short-term deposits are placed with high credit quality financial institutions. Accordingly, the Group
has no significant concentration of credit risk other than bank deposits, with 8.3% of total assets at the Bank of New
Zealand (2017: 23.9%), 3.8% at NAB Bank (2017: 3.3%) and 0% with ANZ (2017: 0%). The carrying value of financial assets
represents the maximum exposure to credit risk.
• Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulty in raising funds at short notice to meet its commitments
and arises from the need to borrow funds for working capital. The directors monitor the risk on a regular basis and actively
manage the cash available to ensure the net exposure to liquidity risk is minimised. Since May 2014, there has been a $1m
BNZ overdraft immediately available.
The liquidity/maturity profile of the liabilities is as follows:
Liquidity Profile
$NZ000’s
31 March 2018 < 1 Year1-2 Years2-5 Years> 5 YearsTotal
Trade and other payables(16,122)---(16,122)
Borrowings(2,806)(36,458)--(39,264)
Derivative liabilities (outbound)(1 2,747)---(1 2,747)
Derivative liabilities (inbound)12,923---12,923
Totals(18,752)(36,458)--(55,210)
31 March 2017
Trade and other payables(14,549) - - -(14,549)
Borrowings (2,144) (14,454) (13,283)-(29,881)
Derivative liabilities (outbound)(9,132) - - -(9,132)
Derivative liabilities (inbound)8,928 - - -8,928
Totals(16,897) (14,454) (13,283)-(4 4,634)
(b) Fair values
The carrying value of financial assets and liabilities (trade receivables and trade payables) approximates their fair value.
Trade receivables are valued net of provision and trade payables are valued at their original amounts by contract.
21. Segment reporting
Operating Segments
$NZ000’s
31 March 2018 AustraliaNew ZealandSoutheast AsiaRest of worldTotal
Revenue49,1932 7,0 9 61,2862,49680,071
Other income-721-1,5142,235
Depreciation and amortisation253087-340
Equity accounted loss of joint venture entity---(1,494)(1,494)
Gain / (Loss) before tax538(4,598)(698)(7,907)(12,666)
Finance income / (loss)4121-125
Finance costs(719)(2,027)94-(2,652)
Total assets25,70628,6221402,13556,603
Property, plant and equipment3927417-330
Intangible assets---5,1185,118
Investment in joint venture entity---2,1342,134
Total liabilities5,25442,65186-47, 9 91
Capital expenditure11509-70
31 March 2017
Revenue3 7,0 6 4 29,168 1,005 1,968 69,205
Other income - 550 -2,109 2,659
Depreciation and amortisation25 294 7 -326
Equity accounted loss of joint venture entity---(414)(414)
Loss before tax(3,633)(5,782)(689)(8,226)(18,330)
Finance income -347 - -347
Finance costs(26)(3,728)(124) -(3,878)
Total assets (restated)19,451 37,254 993 62758,325
Property, plant and equipment54 317 15 -386
Intangible assets -- -2,5482,548
Capital expenditure19 722 10 -751
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker (CODM). For the purposes of NZ IFRS 8 the CODM is a group comprising the Board of Directors, together
with the Chief Executive Officer, the Chief of Staff, the Chief Financial Officer and the Director of International Business
Development. This has been determined on the basis that it is this group that determines the allocation of the resources
to segments and assesses their performance.
The Group has four operating segments based on geographical location reportable under NZ IFRS 8, as described below,
which are the Group’s strategic groupings of business units. The following summary describes the operations in each of the
Group’s reporting segments:
New Zealand – Includes the Head Office function for the Group, supplier relationships and procurement of all stock for the
Group, all regulatory activity, all marketing activity and all finance activity. The sales and distribution activity principally
relates to the New Zealand market.
Australia – Includes the sales and distribution activity relating to the Australian market.
Southeast Asia – Includes the sales and distribution activity relating to the Southeast Asian market (Brunei, Hong Kong,
Malaysia, Philippines, Singapore and Vietnam).
Rest of World – Includes the out-licensing of IP developments to markets in which AFT does not have a presence and
the export of products to export markets (Balkans, Iraq, Pacific Islands, Saudi Arabia, United Arab Emirates). The costs
of research and development and new market development activity not specific to the other segments are expensed
to this segment.
