AFT Pharmaceuticals Ltd

NZX:AFT

Earnings Call Analysis

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by, and welcome to the AFT Pharmaceuticals 2023 Full Year Results Analyst Briefing. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded. Your speakers today are Dr. Hartley Atkinson, CEO; and Malcolm Tubby, CFO.

I'd now like to welcome Dr. Hartley Atkinson, CEO, to begin the conference. Dr. Hartley, over to you.

[Hartley Atkinson, CEO]

Good. Thank you very much. Thank you, everyone, for joining the call today. So look, what I'd like to do is just to flick through the presentation. I'll do some of them, and Malcolm will do other parts of financial parts and in the end see if there's any questions.

So obviously, that's Page number 1, which refers to this full financial year. Then Page number 2 is a standard disclaimer, so if you can please read that and you go at your own time.

Page number 3. Basically, what we're saying is we're pleased to be declaring and made a dividend, and we're pleased to also have yet another year of record revenue. In fact, if you look at the graph on the bottom, you can see that over the last 10 years, we've almost -- not quite but almost quadrupled revenue, which we're really pleased with just getting the ongoing growth. And if anything, we're pleased to see it starting to almost slightly hockey stick as well, which is what we've been working hard to achieve.

So the overall operating revenue grew 20% to $157 million with primarily organic growth. We had a launch of 22 new products in Australasia, and we continued our international expansion. So operating profits, excluding licensing income, I think as we've tried to deal with before we do have, which is positive in many ways but also can skew things or make it harder to interpret, we do have some lumpy licensing income that comes around various milestones, mainly at the moment connected to Maxigesic IV in the United States.

If we just look at the basic operating revenue from product sales and profits from that, profits did actually grow 38% to $18.8 million. And as we signaled at the half, what we had done is we did want to make the decision to put quite a lot more investment, $8 million of investment, into new Australian sales force and new global distribution capabilities and also new product development as well and new products.

If we include the licensing income, we're getting profit of $19.7 million, slightly down on last year where we had very positive contribution from some lumpy licensing income. And if you look at the graph, I guess, at the bottom on the right, I think that gives you a reasonable representation of how things are going. Yes, very much FY '17 was our first full year after listing where we'd explained to people that we did need to spend quite a lot on R&D and then we would make losses in the short term. And then we did explain to people that we won't aim to break even, which we did then in FY '19. And you can see that we are making steady progress.

And obviously, that's what we're working on going forward.

So we have our standard business areas, Australasia, Australia and New Zealand. We have about 150 products presently going out across 7,700 pharmacies with the majority of those in the Australian market. Asia, we have a range of products presently that are sold through licensees and distribution partners. We have strengthened things up, though, with offices, head office in Hong Kong and offices in Singapore as well, and that's part of our aim, too. Rest of the World, overall, we are commercializing product presently in 61 countries, including Australia and New Zealand.

So take those out, it's 59 countries outside ANZ. And we do have agreements presently in more than 100 countries, so it's continuing to roll those out as well.

Moving to the next page, #4. If you just look at the overall summary, we can see that we did get growth across all our markets. Basically, the major chunk of the growth came from our Australasian business, where we grew that by $26.3 million. International, if you include licensing income, it did dip from $13.1 million to $11.7 million. If you smooth it out and take out the licensing income, which was over $6 million, we actually did grow product sales by 71%.

So we did see good underlying product growth, and we would be working hard to get that to pack up further.

And the growth primarily has been led by the OTC channel, but you can still see we're getting significant contribution from hospital business and prescription business. But certainly, quite a lot of our growth did really come this last year from the OTC business. So that's that page.

Moving on to Page #5, looking to Australia, which is our key market. Presently, sales grew 22.8% to $94.1 million. We had always kind of intended that we hope we might have $100 million, but we haven't quite. But certainly, obviously, that is a target we very much want to do, to move through that $100 million sales in the Aussie market. OTC channel was a standout performer, up 29.7%.

We got some really good growth in our pain segment, had a very good launch of our Maxigesic Hot Drink Sachet, which also helped the result.

