One Chart to Rule Them All: AFT Pharma (ASX: AFP)

Good morning, Armchair Army,

Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

I love a “one-chart business”.

A business where the opportunity or thesis can be explained in one compelling chart.

Just like this one…

This is 20 years of unbroken revenue growth.

Every year, more revenue than the last…

… and the company is targeting NZ$300M in revenue for FY2027.

One chart to rule them all.

One chart to define them.

One chart to bring them all together…

… and reveal the engine behind them.

The next company on my Biotech 165 Challenge: New Zealand's second national treasure…

…right behind Lord of the Rings.

AFT Pharmaceuticals (ASX: AFP).

But first…

Regal Partners founder Phil King has announced his retirement at the end of this financial year. (Bloomberg) 

🪑 Regal Partners is one of a handful of ASX-listed funds that play in the small-cap biotech sector. 

It will be interesting to see whether the fund's new management sets new priorities.

TALi Digital (ASX: TD1) acquires Datasphere Analytics, securing a license for in-memory computing technology, and launches a $3.3M capital raise at $0.05 with a 1:3 option. (TD1)

🪑 Interesting acquisition. Looks like TD1 is moving into the “big data / AI” space.

62 Capital lead manager on the raise.

AnteoTech (ASX: ADO) triples its Life Sciences sales pipeline following the ADLM 2026 conference. (ADO)

🪑 ADO supplies advanced chemical and material solutions to the battery and life sciences industries (specifically diagnostic devices like lateral flow and ELISA).

I never love when companies talk about an expanding sales pipeline. I’d rather the company underpromise and overdeliver. Tell us when the deal is closed, not the pipeline of deals to come.

Avecho Biotechnology (ASX: AVE) appoints ex-CSL Global Head of Business Development, Eve Williamson, as a strategic consultant. (AVE)

🪑 Nice appointment.

Acrux (ASX: ACR) appoints Dr Jolanta Airey as CMO to advance its Female Testosterone treatment through pending Phase III. (ACR, held)

🪑 This is classic… 

When you announce a new employee… I’m not sure why you would have a picture of someone else at the top of the announcement:

On Friday, I recorded a podcast with Henry Jennings from MarcusToday. We talk all things Biotech. Give it a listen here:

Cyclopharm Limited (ASX: CYC) reports 1H2026 revenue of $17.5M, up 14%, with US revenue up 74%. (CYC)

Ansell (ASX: ANN), a large PPE manufacturer, reports FY26 revenue of $2.14B, up 6.8%, and net profit of $208.6M, up 105.3%, with a dividend of 41.50 US cents per share. (ANN)

🪑 The market liked this one. Up 18% at the open.

Regis Healthcare (ASX: REG) reports a 16.3% increase in revenue to $1.35 billion for FY26 and underlying NPAT of $55.7M (up 4% from last year). (REG)

🪑 Regis is one of the largest aged care organisations in the country.

I wanted to take a closer look at this annual report because I think it gives a good idea of “where the aged care industry is at”.

These are the four things I wanted to see for the emerging aged care tech companies that serve the industry and solve these problems: Talius Group (ASX: TAL) and Intelicare (ASX: ICR).

Two weeks ago, I published an article titled “The Money Equation for Biotechs”:

In it, I explained the different ways in which ASX-listed drug developers can finance expensive drug development projects.

Cap Raise. Options. Grants. R&D Advance. Directors' Loans. Convertible Debt. Licensing Deals…

But my article had one obvious omission.

Self-funding through sales revenue.

Companies that generate revenue through selling products that they have either developed themselves or licensed from other people, and use this cash to reinvest in their own R&D pipeline.

A compounding value loop.

Sell products → Develop pipeline → Bring better products to market → Repeat.

More products create more revenue.

More revenue funds more R&D.

And the cycle escalates.

That is how a small business operating out of a family garage in 1997 became a global pharmaceutical company selling more than 150 medicines across 87 countries.

One year at a time.

This is the story of the next company in my Biotech 165 Challenge: AFT Pharma (ASX: AFP).

In 1997, a young Hartley Atkinson left his role as Sales & Marketing director at a big international pharmaceutical company, Roche, to start his own business.