Major Customers – Revenues from one customer of the Australian segment (being a licensed wholesaler) represents
approximately NZ$38.5m (2017: NZ$15.5m) and from one customer of the New Zealand segment (also being a licensed
wholesaler) represents approximately $14.6m (2017: $13.9m) of the Group’s total revenues.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
5657AFT PHARMACEUTICALS LIMITED
Annual Report 2018
NOTES TO THE FINANCIAL STATEMENTS
22. Contingent liabilities
In May 2015, AFT Pharmaceuticals Limited signed as guarantor of AFT Pharmaceuticals (AU) Pty Limited for its five-year
lease contract with Investec Limited for the premises occupied in Sydney, Australia. A deposit of AUD$75,000 has been
placed with NAB as security for this lease. The Company has also placed NZD$75,000 on term deposit with the BNZ as
security for a guarantee issued by the BNZ in favour of the NZX, should the Company ever default on any of its payment
obligations to NZX.
23. Commitments
(a) Capital commitments
The Group has no capital commitments at 31 March 2018 (2017: nil).
(b) Lease commitments
Operating leases are those in which all the risks and rewards are substantially retained by the lessor. Lease payments are
charged in the income statement on a straight-line basis over the term of the lease.
$NZ000’s 20182017
Due within one year843890
Due later than one year but within five years1,9532,261
Due later than 5 years1,065 1,750
3,8614,901
The above includes leases for property (with lease terms of 2 to 8 years) and vehicles and equipment (with lease terms
of up to 4 years.
(c) Other commitments
The Company has entered into contracts to complete clinical trials overseas. These contracts call for stage or milestone
payments to be made progressively when those stages or milestones are achieved. Certain conditions allow for the termination
of the trials, with future obligations extinguished. The aggregate expected amounts to be paid under these contracts is
$4.0m (2017: $4.0m).
24. Management of capital
The Group’s objectives when managing capital are to:
• Safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns to its
shareholders, and
• Maintain a strong capital base to support the development of its business.
The Group meets these objectives through a mix of equity capital and borrowings. The level and mix of capital is
determined by the Group’s internal Corporate Governance Policies.
The long-term debt in the form of the CRG Loan was used to replace the trade facility from the BNZ in May 2014.
Under the CRG Loan Agreement, there is a covenant requiring a minimum bank balance of NZ$4m at each month end.
Under the BNZ facility, there is a covenant requirement that the facility, comprising an overdraft and letter of credit facility,
must not exceed the total of 70% of acceptable debtors plus 40% of acceptable stock.
The Group has complied with both the CRG and BNZ covenants during the 2018 and 2017 financial years.
In March 2017 the Group issued 3,330,000 Redeemable Preference Shares raising $9.1m, and in May 2017 an issue of
ordinary shares was offered to existing shareholders, resulting in the issue of 473,181 ordinary shares and raising an
additional $1,064,657. Details are covered in note 17.
Notes to the Financial Statements (continued)
For the year ended 31 March 2018
Going concern assumption
At 31 March 2018, the outstanding balance on interest bearing loans with CRG amounted to $30.5m (2017: $23.4m). At the
same time, the Group held a cash balance of $6.8m (2017: $16.0m). The Group incurred a net loss in the period of $12.7m
(2017: net loss of $18.4m) and had a net operating cash outflow for the period of $11.0m (2017: $19.1m).
During the period ended 31 March 2018, a new loan facility of US$10m was entered into with CRG of which US$5m has been
drawn and US$5m is available for drawdown (refer note 16). A further $1m of additional share capital was also raised from
existing shareholders (refer note 17).
The CRG loan is due for repayment in full on 31 March 2020 (refer to note 16).
The Directors have approved internal forecasts through to 31 March 2020, considered achievability of the assumptions under
these forecasts, reviewed the existing working capital against Group requirements and considered forecast compliance with
applicable debt covenants. The key revenue assumptions, which like all assumptions, are subject to a degree of uncertainty are:
• the ability to execute further licensing agreements for the key innovative products, Maxigesic, Pascomer and NasoSurf;
• the ability to generate future international revenues from the existing and potential licensing agreements for the key
innovative products, Maxigesic, Pascomer and NasoSurf; and
• the continued Australian sales growth for Maxigesic as the market adjusts for the re-scheduled codeine-based painkillers
from over-the-counter to prescription only, which took effect on 1 February 2018 (Maxigesic is codeine-free and is therefore
exempt and remains available over-the-counter).