We did invest a fair chunk of money and product promotion and also a new GP sales force, which we do believe in the long term can deliver some good results just to also increase their promotion to doctors as well. So that sort of did have a bump up. But look, we're not looking to hire any extra GP sales reps. We're really just pinning that down and getting that going. Hospital channel, we saw a further growth, 14%, and that was mainly with injectable products.

So that's that page and moving on to Page #6, New Zealand. We got pleasing growth. It grew 26% from $35 million to $44 million. Certainly, we saw things easing up after our release of COVID restrictions, and we've got some good growth as well in our Maxigesic product as well, which is very pleasing.

Hospital, we grew 20%. And actually, we got a lot of prescription growth, too. That actually grew 50%. Certainly, we can see better access to GPs as the pandemic pressures kind of eased off. I think a lot of people didn't go to doctors during the COVID period, and that certainly restricted some of our sales, and we could see that turn around as things ease off.

Moving now on from Page 6 to Page 7, just a summary slide talking about our NPD and new product pipeline. This is what we worked on a lot over the COVID period, where we were restricted and basically we couldn't travel, but we're able to really pad out our pipeline. And actually, we're carrying on doing this. Basically, we're able to launch 22 products during this last financial year. 11 of those were OTC.

And we have been able to -- I think we talked at the half year, we had about -- over a 3-year period, we had about 70 products or 72 products. But even taking this financial year off, we're still continuing to pad out our NPD pipeline, and we've got 68 planned new product launches over the next 3 years.

And some of these products, what we're also doing, there is definitely an angle where we can -- we believe we can significantly grow Singapore and Hong Kong by choosing those markets and putting some of the products we're launching in Australia and New Zealand and put them into those markets as well. And that's something that we're working on at the moment to really accelerate the product offerings in those markets.

So moving on to Page #8, Asia. So basically, sales rose by 24% to $6.8 million, which is a reasonable result. But certainly, we do see better potential in Asia to accelerate and grow that more as time kind of pass, as sort of goes by. It takes a while to get some of these things into place.

The OTC channel is still relatively small, but we certainly saw that starting to contribute more. If you look at the graph on the -- pie graph on the far-right side, it was -- the OTC was relatively small at about 8%. And now that's closer to 15%, and we want to keep on growing that as well.

So we are working through our Tmall Global site. We have a number of products approved for cross-border trade into China. But there are other angles around that as well which we're looking to expedite, also looking at further product approvals and then launches in China, not just through the cross-border channel. And obviously, there's a lot of people in China. It is the world's second biggest market.

That's one we are interested in and see some good potential.

We have expanded our distribution capabilities across the region. We've launched in some new markets. Like for example, we launched in Indonesia, I think the world's fourth most populous country. And we also launched in South Korea as well. And we're really pleased to see something like Maxigesic IV, the sales have gone very well in South Korea and certainly well ahead of their forecasts.

So that's only the first 6 months, and we see further progress kind of going forward. So that's Slide number 8.

Moving on to Slide number 9. Yes, look, probably the important thing here, just to clarify, is that if you look at the top graph on the left, we had quite a lot of contribution last year. We had a big chunk, 6-point-something million dollars of licensing income, which we're obviously pleased to get. But it does make the results a bit lumpy and looks as though the sales went down, which it did overall. But if you take the licensing income out, we grew the underlying product sales, and royalties grew by 71%.

So they grew to $10.8 million, and we see good potential for further growth going forward. Certainly, a number like $10.8 million is nowhere near where it should be, and that's what we're working hard on getting that number up.

We did make progress in other difficult regulatory jurisdictions. We were pleased to get our first U.S. approval with Maxigesic Rapid tablets. Presently, we're having a number of discussions, just working the best way to get the launch on. What I mean there, I mean the best way for AFT.

There's various options there. Probably we look to sacrifice licensing income and return for a bigger profit share down the track, and that's really what we're talking to people about.

