AFT Pharmaceuticals : Annual Report - FY2024

2 0 2 4 ANNUAL REPORT

"AFT is a growing multinational pharmaceutical company that develops, markets, and distributes a broad portfolio of pharmaceutical products across a wide range of therapeutic categories."

Contents

FY24 Financial and Strategic Highlights	04
Chair and Managing Director's Report	06
Business Focus:
- Regional Performance	10
- Research and Development	14
AFT's Global Reach	16
Sustainability	18
Reconciliation of EBITDA to GAAP	39
Governance	41
- An Experienced and Skilled Board	42
- Our Senior Management Team	44
- Corporate Governance Statement	46
Remuneration	62
Consolidated Financial Statements	69
- Independent Auditor's Report	70
- Consolidated Income Statement	73
- Consolidated Statement of Comprehensive Income	74
- Consolidated Statement of Changes in Equity	75
- Consolidated Balance Sheet	76
- Consolidated Statement of Cash Flows	77
- Reconciliation of Profit After Tax
with Net Cash Flow From Operating Activities	78
- Notes to the Financial Statements	79
- Statutory Disclosures	104
Appendix 1 - Climate Resilience	108
Appendix 2 - The Material Sustainability
Matters Definitions	121
Directory and Financial Calendar	123

This report provides a summary review of AFT's operational and financial performance for the year to 31 March 2024.

It should be read in conjunction with the company's financial statements on pages 69 to 103 of this report. The information provided in this report has been compiled in accordance with relevant law, rules, and corporate governance recommendations for investor reporting. Financial information has been prepared in accordance with appropriate accounting standards and

has been audited by Deloitte Limited. Throughout this report we have focused on what we believe matters most to our stakeholders and our business. We have endeavoured

to ensure all information is accurate through internal verification and other approval processes.

2 | W O R K I N G TO I M P R O V E Y O U R H E A LT H

Investing for the future - we have extended our reach around the world, expanded our product range, and added new medicines to a research and development portfolio that promises better health outcomes. We have delivered, and continue to

focus on, long-term sustainable growth.

AF T PHARMACEUTICALS ANNUAL REPORT 2024 | 3

F I N A N C I A L A N D S T R AT E G I C H I G H L I G H T S

Record Revenue and Earnings

Strong Global Growth

$195.4m

Total revenue up 25% lifted by growth across all territories

and $8.5 million of licensing income

$26.2m	$15.6m
EBITDA1 reaches record	Net profit after tax
up 22% from $21.4 million	increases 46% from $10.7 million
$16.2m	1.6
	cents per share
Net debt2 down 45% from $29.9 million,	Dividend per share
now below EBITDA gearing target
increases on FY23

OUR STRATEGIC ACHIEVEMENTS

Launched

our products

in 12 new countries taking the total to

73

Launched

Maxigesic IV®

and now poised

to launch

Maxigesic Rapid®

in the US

GAINED

REGULATORY

APPROVAL

to sell antiseptic

Crystaderm®

in China's

domestic market

ESTABLISHED

NEW

BUSINESS

HUBS

in the

UK, Canada, and the US

Our research and

development

portfolio extends to

7 PROJECTS

• after four projects commercialised and 3 new projects added

Assessed our

carbon footprint

against the

new Aotearoa New Zealand Climate standards and further evolved our sustainability strategy

1 EBITDA is a non-GAAP measure of financial performance. It is defined and reconciled to AFT's standard profit measure under New Zealand GAAP of Net Profit After Tax on page 39 of this report.

2 Net debt is net interest bearing liabilities less cash and cash equivalents.

4 | W O R K I N G TO I M P R O V E Y O U R H E A LT H

F I N A N C I A L A N D S T R AT E G I C H I G H L I G H T S

AUSTRALIA

Revenue:

$108.2 million

up 15%

Operating profit

$15.5 million

down 20%

Key growth drivers:

OTC medicines across all seven therapeutic categories, with investment for growth diluting earnings.

NEW ZEALAND

Revenue:

$48.7 million

up 11%

Operating profit

$7.3 million

down 10%

Key growth drivers:

Strong growth across

all channels, with earnings diluted by investments for growth

ASIA

Revenue:

$10.7 million

up 57%

Operating profit

$2.5 million

up 177%

Key drivers:

Growth in the

hospital channel

INTERNATIONAL

Revenue:

$27.8 million

up 138%

Operating profit

$8.5 million

up from $0.3 million

Key drivers:

Strong growth in Maxigesic sales and $8.5 million of licensing income.