The directors actively monitor and manage these key revenue growth plans, together with their associated uncertainties, and
have also taken into account the ability of the Group to significantly reduce and or defer forecast development and marketing
spend should this be required, in order to preserve funds.
After considering the uncertainties and mitigations described above, the Directors have a reasonable expectation that the
Group will be in a position to repay this loan on or before 31 March 2020 from a combination of positive cash flows, issuance
of new equity or by establishing a replacement facility if required.
25. Earnings per share
Basic earnings per share is computed by dividing net earnings by the weighted average number of ordinary shares
outstanding during each period.
The calculation of diluted earnings per share assumes the conversion of all dilutive potential ordinary shares in determining
the denominator.
$NZ000’s 20182017
Earnings used in the calculation of basic and diluted earnings per share
Loss after tax(12,724)(18,388)
Weighted average ordinary shares for the purposes of basic and diluted earnings per share 97,248,87196,837,838
Basic and diluted loss per share ($)(0.13)(0.19)
26. Dividends per share
No dividends have been declared to the ordinary shareholders of the parent company during the current year, nor in FY2017.
Gross dividends of $894,506 were declared on the Redeemable Preference Shares, with $411,701 paid in cash and withholding
taxes, and $482,805 accumulated in a reserve for future settlement per the terms described at note 17.
27. Subsequent events
On 30 April 2018, the Group announced that it had concluded its divestment of non-core hospital products by divesting
to Baxter Healthcare a range of non-core hospital products currently sold in Australia. The expected completion date is
1 June 2018. For FY2018 sales of these products in Australia were NZ$5.2m and stock on hand was NZ$1.0m.
5859AFT PHARMACEUTICALS LIMITED
Annual Report 2018
STATUTORY DISCLOSURES
Statutory Disclosures
Executive Director Remuneration
The executive directors, Hartley Atkinson and Marree Atkinson, receive remuneration and other benefits in their respective
executive roles as Chief Executive Officer and Chief of Staff and, accordingly, do not receive director fees.
The table below sets out the total remuneration and value of other benefits earned by or paid to each executive director of
AFT during, and in respect of, the financial period ended 31 March 2018:
Base SalaryTaxable
Benefits
1
Subtotal
Pay for PerformanceTotal
Remuneration
STILT I
4
Subtotal
Hartley Atkinson
$428,978
$9,035$438,013$76,225
2
-$76,225$514,238
Marree Atkinson
$114,053-$114,053$11,425
3
-$11,425$125,478
1
Taxable benefits include a car allowance.
2
The short-term incentive stated was earned in FY2017 and paid in FY2018. Hartley earned a short-term incentive for FY2018 of $119,842 from a full
potential of $248,472. This will be paid in FY2019.
3
The short-term incentive stated was earned in FY2017 and paid in FY2018. Marree earned a short-term incentive for FY2018 of $11,388. This will be
paid in FY2019.
4
Neither executive director was issued any form of long-term incentive during the financial period.
Employee Remuneration
The table below sets out the number of employees or former employees of AFT and its subsidiaries, not being directors of
AFT, who, in their capacity as employees received remuneration and other benefits during the period ended 31 March 2018
totalling at least $100,000 per annum. The remuneration of those employees paid outside of New Zealand has been
converted into New Zealand dollars.
Remuneration Range (NZD)
Total Number
of Employees
$100,000-$110,0004
$110,001-$120,0009
$120,001-$130,0004
$130,001-$140,0007
$140,001-$150,0001
$150,001-$160,000-
$160,001-$170,000-
$170,001-$180,0004
$180,001-$190,000-
$190,001-$200,0001
$200,001-$210,0001
$210,001-$220,0001
$220,001-$230,0001
$270,001-$280,0001
$280,001-$290,0001
Total number of employees and former employees35
The table includes base salaries and short-term incentives paid during FY2018 and long-term incentives vested or exercised
during FY2018. The table does not include long-term incentives that have been granted and have not yet vested. Where
the individual is a KiwiSaver member, contributions of 3% of gross earnings towards that individual’s KiwiSaver scheme
are included in the above table. Where the individual works in Australia contributions of 9.5% of gross earnings towards
Australian Superannuation are included in the table above.