And then obviously, Europe. Europe has probably stood out our main market at the moment. It's Europe and the Middle East. So we're getting some good sales growth out of Europe. What we've done is we set up our own European -- or own, sorry, U.K. entity, AFT Pharmaceuticals UK Limited. And also, some of that NPD that we are driving in New Zealand, Australia, we're also going to wrap that through up into the U.K., which there is a good opportunity for that now because the key change is the U.K. does not sit in with Europe. So it literally sits out by itself and actually fits in quite nicely with Australia. So those 2 markets do go together quite well.

And certainly, the U.K. is a decent-size market with a population of about 65 million to 67 million people. So that is obviously a work in progress. We don't have any sales from it yet, but we should start to record our first sales during this financial year.

Maxigesic IV launch. We -- the up-front payment of about $6 million, that depends on the launch date. The launch date we said will be in calendar '24. So obviously, that's going to have quite a swing factor on this year's profit, which is why we've actually pulled licensing income out. So all going well, presuming we get U.S.

FDA approval in October, the launch could be anywhere from February to March to April sort of thing. So it could slip into this year or could slip out of this year. But overall, the big picture, that wouldn't be a disaster, but clearly, it would have an impact on the profit for this year just to explain that.

You can see the graph top right, the number of countries continues to grow. I guess the only comment is, yes, I mean, although we look at countries, probably also to consider large countries like the U.S., we'll only take that number up by one but obviously makes more of a difference because the U.S. is the world's largest pharma market. So it's Page #9.

Flicking on to Page number 10, you can see a global graph where the aim we have is to turn as much of it possible from white and blue into yellow. So we are making progress. We're getting more yellow as time goes on, yellow meaning where Maxigesic has been launched. So we launched it across a good chunk of Continental Europe now and also Canada and Mexico and Central America. So we're still working on licensing in more difficult markets like China.

We certainly got interest there. Just come back from a 2-week truck meeting various parties and mainly in China and also Japan as well. Brazil is the other market that's quite different and also quite challenging, so we are working on that as well. But look, we're making overall progress. We are getting more countries launched, which is the yellow color.

That's Page number 10.

Page number 11. What maybe isn't so apparent but we do believe is really important is our R&D pipeline. And we do see some significant potential for that in the medium to long term as well. As you can see, Maxigesic IV in the U.S., we're targeting approval. This calendar year, we have a PDUFA date from FDA of October 2023.

And that's when they have to get back to us with a viewpoint on the additional data, which was only just around something called extractable and leachables, which we've got various U.S. labs to do tests on it. And we work closely with Hikma, who are very experienced in that area. They also helped us. So we would be hopeful that we should secure approval.

Maxigesic Dry Stick, we continue to work on that and target to complete that in this calendar year. We've got a Day/Night variant which we are filing at the moment, literally the first filing. And we also have a patented Cold, Flu & Sinus Kit, which we have already launched in Australia as our first market. And we would look to commercialize that in some additional markets.

And NasoSURF intranasal, we have had some challenges with that project. We've visited the factory that makes the transducers in China, we're doing a bit of work around that. So that is delayed, but we still see that getting back on track and getting clinical studies underway next year, where really we planned on them this year. So this can happen with R&D projects, that not everything is simple. And that's also why we do have a variety of projects, but we are confident we can still expedite that project.

Antibiotic eyedrop, this is potentially a pretty big market. We're licensing technology from a U.S. company, and we're just underway with the drug development presently. So this is for antibiotic-resistant drug infections which could cause people to go blind, so that's pretty important. And that's underway presently.

Flipping to the next page, Page #12. We got a number of projects here, some at early stage, some are quite well advanced. We have one we call SD. So that's been filed. We've got our first filing as a dermatology drug.

Strawberry birthmarks, we licensed that from Massey Ventures, which is part of Massey University, just an [ initial ] formulation work on that. So that has a patent going out until mid- to late-2030s. And that's topical treatment of strawberry birthmarks, which does affect quite a lot of newborns. And certainly, presently, there aren't treatments that are topical for this sort of condition. There is an oral formulation which is quite toxic and, therefore, is only used in really serious cases.

And this potentially also is a really big market as well.

Gastroenterology is one of our focus areas. We've got a number of advances we've been able to make. We have project we've called KW, and we have 3 different dose forms. The first 2 we will be filing this year, so that's really good progress. And we've got a combination one where we're still in the development phase.