A Growing Contribution From Our Global Operations

FY23 Revenue		FY24 Revenue
New Zealand	28%	New Zealand	25%
Australia	61%	Australia	55%
Asia	4%	Asia	6%
International	7%	International	14%

Extending Our Record of Growth in Revenue and Earnings

AFT Pharmaceuticals Revenue

NZ$ MILLION

$200												$195
$180
									$157
$160
$140
								$130
$120							$106	$113
$100
				$80	$85
$80
		$64	$69
$60	$49	$56
$40
$20
$-
2014	2015	2016	2017	2018	2019	2020	2021	2022	2023		2024
			FULL FINANCIAL YEAR	FIRST HALF FINANCIAL YEAR	SECOND HALF FINANCIAL YEAR

AF T PHARMACEUTICALS ANNUAL REPORT 2024 | 5

C H A I R A N D M A N A G I N G D I R E C TO R ' S R E P O R T

Record Profits and Strong Cashflows Investing For the Future

Dear Shareholders,

AFT Pharmaceuticals has delivered another stand out result for shareholders.

We have generated record profits for the March financial year on the back of strong topline growth across all territories, especially in our International and Asian businesses, extending the company's decades long record for consistent expansion.

AFT Operating Profit*

	$35
	$25					$20.4		$24.2
					$19.7
MILLION	$15			$11.4	$10.7
		$6.1
NZ$	$5
	$0
	-$5
	-$15	-$10.1
		FY2018	FY2019	FY2020*	FY2021	FY2022	FY2023	FY2024

OPERATING PROFIT (EX LICENSE INCOME) LICENSE INCOME

Moreover, we achieved this result while reducing debt and continuing to significantly invest for the future with the expansion of our product development portfolio, our presence in new markets such as the UK and North America and support for a strong programme of new product launches.

The result underscores the strengths of AFT's approach to international expansion and sustainable growth. We've benefited from growing demand for our products in both our home markets and further afield, reaping the rewards of careful and consistent investment into research and development and the product pipeline.

With the recent launch of the intravenous form of our Maxigesic® pain relief medicine in the US and the impending US launch of the line extension, the rapid dissolving tablet Maxigesic Rapid, our proprietary products are now positioned in a significant number of the world's major healthcare markets.

This achievement marks a significant milestone in our journey towards becoming a truly global pharmaceutical company and it is a major achievement for a New Zealand company.

• Operating Profit excluding non-recurring gain of $9.8m related to the valuation of the Pascomer intellectual property

We have meanwhile positioned the company to build on that record with investments for the future. These growth projects have included the establishment of new business hubs in the US, Canada, South Africa and further investment in the UK and Europe. We have extended our existing products to new territories, signed 122 new in-licensing agreements for markets around the world, and expanded our product development pipeline.

We continue to see considerable potential in all of the markets we operate, and we are pleased with the progress we have made capitalising on it.

Financial Results

Revenue from the sale of existing products,

new products and product royalties grew by 20% to $186.9 million from $155.8 million, with the company's family of Maxigesic pain relief medicines and the Australian over the counter (OTC) business making the strongest contribution.

Growth has also been supported by ongoing investment in product marketing including the launch of the Maxigesic tablets and intravenous (marketed as Combogesic®) dose forms in the UK and our E-commerce platforms.

Total revenue, which included licensing income of $8.5 million, rose 25% to $195.4 million from $156.6 million in the prior year. The majority of the licensing income came from a milestone payment of circa $6 million from the US licensee Hikma Pharmaceuticals following the launch of Maxigesic IV in February.

Operating profit rose 23% to $24.2 million from $19.7 million in the prior year. The result was in line with guidance issued in February 2024, but lower than our initial guidance of $22 million to $24 million which excluded the Hikma license income, due principally to slower than expected Australian sales from newly launched products and our decision to accelerate our investment into important growth projects utilizing proceeds

of the Maxigesic IV milestone payment.

Meanwhile, we saw what we believe is a short-term reduction of margins in Australasia due to some overstocking and subsequent price discounting of some key high margin lines, stronger sales of lower margin products plus some stock write offs including some one off's dating back to the pandemic.