Non-Executive Director Remuneration
AFT’s shareholders have approved a total cap of $575,000 per annum for non-executive directors’ fees, for the purposes
of the NZX Listing Rules. This annual fee pool has not been increased since it was approved by shareholders in 2015. AFT
currently pays directors’ fees which, in aggregate, amount to approximately $300,000 per annum (subject to exchange
rate fluctuations). More information about the remuneration payable to directors is set out in AFT’s Corporate Governance
Statement which is located on the investor centre of the Company’s website.
The Board has agreed that the following fixed annual fees will apply to all non-executive directors during FY2019
(these remain unchanged from FY2018):
Position
Fees Per Annum
(Paid in NZD except
where stated)
Board of DirectorsChair$95,000
Non-Executive Director$40,000
Audit and Risk CommitteeCommittee Chair $ 7, 5 0 0
Committee Member$5,000
Remuneration and Nominations CommitteeCommittee Chair $ 7, 5 0 0
Committee Member$5,000
Regulatory and Product Development Oversight CommitteeCommittee Chair $ 7, 5 0 0
Committee Member$5,000
1
Fee payable to non-United States (US) based directors. US based directors receive USD$50,000.
2
Fee payable to non-US based directors. US based directors receive USD$5,000.
Non-executive directors received the following directors’ fees, remuneration and other benefits from the Company in the year
ended 31 March 2018:
Remuneration and Value of Other Benefits Received in FY2018
Director
Non-Executive
Directors’
Board Fees
Audit and Risk
Committee Fees
Remuneration
and Nominations
Committee Fees
Regulatory
and Product
Development
Oversight
Committee Fees
Shares and
Other Payments
or Benefits
1
Total
Remuneration
Jim Burns
2
$69,968 $6,997$6,997--$83,962
David Flacks$95,000
(Chairman)
$5,000---$100,000
Nate Hukill
3
- -----
Jon Lamb
$40,000 $ 7, 5 0 0
(Chairman)
$ 7, 5 0 0
(Chairman)
--$55,000
Doug Wilson
$40,000--$ 7, 5 0 0
(Chairman)
-$ 47, 5 0 0
Total$244,968$19,497$14,497$7, 5 0 0-$286,462
1
In addition to director fees, AFT meets costs incurred by non-executive directors that are incidental to the performance of their duties. This includes
paying the costs of directors’ travel. As these costs are incurred by AFT to enable directors to perform their duties, no value is attributable to them as
benefits to directors for the purposes of this table.
2
Fees disclosed in New Zealand Dollars. Jim Burns receives fees paid in USD. These fees have been converted into NZD in the above table, calculated
at an exchange rate of 1: 0.715
3
Nate Hukill agreed not to receive any directors’ fees during the financial year ended 31 March 2018.
1
2
2
60AFT PHARMACEUTICALS LIMITED
Annual Report 2018
61
Diversity
The respective numbers and proportions of men and women at various levels within the AFT workforce as at 31 March 2017
and 31 March 2018 are set out in the table below:
FemaleMale
2018201720182017
No.%No.%No.%No.%
Directors
114%1
14%686%686%
Officers
1
440%327%660%873%
Senior Employees
2
229%233%571%466%
Overall Workforce
5461%4956%3439%3944%
1
Officers are considered to be the CEO and his direct reports (Management Team). Note that CEO, Hartley Atkinson, and Chief of Staff, Marree
Atkinson are included in both the number of Directors and Officers reported.
2
Senior Employees are considered to be direct reports to Officers.
The Board’s assessment of AFT’s performance against its Diversity Policy is set out in AFT’s Corporate Governance
Statement, which can be found on the investor centre of the Company’s website.
Board and Committee Attendance
The table below shows the number of Board and Committee meetings each director was eligible to attend and attended
during the year ended 31 March 2018:
DirectorBoard
Audit and Risk
Committee
Remuneration
and Nominations
Committee
1
Regulatory and New
Product Development
Committee
Hartley Atkinson
9/9-2/2
2/2
Marree Atkinson
8/9--2/2
Jim Burns
9/94/42/2-
David Flacks
9/94/4--
Nate Hukill
7/ 9---
Jon Lamb
7/ 94/41/2-
Doug Wilson
9/9--2/2
1
The Remuneration and Nominations Committee carried out certain functions during the year via circular resolution.