Got another enema that we're filing this year as well.

And also, we do have work in CBD, and we're making some good progress there. That is certainly a very crowded area. Our main target would be the Australia and OTC market. And given it's just so crowded, we'd rather keep the time lines confidential in that one, where most of our competitors are crowing from the rooftops when they've advanced something or other, but we'd just rather try and see if we can get to market first or second or something like that. So that's at Page number 12.

And flicking on to Page 13, I will hand over to our CFO.

[Malcolm Tubby, CFO]

Yes. Thanks, Hartley. So looking on the top line, revenue up 20% to $157 million; gross profit up 18%, $73 million. Operating expense is up a little bit more at 28%. As we explained, the main reason for that is the investment behind the new products and the full-time GP sales force in Australia.

So operating profit of just under $20 million, which is in line with last year, but bear in mind that there's an additional $6 million licensing income in last year. So good growth if you extract the licensing income. Back into a tax-paying position now, so the higher tax cost, to leave us with profit after tax of $10.6 million.

On the next slide, we are introducing EBITDA, and we will continue now to talk about EBITDA, primarily with the banking facility is now the covenant, so based on EBITDA. And our dividend policy is also based on the EBITDA as a ratio to net debt.

We've just shown at the bottom what the revenue and the growth profit looks like without the licensing income, so again, targeting the gross profit margin in that sort of 45% to 50% range. And then we're obviously very pleased to be announcing a dividend today of $0.011 per share, which is 11% of our net profit after tax, a little bit lower than our policy. We've indicated that we want to get into that 20% to 30% range of normalized net profit. It will always be dependent on what our capital requirements are, and we were a little bit higher than we want to be with our target debt, so we want our net debt to be around about 1x EBITDA. At year-end, it was 1.4x.

And specific growth opportunities we've got going, we think that, that is a prudent way to start the dividend at 11%.

If we turn on to the next slide, the balance sheet. So net debt is in line with last year at just under $30 million. The new facility with the BNZ goes out to April 2026. And it has no -- there's one more repayment of $1 million in June, and then there's no more repayments required on that facility.

[Hartley Atkinson, CEO]

So repaid $4 million. By the time, we will repay $4 million.

[Malcolm Tubby, CFO]

This year, we repaid $4 million, yes.

[Hartley Atkinson, CEO]

Yes.

[Malcolm Tubby, CFO]

The working capital, which is the current assets and the cash less the current liabilities, that grew in line with revenue at about 20%. So that's $48 million at the minute. And then our total equity is $73 million, up from $62 million last year.

In terms of the cash flow, so $11.6 million out of the operating activities, $9 million of that into investing activities. And $6 million -- just under $7 million of cash financing activities, that includes the $4 million repayment. So that's really the $4 million going at lower cash is the repayment of the net debt, with the net debt staying level at just under $30 million. And so I believe we had closing cash of $3 million.

I'll turn it back to you now, Hartley, for the outlook.

[Hartley Atkinson, CEO]

Yes. No, look, thanks, Malcolm. Just to summarize sort of the outlook, I mean we're looking at the momentum are continuing in this new financial year, supported by growth in the existing portfolio. I mean we are -- although we talk about new product launches, we are still getting growth in our existing products. And certainly also, with something like Maxigesic, when we launch it in international markets, it doesn't just go straight up.

It literally grows year-on-year on year. And that's what we're also seeing in our local Australasian markets as well. So there's that ongoing growth from the existing portfolio. There's also new product launches, it's something we're very focused on as well, and also just sales growth in our core Australasian markets.

When we say that, I think it's important then that leads on to the next point. Just because, yes, we are working hard on our existing core Australasian markets doesn't mean to say we're also not really targeting where we do see the biggest potential upside growth in international Asia markets and also things like expanding our U.K. presence, where we set the company up. We've got people working there. We've also taken over some of the Maxigesic launches ourselves, like that means we will launch Maxigesic IV ourselves in the U.K.

market. And we have other products ourselves that we're launching over this financial year ourselves in the U.K. market.

