AFT Pharmaceuticals is a New Zealand-based pharmaceutical business with global ambitions. The company has publicly set a goal of achieving NZ$300 million in revenue by the end of 2027—a target repeated in its 2025 annual report, market release, shareholder letter, and chairman’s address. The question is how realistic this goal is, and what risks AFT must take on to reach it.
At the close of FY2025, AFT’s revenue stood at NZ$208 million. To meet its goal, it must grow revenue nearly 50% in just two years. This will depend on the timely launch of new products, successful navigation of regulatory approvals across multiple jurisdictions, and careful management of rising costs.
AFT’s income is drawn from a mix of proprietary and in-licensed products, including generics, patented brands, over-the-counter medicines, and prescription drugs. With 20 years of history, it has built a wide-ranging portfolio covering diverse ailments. Such diversification provides resilience and multiple income streams, but can also stretch resources, erode margins, and create inefficiencies.
The demand outlook remains favourable. An ageing global population supports demand for pharmaceuticals, while rising regulatory standards may limit competition by raising barriers to entry. However, those same regulations add complexity and cost for AFT, especially as it pushes deeper into Asia, America, and Europe—regions targeted for its next stage of growth.
While revenue growth is a focus, profitability tells a less encouraging story. Over the past five years, AFT’s profits have been largely flat, impacted by supply chain disruptions, customer destocking, and delays in product rollouts. International expansion also exposes the company to currency risk and the challenges of managing compliance across different markets.
The company’s founder, CEO, and managing director, Hartley Atkinson, owns nearly 70% of the business and is fully committed to the strategy. Other directors, however, do not share the same level of personal financial exposure. Market sentiment is moderately positive, with a forward PE ratio of 21.03, suggesting confidence but not overexuberance.
Debt is currently under control, with an income coverage ratio of 6.7 times. However, further debt-funded growth would be concerning. Average historical margins of just 7% are another red flag, highlighting the risk that revenue growth will not translate into earnings growth. Streamlining the product range could improve margins but would likely reduce headline revenue—making the NZ$300 million target harder to reach.
Analysts broadly agree that AFT is set for strong revenue growth, though many doubt the full NZ$300 million will be achieved within the timeframe. Even if the target is met, the achievement could ring hollow if cost growth outpaces revenue. Ideally, once growth milestones are reached, the company would enter a consolidation phase to focus on efficiency and profitability.
AFT’s NZ$300 million revenue goal is ambitious and sits at the upper edge of what is realistically achievable. The commitment from leadership, particularly Hartley Atkinson, is clear, but execution risks remain high. For investors, AFT represents a potentially rewarding opportunity for those with some appetite for risk, provided they remain mindful of the thin margins, regulatory hurdles, and global expansion challenges.
How well do narratives help inform your perspective?
Disclaimer
The user Robbo holds no position in NZSE:AFT. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.