Director Independence
As at 31 March 2018 (and the date of this Annual Report), the Board comprised seven directors:
• David Flacks – Independent, Non-executive Director and Chairman
• Jon Lamb – Independent, Non-executive Director
• Doug Wilson – Independent, Non-executive Director
• Jim Burns – Independent, Non-executive Director
• Nate Hukill – Non-independent, Non-executive Director
• Hartley Atkinson – Executive Director and Chief Executive Officer
• Marree Atkinson – Executive Director and Chief of Staff
A biography of each director is set out on pages 20 and 21 of this Annual Report.
The Board has determined, based on information provided by directors regarding their interests, that as at 31 March 2018
(and the date of this Annual Report) David Flacks, Jon Lamb, Doug Wilson and Jim Burns are independent directors.
The Board has also determined that Hartley Atkinson and Marree Atkinson are not independent directors due to also
being executives and having major shareholding interests in AFT. The Board has also determined that Nate Hukill is not
independent due to his relationship with CRG, a major shareholder in AFT.
Statutory Disclosures (continued)
Director Interest Disclosures
Directors have given general notices disclosing interests pursuant to section 140(2) of the Companies Act 1993. All of
those interests (and any changes to interests) notified and recorded in AFT’s Interests Register during the financial year
ended 31 March 2018 are set out below:
DirectorEntityRelationship
Hartley AtkinsonAFT Orphan Pharmaceuticals LimitedDirector
AFT Pharmaceuticals Pty LimitedDirector
AFT Pharmaceuticals Singapore PTE LimitedDirector
AFT Pharmaceuticals (SE Asia) SDN BHDDirector
Atkinson Family TrustTrustee/Discretionary Beneficiary
AFT Limited Partner LimitedDirector
DSGP LimitedDirector
Dermatology Specialties, L.P.Director of AFT Limited Partner
Limited (LP of Dermatology
Specialties)
AFT Dermatology LimitedDirector
Marree AtkinsonAtkinson Family TrustDiscretionary Beneficiary
James BurnsPrecera Bioscience (formerly SanoAppointed Director
Informed Phenomics Health IncAppointed Director
Assurex Health, IncCeased to be Chairman/Director
Symmetry Surgical, IncCeased to be Director
Vermillion, IncDirector
David FlacksHarmoney Corp LimitedAppointed Chairman
NZX Regulatory Governance CommitteeAppointed Chairman
NZX Markets Disciplinary TribunalCeased to be Director
Vero Liability Insurance New Zealand LimitedDirector
Vero Insurance New Zealand LimitedDirector
Flacks & Wong LimitedDirector
Asteron Life LimitedDirector
NZ Venture Investment FundDirector
Upside Biotechnologies LimitedChairman
Nate HukillCapital Royalty Group entitiesPresident/Shareholder
CRG Investment CommitteeChairman
Valeritas IncDirector
Jon LambZoono LimiteAppointed Executive Chairman
Redwood Medical LimitedCeased to be Director
Rivers One LimitedTruste e
Redvers LimitedDirector
Project X Trustee LimitedDirector
Coronation Equities LimitedDirector
Three Dots LimitedDirector
Doug WilsonAdherium LimitedCeased to be Chairman
Mainz Consulting LimitedDirector
There were no entries in the Interests Register for the purposes of section 140(1) of the Companies Act 1993.
STATUTORY DISCLOSURES
62AFT PHARMACEUTICALS LIMITED
Annual Report 2018
63
In accordance with Section 148(2) of the Companies Act 1993, directors disclosed the following acquisitions or disposals of
relevant interests in AFT ordinary shares during the financial year ended 31 March 2018:
Name
Date of
Acquisition
/Disposal
Number of
Shares
Acquired
/(Disposed)
Nature of
Relevant Interest
Details of
Acquisition/Disposal
Consideration
Paid/Received
(NZD)
James Burns16 -J un -176,667 ordinary
shares
Registered holder and beneficial
owner of ordinary shares.
Acquisition of shares
under Share Purchase
Plan.
$15,000
4 -J ul -1714,000 ordinary
shares
Registered holder and beneficial
owner of ordinary shares.
On market acquisition
during permitted
trading period.