Operating profit guidance is up to about $22 million to $24 million, excluding licensing income. So as the following note says, we are expecting licensing income, which isn't included in that guidance. If we're able to launch in this financial year, there is a further $6 million for Maxigesic IV in the U.S. So we need to get that FDA approval in October, and we need to be able to get the stock in time, et cetera, to be able to launch in this financial year. So that potentially is another $6 million.

Now the guidance, I guess, is still subject -- the other sort of swing factor is the U.S. Maxigesic Rapid commercialization strategy. So we are working on that principally with a number of parties. Probably ideally, we would launch the Rapid tablet at about the same time as the IV, so that could have an impact. We really can't say at this time because it's still under discussions.

I mean, generally, a possible ideal scenario would be not really focused around so much licensing payments, be more around the profit shares where we have a bigger long-term upside for AFT, but can't really say at this stage because we're still working on it. And look, we definitely do have a target in mind of $200 million on a rolling 12-month basis.

I mean when we say that if we kind of performed exceptionally well, we might get there this financial year. We think it's probably more likely to be a 14- or 15-month target. But certainly, we can see it clearly in sight. And that growth is something that we are really focused on to grow. Profit obviously is important, but I think in this last year, we really saw the opportunity to really grow the business, so we did invest a bit more, which obviously resulted in a flat profit.

But even with a lot of extra investment, like an extra $8 million, we're still able to deliver what was a pretty reasonable profit and interim dividend as well.

So thank you very much and open for any questions.

[Operator]

[Operator Instructions] And your first question comes from the line of Matt Montgomerie come from Forsyth Barr.

[Matt Montgomerie, Forsyth Barr]

Hartley and Malcolm, I might just start on the gross margin, if that's okay. The second half was close to 49% if we strip out the licensing income. It's always a bit second half skewed but appears to be a very strong number aided by the strong OTC performance in ANZ. Can you maybe just talk to the dynamics here in terms of pricing, the impact of the mix effect, freight costs, et cetera? And then I guess the key question is how sustainable do you think that level is around in, say, 48% looking ahead on a full year basis.

[Malcolm Tubby, CFO]

Yes, thanks, Matt. Yes, so the skew in the revenue is more OTC skewed as well. The prescription hospital tends to be more static, and the better margins that we are getting is out of OTC. So that is explaining the kickup there.

In terms of extra cost of freight, we are seeing in the main shipping lines, the pricing has improved, coming back. It's been taking it into New Zealand. We are seeing it start to happen now. And Australia is happening in. So there is improvements in those freight costs.

And we did air freight a fair bit this year, particularly with the Hot Drink that were selling so well. I mean, look, if we need to, we will air freight if we have to, to meet demand.

[Hartley Atkinson, CEO]

Now it's probably relatively more air freight in the first half as well.

[Malcolm Tubby, CFO]

Yes.

[Hartley Atkinson, CEO]

And the second half, we're really trying to wait airfreight as well, which may have helped the margin in turn as well, wouldn't it?

[Malcolm Tubby, CFO]

Yes. So we see the margin going forward to be certainly that. The broad range is 45% to 50% but targeting this sort of at half of that.

[Matt Montgomerie, Forsyth Barr]

Great. That's very clear. And then maybe secondly, on Australia, just, yes, again a pretty good number. Just trying to get a feel of sustainability. Are you able to split out growth drivers between, say, mature products, those that have been in market for a few years versus those that have been recently launched?

Do you have a metric you can reference here in terms of like-for-like sales or of the incremental growth this year, how much of that is from new products versus mature products?

[Malcolm Tubby, CFO]

Yes, we try -- if we're launching a new product, we will try and make sure that there's plenty of stock in the wholesalers and in the trade. So normally, our sales to the market will be exaggerated in the early months, and then it will come back a little bit as things settle down and the product takes off. So it does take a little bit of time to get a regular pattern of what's happening with the new products. But we're seeing growth pretty much in -- across all the existing range and then, of course, adding the new products on top of that.