EBITDA of $26.2 million was 22% higher than the $21.4 million in the prior period, while net profit after tax increased 46% to $15.6 million from $10.7 million.

6 | W O R K I N G TO I M P R O V E Y O U R H E A LT H

C H A I R A N D M A N A G I N G D I R E C TO R ' S R E P O R T

"We've benefited from growing demand for our products in both our home markets and further afield, reaping the rewards of careful and consistent investment

into research and development and the product pipeline."

Dr Hartley Atkinson | Co-Founder and Managing Director David Flacks | Chairman

AF T PHARMACEUTICALS ANNUAL REPORT 2024 | 7

C H A I R A N D M A N A G I N G D I R E C TO R ' S R E P O R T

International Expansion

AFT has significantly expanded its international operations with the establishment of business operations in the US, Canada, UK, Europe (through our subsidiary based in Ireland), Singapore and Hong Kong. Additionally, we are setting up a new subsidiary AFT Pharmaceuticals South Africa.

A number of product licenses have been acquired in the UK and European markets in order to accelerate future sales growth. For example, in Europe, AFT Pharmaceuticals Europe successfully bid for six product licenses from an insolvent company in Germany.

AFT is on track to offer the world's largest range of combination paracetamol and ibuprofen products globally. Maxigesic is now sold or ordered in 73 countries up from 61 in March 2023.

The launch of Maxigesic IV in the US, the world's largest market for pain relief medicines, was the most significant of the year. It delivered AFT and our development partner Hyloris Pharmaceuticals a US$6 million milestone payment that we share 65:35. The launch is also expected to deliver

an ongoing and growing stream of payments from our profit share agreement.

AFT's entities are commercialising Maxigesic tablets in the US, Australasia, and the UK, along with Maxigesic IV in Canada, Australasia the UK, Hong Kong, Singapore and Malaysia.

We are meanwhile using our hubs in Canada, UK, Hong Kong, Singapore, Malaysia and Europe to beach head selected medicines we have in-licensed.

We are finalising our US strategy for Maxigesic Rapid with a focus on AFT Pharmaceuticals USA securing distributors for specific market channels. We are also advancing plans for launch of the recently approved, Maxigesic IV in Canada through the newly formed AFT Pharmaceuticals Canada.

We offer a total of ten different Maxigesic line extensions: Tablets, Oral Liquid, Rapid Dissolve Tablet, Day/Night Tablet, Oral Liquid, Hot Drink, Dry Stick, PE version, Cold/Flu & Sinus Pain Kit and Intravenous and these will be launched

in target markets.

Finally, following regulatory approval for the sale of our Crystaderm antiseptic cream in China late last year, we are planning for the launch this year in the world's second largest pharmaceutical market.

Research And Development

Research and development expenditure in this financial year was steady at $12 million. In the short term we continue to work on launching our already available pipeline into more markets: additional Maxigesic line extensions such as the Maxigesic IV US launch; Crystaderm antiseptic cream; Kiwisoothe tablets and sachets; Micolette micro enema; ZoRub Osteo and HP analgesic creams. Commercialization of these products will help to drive short to medium term sales and offset ongoing expenditure. Extensive work on this latter group of products has been funded from existing cash-flows.

Our research and development pipeline now extends to seven projects. Four projects in the pipeline exited the development phase and moved to commercialisation and we added three new projects over the year. The new projects include treatments for Burning Mouth Syndrome and Vulva Lichen Sclerosis, in collaboration with our Maxigesic IV development partner Hyloris Pharmaceuticals.

Last month we also announced we had extended our collaboration with Massey Ventures and the Gillies McIndoe institute, adding the development of a treatment for Keloid scars to the existing strawberry birthmark medicine project. These additions bring our pre-commercialization R&D pipeline to a total of seven projects, some with multiple indications. This pipeline offers opportunities to significantly drive our global expansion as well as growth in our Australasian markets.

We continue to work to finalise one further agreement for a commercially significant late-stage R&D project which would require a large clinical study.

"The research and development pipeline offers opportunities to significantly drive our global expansion as well as growth in our Australasian markets."

8 | W O R K I N G TO I M P R O V E Y O U R H E A LT H