$32,200
10 -J ul -1720,000 ordinary
shares
Registered holder and beneficial
owner of ordinary shares.
On market acquisition
during permitted
trading period.
$46,000
David Flacks1 5 -J un -1725,000 ordinary
shares
Joint registered holder and
beneficial owner of ordinary
shares as trustee of Waitemata
Family Trust.
On market acquisition
during permitted
trading period.
$ 5 7, 5 0 0
16 -J un -176,667 ordinary
shares
Joint registered holder and
beneficial owner of ordinary
shares as trustee of Waitemata
Family Trust.
Acquisition of shares
under Share Purchase
Plan.
$15,000
Jon Lamb16 -J un -176,667 ordinary
shares
Power to control the exercise of
the right to vote as trustee of the
Rivers One Trust which holds the
shares in Rivers One Limited.
Acquisition of shares
under Share Purchase
Plan.
$15,000
Doug Wilson25 - M ay-1750,022/
(50,022)
ordinary shares
Beneficial interest as beneficiary
of trust.
Power to control the exercise of
the right to vote as director and
shareholder of Gillespie Nominee
Limited.
Off-market transfer of
shares to new trustee
entity. The underlying
beneficial holders
remain unchanged.
n/a
16 -J un -176,667 ordinary
shares
Beneficial interest as beneficiary
of trust.
Power to control the exercise of
the right to vote as director and
shareholder of Gillespie Nominee
Limited.
Acquisition of shares
under Share Purchase
Plan.
$15,000
Statutory Disclosures (continued)
In accordance with the NZX Listing Rules, as at 31 March 2018, directors had a relevant interest in AFT ordinary shares
as follows:
NameRelevant InterestPercentage
Hartley Atkinson
1
72,964,94274.98 3%
James Burns100,4170.103%
David Flacks115,4310.119%
Jon Lamb2 0 7, 9 7 20.214%
Doug Wilson56,6890.058%
1
Hartley Atkinson also has a relevant interest in 730,000 redeemable preference shares (21.9% of the total redeemable preference shares on issue),
which may in the future convert into ordinary shares.
For the purposes of section 161 of the Companies Act 1993, the following entries were made in the Interests Register in
relation to the payment of remuneration and other benefits to directors:
DateDirectorParticulars of Board Authorisation
16 June 2017Hartley Atkinson
Maree Atkinson
The payment of remuneration and the provision of other benefits
by the Company to each of Hartley Atkinson and Marree Atkinson
on the terms set out in a letter of amendment to the relevant
employment agreement.
For the purposes of section 162 of the Companies Act 1993, an entry was made in the Interests Register in relation to
insurance effected for directors of AFT, in relation to any act or omission in their capacity as directors.
Shareholdings
As at 30 April 2018, there were 97,308,019 AFT ordinary shares on issue, each conferring on the registered holder the right to
vote on any resolution at a meeting of shareholders, held as follows:
Size of ShareholdingNumber of Ordinary HoldersNumber of Ordinary Shares
1 to 1,000
3483 7. 2 %171,301
0.2%
1,001 to 5,000
37339.8%1,021,1801.1%
5,001 to 10,000
10611.3%804,4440.8%
10,001 to 50,000
849.0%1,674,1501.7%
50,001 to 100,000
91.0%590,9370.6%
100,001 and over
161.7%93,046,00795.6%
Total
936100.0%97, 3 0 8 ,01 9100.0%
As at 30 April 2018, there were 50 individuals holding a total of 694,000 options to acquire shares issued by AFT under its
employee long-term incentive scheme. The options are unlisted and carry no voting rights.
As at 30 April 2018, there were 5 shareholders holding a total of 3,330,000 redeemable preference shares issued by AFT.
The redeemable preference shares may convert into ordinary shares in certain circumstances. The redeemable preference
shares are unlisted and do not carry any right to vote except at meetings of an “interest group” of holders of Redeemable
Shares.
There is currently no on-market buy-back of the Company’s ordinary shares.