[Matt Montgomerie, Forsyth Barr]

I mean, I would be quite keen for specifics if you have them. Of the $17 million incremental increase in revenue in the financial year '23 over '22, do you know how much of that would be from the new products that you've launched this year in dollars?

[Malcolm Tubby, CFO]

I haven't got that on my fingertips at the minute, but I can dig something out on that, yes.

[Matt Montgomerie, Forsyth Barr]

Okay. No, that would be good. And then maybe on the rest of world, the second half, if we strip out licensing, look pretty solid. Can you just talk to where specifically the growth is coming from? Are there a couple of key geographies that have sort of turned around post-COVID?

Or is it sort of broad-based across markets?

[Hartley Atkinson, CEO]

Yes, it's certainly broad-based, to be honest, because things are very slow. Like especially in Europe during the COVID period, like we did start launching Maxigesic IV into places like Germany and Austria. It really was slow because the sales force of our licensees couldn't get into customers like the hospitals because literally, I mean, the doctors are buried with COVID patients lined up in the corridor, and they're not wanting to hear about the new drug. So we're just generally seeing things start to pick up.

So it is sort of general. I mean, although this is in Asia we've seen some new launches in like Indonesia and Korea -- South Korea. Certainly, the South Korean line has gone very well, much better than they forecast. But even though it started to contribute last year, it's probably going to contribute more this year because their sales build. So it's really just new launches and the ongoing kind of growth.

It's fairly broad. It's not any -- it's not really any one specific area.

[Operator]

Your next question comes from the line of Christian Bell from Jarden.

[Christian Bell, Jarden]

Can you hear me okay?

[Hartley Atkinson, CEO]

Yes, thank you.

[Christian Bell, Jarden]

Okay. Cool. So first question for me, your guidance of $22 million to $24 million of operating profit, does that include you commencing sales in both Maxigesic IV and Rapid in the U.S.?

[Malcolm Tubby, CFO]

No.

[Hartley Atkinson, CEO]

No. I mean it has maybe some very small IV sales. There's no Oral sales at all written then. Because it was too hard for us to put an estimate on when, how much, et cetera, until we've done some sort of agreement, so certainly, there's no Maxigesic Oral.

I think we might have put a tiny bit, like a couple of batches or something at the end of the financial year for Maxigesic IV. So whether that happens or not is not really going to have any kind of incremental effect that show that it could potentially have upside. But it's not going to have a downside at the launches later for the IV.

[Christian Bell, Jarden]

Okay. Because in -- correct me if I'm wrong, when you were recent -- in one of your recent announcements, it mentioned that you'd be expecting sales to commence for Maxi IV, I think it was towards the end of this year. Firstly, is that a true statement or have I got it wrong?

[Hartley Atkinson, CEO]

Yes, basically, our present view with the FDA, the timing of the data back in PDUFA, so PDUFA is October, so assuming that the approval is clear, which we're hopeful but can't guarantee it but we believe it should be, then we would hope to be able to get stock into the U.S. market about February. If that swings and goes late, then we'll miss that. But the present plan is about February, maybe March. But it's quite close to the end of the year, so it's still possible it could flick into April, which will be another financial year.

That may be a bit on licensing, not the product sales targets.

[Christian Bell, Jarden]

Sorry, what was that?

[Hartley Atkinson, CEO]

I mean the key impact of that is not really on the product sales targets, it's really on the licensing income that's the difference there. But in terms of effect on profit from product sales, it's not going to make a lot of difference, to be honest.

[Christian Bell, Jarden]

Okay. Yes. So yes, okay. So what you're saying is, while sales -- there is a chance that sales do commence in FY '24, you're not really attributing much to that, which is reflective of your current guidance.

[Hartley Atkinson, CEO]

No.

[Christian Bell, Jarden]

Yes. And so just, I mean, given the rest of world sales is probably is the swing factor going forward, the U.S. being an important country for that, are you able to give any sort of sense as to what type of sales you are expecting from that market? For example, do you think that it could do 10x the average country sales as of today or just as a starting point?

[Malcolm Tubby, CFO]

For which one, for the IV in the U.S.?

[Christian Bell, Jarden]

Either one. Either one.