STATUTORY DISCLOSURES
6465AFT PHARMACEUTICALS LIMITED
Annual Report 2018
Set out below are details of the 20 largest holders of AFT ordinary shares as at 30 April 2018:
Shareholder
1
Number of
Ordinary Shares Held%
1.Hartley Atkinson + Colin McKay72,964,94274.98 %
2.Capital Royalty Partners II – Parallel Fund B (Cayman) L.P.6,499,5086.68%
3.National Nominees New Zealand Limited – Nzcsd <NNLZ90>3,468,8103.56%
4.Capital Royalty Partners II – Parallel Fund A L.P.3,285,5893.38%
5.Capital Royalty Partners II L.P.2,444,4152.51%
6.HSBC Nominees A/C NZ Superannuation Fund Nominees Limited – NZCSD <SUPR40>1,006,6671.03%
7.JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct – NZCSD <CHAM24>875,0230.90%
8.Capital Royalty Partners II (Cayman) L.P.769,5030.79%
9.FNZ Custodians Limited446,0660.46%
10.HSBC Nominees (New Zealand) Limited – NZCSD <HKBN90>41 7, 9 9 30.43%
11.Rivers One Limited2 0 7, 9 7 20.21%
12.Hamish Stewart Atkinson + Karen Winifred Atkinson + Andrew John Marriott190,0000.20%
13.Joseph Wallace Carson125,0000.13%
14.Joeri Yvonne Jozef Sels123,1000.13%
15.Citibank Nominees (New Zealand) Limited – NZCSD <CNOM90>121,0020.12%
16.James Burns100,4170.10%
1 7.David Mark Flacks + Adina Rita Betty Halpern90,4310.01%
18.BNP Paribas Nominees Pty Ltd <IB Au Noms Retailclient DRP>75,7500.08%
19.Barbara Tubby + Colin Tubby + Malcolm Tubby75,2180.08%
20.Custodial Services Limited <A/C 3>63,4120.07%
1
The shareholding of New Zealand Central Securities Depository Limited (custodian for members trading through NZClear) has been re-allocated to
the applicable members.
According to notices given to AFT under the Financial Markets Conduct Act 2013, the following persons were substantial
product holders in AFT as at 31 March 2018 in respect of the number of quoted voting products noted below. As at the
balance date (31 March 2018) there were 97,308,019 ordinary shares on issue:
Substantial Product Holder
Number of Ordinary Shares
in which Relevant Interest is Held% of Class Held at Date of Last Notice
Capital Royalty Partners Funds
1
12,999,01513.36%
Hartley Campbell Atkinson and Colin McKay as
Trustees of the Atkinson Family Trust72,964,94274.98 %
1
Funds detailed in the substantial product holder notice.
Statutory Disclosures (continued)
Subsidiary Company Directors
The following fees were paid to directors of subsidiary companies during the year ended 31 March 2018. No other directors
of subsidiary companies received director fees:
• Raymond McGregor received A$12,000 during the financial year ended 31 March 2018 in his capacity as a director of
AFT Pharmaceuticals (AU) Pty Limited.
• Hawksford Singapore Pte Ltd received SG$3,600 during the year ended 31 March 2018 in relation to Leong Wai Kuan acting
as a director of AFT Pharmaceuticals Singapore Pte Limited.
• Ilium Corporate Management SDN BHD received MYR3,600 during the year ended 31 March 2018 in relation to Khafnena
Binti Khanafiah and Irdawati Binti Mohamad acting as directors of AFT Pharmaceuticals (SE Asia) SDN BHD.
The following people held office as directors of subsidiary companies as at 31 March 2018:
SubsidiaryDirectors
AFT Pharmaceuticals (AU) Pty Limited (Australia)
Hartley Atkinson, Raymond MacGregor
AFT Pharmaceuticals (SE Asia) SDN BHD (Malaysia)Hartley Atkinson, Khafnena Binti Khanafiah,
Irdawati Binti Mohamad
AFT Pharmaceuticals Singapore Pte Limited (Singapore)
1
Hartley Atkinson, Leong Wai Kuan
AFT Orphan Pharmaceuticals LimitedHartley Atkinson, Andrew Moore, Giles Moss,
Malcolm Tubby
AFT Dermatology Limited
Hartley Atkinson
AFT Limited Partner Limited
Hartley Atkinson
DSGP Limited
Hartley Atkinson, Michael Derby
1
Chia Lai Kuan ceased to be, and Leong Wai Kuan was appointed, a director of AFT Pharmaceuticals Singapore Pte Limited during the financial year
ended 31 March 2018.
There were no entries made in the subsidiary company Interest Registers during the financial reporting period.
STATUTORY DISCLOSURES
66AFT PHARMACEUTICALS LIMITED
Annual Report 2018
67
NZX Waivers
On 21 December 2015, NZX granted the Company a waiver (Original Waiver) from NZX Main Board Listing Rule 5.2.3 in
respect of its quoted shares (Shares) for a period of 12 months to the extent the Rule required the Company to have at least
25% of Shares held by Members of the Public holding at least a Minimum Holding (as that term is defined in the NZX Main
Board Listing Rules). The Original Waiver has expired. On 21 December 2016, a further waiver from NZX Main Board Listing
Rule 5.2.3 was granted to AFT for an additional 12 month period. This waiver was renewed by NZX Regulation for a further
12 month period on 20 December 2017.
The waiver was granted on the following conditions:
• NZX receives an undertaking from the Atkinson Family Trust (AF Trust) that it will not increase its holding in AFT during the
term of the waiver, otherwise than as a result of an allotment pursuant to an offer or issue of shares that is made pro-rata to
all AFT shareholders;
• At least 10% of shares are held by more than 500 Members of the Public, with each Member of the Public holding at least
a Minimum Holding;
• AFT clearly and prominently discloses this waiver, its conditions, and its implications in AFT’s half year and annual reports,
and in any Offer Documents relating to any offer of shares undertaken by AFT, during the period of the waiver;
• AFT consistently monitors the total number of Members of the Public holding shares and the percentage of shares held by
Members of the Public holding at least a Minimum Holding;
• AFT notifies NZX as soon as practicable if there is any material reduction to the total number of Members of the Public
holding at least a Minimum Holding of shares, and/or the percentage of shares held by Members of the Public holding at
least a Minimum Holding; and
• AFT provides NZX with a written quarterly update of the total number of Members of the Public holding shares holding at
least a Minimum Holding and the percentage of shares held by Members of the Public holding at least a Minimum Holding.
The quarterly updates are from the date the waiver is granted, for the period of the waiver. The updates are to be provided
to NZX within ten business days of the end of each quarter.
• AFT provides NZX, with the second quarterly update, an update on the proposed initiatives AFT intends to undertake to
materially increase the percentage of shares held by Members of the Public before the expiry of the waiver.
The implication of the waiver is that the Shares may not be widely held and that there may be reduced liquidity in the Shares
following quotation. A copy of each waiver can be viewed at www.aftpharm.com.
Donations
No donations were made to charities or political parties during the financial reporting period. We donated medicine that was
used in education, prison and government institutions in Fiji.
Credit Rating
AFT does not currently have an external credit rating status.
Statutory Disclosures (continued)
AFT is a company incorporated with limited liability under the New Zealand Companies Act 1993
(Companies Office registration number 873005).
Registered OfficeLevel 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
+64 9 488 0232
www.aftpharm.com
Mertons, Level 7, 330 Collins Street, Melbourne, Victoria 3000, Australia
+61 3 8689 9997
Principal
Administration
Office
Level 1, 129 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
+64 9 488 0232
www.aftpharm.com
113 Wicks Road, North Ryde NSW 2113, Australia
+61 2 9420 0420
ARBN: 609 017 969
Directors
(as at date of this
annual report)
Dr Hartley Atkinson
Marree Atkinson
Dr James (Jim) Burns
David Flacks
Nathan (Nate) Hukill
Jon Lamb
Dr Douglas (Doug) Wilson
Share RegistrarComputershare Investor Services Limited
Level 2, 159 Hurstmere Road, Takapuna, Auckland 0622, New Zealand
+64 9 488 8777
enquiry@computershare.co.nz
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street, Abbotsford VIC 3001, Australia
+61 3 9415 4083
enquiry@computershare.co.nz
AuditorDeloitte
Deloitte Centre, 80 Queen Street, Auckland 1140, New Zealand
+64 9 303 0700
Annual Meeting3 August 2018
Half-Year End30 September 2018
Interim Results
Announcement
November 2018
Financial Year End31 March 2019
Financial calendar
Directory
DIRECTORY
68AFT PHARMACEUTICALS LIMITED
Annual Report 2018
Notes
AFT PHARMACEUTICALS LIMITED
Annual Report 2017
70
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