[Malcolm Tubby, CFO]

Yes. I think [indiscernible].

[Christian Bell, Jarden]

Sorry, what was that? So your average rest of world sales per country right now is about $140,000 a year. When you start selling Maxigesic Rapid or IV, are you sort of envisaging the average -- the amount of sales going into the U.S. for one product, for example, being more like $1 million? Or what are we kind of thinking?

[Hartley Atkinson, CEO]

Yes. I mean we have, I guess, finalized that forecast for the Rapid with a partner to have a firmer view on it. Certainly potentially, it is a significant market, could have many multiples of the current per-country sales. Yes, the IV, we're still working on forecast with Hikma. Forecasts certainly are reasonable, like at least $1 million.

But -- and then they grow over time. It's not just a one-off thing like year 1, year 2, year 3, year 4, et cetera. It'd continue to grow.

[Christian Bell, Jarden]

Okay. So I mean just a follow-on on that line of thinking, how -- so obviously, Maxigesic has been successful in Australia and New Zealand, which is partially because a lot to do with the fact that it's pretty mature in these markets, and you've had a lot of targeted marketing towards that. So just how realistic do you think it is that you will be able to replicate that sort of success in the U.S. market given you're using a third party to sell and distribute?

[Hartley Atkinson, CEO]

Well, certainly, we know that -- I mean, we are meeting with Hikma literally in 2 weeks' time. We did know that's been color of the money with various U.S. parties to look at the sale of the marketing, et cetera. They are successful presently. One can never be 100% confident, which is why I guess one of the things we've always said is that we're quite careful that we don't just do one global deal with a big pharma.

We see it safer to do it with various local country or regional partners, which has been our approach.

I mean, look, I mean, if we're selling $10 million at the moment at certain targets overall, by the time we grow and add the different product lines, then certainly would be a lot greater than $10 million, obviously -- well, not obviously, but it is. [indiscernible]

[Christian Bell, Jarden]

Right. Okay. So what kind of marketing will Hikma actually do like. So using New Zealand and actually Australia as an example, you've got TV ads and sort of all that kind of stuff selling Maxigesic. What type of marketing work that can actually be done specifically for [indiscernible]?

[Hartley Atkinson, CEO]

Yes. Given that's IV though, it ends up being very much a rep-based promotional program really and then working with hospital formulary committees, which is somewhat torturous to sort of get the different approvals really. So that particular, the IV line is very much a standard kind of pharma angle. We have reps, and they have committees that they have to go through. So this is really a standard promotional OTC model.

So they certainly do have reps and all of that, and that's the angle really in the U.S.

[Operator]

[Operator Instructions] Your next question comes from the line of John Hester from AFG (sic) [BFG].

[John Hester, AFG]

Just a question for you on the license -- prospective license income for next year. The $6 million, Hartley, is that U.S. dollars or Kiwi dollars?

[Hartley Atkinson, CEO]

That's Kiwi dollars, John.

[John Hester, AFG]

And $6 million on registration by the FDA, so $6 million on approval and then a further $6 million on...

[Hartley Atkinson, CEO]

Yes, sorry, just to clarify, it's actually $6 million upon launch. So we're relying on Hikma making their first sales. So if we -- like October, we can get approval by the PDUFA date, assuming that's sorted out, yes, it's probably going to be about February, so we get the stock maybe March. If something gets slow, it could be April.

[John Hester, AFG]

I understand. So just to be -- there's nothing, there's no milestone on approval.

[Hartley Atkinson, CEO]

No, there isn't, correct.

[John Hester, AFG]

Okay. Okay. Fair enough. And you just made some comments there about Hikma's planned launch in the U.S. and a slow process can take a little while.

Have they given you sort of any estimate of what they believe the addressable market is? Have they talked about TAM and all that sort of thing? Have they talked about that with you at all?

[Hartley Atkinson, CEO]

Yes, we're just starting to do that now to really have -- and then we -- and so I can't give the exact figure presently. Like we are meeting with them in 2 weeks' time in New Jersey to sit and go down through a number of items, including that.

So I mean it is a reasonable-sized market. Obviously, it's the biggest market, so we're just still working through exactly. I mean usually a bit slower in the first year and then build. We've generally seen that with most of our markets, year 1, year -- as I was saying, year 1, year 2, year 3, it kind of build year-on-year. And the fastest market we've seen is South Korea, which has actually kind of rocketed but not a big country, but yes.

[John Hester, AFG]

Yes. Okay. Just I mean I don't want to harass you on this, but would you expect that the market in the U.S. is sort of north of USD 10 million for Maxigesic IV or is it underneath that number?

[Hartley Atkinson, CEO]

I think the sales that Hikma would make should be north of $10 million, not straight away, but yes, yes, we would expect it to be.

[John Hester, AFG]

Okay. Okay. Just on, as you mentioned, South Korea there, and you've got Asia and also international, so South Korea, is that in Asia? Or is that in the international side?

[Hartley Atkinson, CEO]

Yes, that's in Asia. So basically, the area we're looking at is Southeast Asia plus China, plus Japan, plus Korea.

[John Hester, AFG]

Right. Okay. So the Asia operating revenue, it says on the slide that I'm looking at, went from $5.5 million to $6.8 million. So Korea is somewhere in that $6.8 million, right, which it is on Slide 8 in the pack?

[Hartley Atkinson, CEO]

Correct. So they've only really just launched the IV. But certainly, we've seen them, they've reforecasted about 2 or 3 times so far due to sales growth being further ahead than they expected. So it's certainly pleasing to see some good progress in that market for start.

[John Hester, AFG]

Yes. And on Slide 9, with your product sales going up from about $6 million to that $10.5 million, it looks like based on that slide, so what's been the standout sort of country there? Is it broad-based?

[Hartley Atkinson, CEO]

It wasn't really one country. Yes, honestly, it was just broad-based. Yes, and we've got some new launches that have just started in places like France. So they have really been -- yes, they're just sort of getting orders just at the end. I mean, we had about at least $2 million of orders got stuck too waiting for a container.

So things like that, like it's business as usual but quite frustrating, but it is just what it is.

[Operator]

Unfortunately, in the interest of time, we do need to move on to the next question. And your next question is from Sam Arcand from Mint Asset Management.

[Sam Arcand, Mint Asset Management]

Questions on the Aussie GP sales force that you brought in. So initially, I think you'd said it's going to be about $10 million, and it's come in at $8 million for the year. Any -- what's the reason for that and why did that miss?

[Hartley Atkinson, CEO]

Yes, we're able to -- I mean, there was a combination of marketing and also the sales force costs, so been able to pull that back a little bit without affecting the end points. I mean, that's really why there's a little bit of variance there. We are able -- what we've also done with the sales force this year actually is we've taken the whole sales force in-house. This start with offers of a contract deal, of course, to get it underway quickly. We take that in-house.

This has been quite a lot of work, but that does save us money going forward, which will -- yes, we'll see those starting during this time of year.

But a lot of the money was marketing money. So with new product launches, we still have been needed to spend money to make sure that products are successful. So a lot of work was around them as well.

[Sam Arcand, Mint Asset Management]

Right. So it wasn't -- nothing related to them not hitting the sales targets or maybe as component of compensation related to the sales targets?

[Hartley Atkinson, CEO]

No, just really about some swing factors. We probably saved a little bit on various sort of marketing and costs of staff, yes, but there's the swings and roundabouts really. We're -- I mean, we are doing quite a few things. I mean, we've always been careful, but we're doing what we're saying, but we're doing a lot of things and also working to save money. Like we're switching some suppliers, we're doing other things in-house with advertising costs and promotional costs.

We've got our own graphic designer in-house and able to make some savings there. So there's a whole lot of things going on as well, that we're also working on that side of it as well and in the business. But yes, those things were able to make some savings, and that's probably a way of seeing that.

[Operator]

That does conclude today's Q&A session. And as there are no further questions, I would like to thank our speakers, Dr. Hartley and Malcolm, for today's presentation. And thank you all for joining us. This now concludes today's conference. Enjoy the rest of your day. You may now disconnect.