All he had was NZ$50,000 and a room off the family garage.

He thought… if these big pharmaceutical giants can buy and sell products to pharmacies, what is stopping me?

“I have the relationships… I have the hustle…”

That's when AFT Pharma was born.

An underdog story of a husband-and-wife duo, betting on themselves to take on the big pharma giants.

No new shiny products, just hustle.

Today, AFT Pharma is capped at ~$400 million, and the original founders still own ~69%.

A mighty effort to bootstrap the business without giving up control throughout the years.

So how did they do it?

It all started with their first sale.

A fungal foot cream sold to a chemist in rural New Zealand.

Hartley saw an opportunity to go where the big pharma companies didn’t…

Over-the-counter products to chemists in rural areas that don’t get the same access as the bigger players in the city.

This worked well for the first few years… and sales grew.

Every dollar that they made went back into the business, buying more inventory.

But the Atkinson family had grander ambitions.

To take on the big pharma giants, it would need its own set of products.

So, that’s what it did.

A few years later, the company took part-ownership in a couple of South African pharma businesses, and development started on the product that would define the company’s next 15 years.

Maxigesic.

Maxigesic is AFT Pharmaceuticals’ patented pain-relief product combining paracetamol and ibuprofen in one formulation. 

The standard Australian and New Zealand tablet contains 500 mg of paracetamol and 150 mg of ibuprofen.

The logic is:

It's like combining Panadol (paracetamol) and Nurofen (ibuprofen) into one pill.

… and it took off when it finally launched in 2009.

That’s when Maxigesic hit New Zealand shelves, with Australia following in 2013.

In December 2015, AFT listed at NZ$2.80 per share, raising around NZ$30 million of new capital.

Then the profits disappeared.

AFT reported operating losses for the next three financial years.

Not because the core business had stopped growing.

(Revenue increased from NZ$64 million in FY2016 to NZ$85 million in FY2018.)

The money was going somewhere else.

R&D.

New formulations.

Clinical trials.

Regulatory approvals.

International licensing deals.

All the expensive work required to turn Maxigesic from a pain-relief tablet sold in Australia and New Zealand into a family of products that could be licensed around the world.

It’s now sold in 87 countries.

AFT returned to operating profit in FY2019.

Revenue passed NZ$100 million the following year.

Then NZ$150 million.

Then NZ$200 million.

By FY2026, the company was generating NZ$255 million in revenue and NZ$24.4 million in operating profit.

But Maxigesic was only the first round of the flywheel.

The profits from selling and licensing Maxigesic helped AFT fund the next group of products.

Injectable iron.

Room-temperature injectables.

Pascomer.

New hospital products.

More shots on goal, largely funded by the business that came before them.

That is the AFT model.

Sell products today.

Use the money to develop tomorrow's products.

Then repeat.

To understand why AFT deliberately went loss-making after listing, we first need to understand the three ways a pharmaceutical company like this can make money.

First, AFT isn’t a pharmacy.

It doesn’t own chemists or dispense medicines directly to patients.

It is a pharmaceutical company.

AFT develops or licenses products, gets them through the regulatory process, contracts someone else to manufacture them, and then sells them through pharmacies, hospitals and other distributors.

Simple…

(Except for all the difficult bits.)

The Australian and New Zealand markets already have enormous pharmaceutical wholesalers such as EBOS Group and Sigma Healthcare.

Then there are global generic companies such as Sandoz.

And above them are the Big Pharma giants, with enormous product portfolios, sales teams, and R&D budgets.

So, for a small pharmaceutical company starting with $50K in a room beside the family garage, it isn’t easy.

But every pharmaceutical company needs to start with a product.

Then sell it.

Then sell it some more.

Buy more inventory.

Add another product.

Sell that one too.

Eventually, if the business keeps growing, it can build a sales team and start licensing multiple products.

Then comes the next step.

Developing its own.

That is when a pharmaceutical distributor can start becoming a pharmaceutical developer.

AFT sells products through three main channels.

These are products consumers can buy without a prescription.

Pain relief. Allergy tablets. Eye drops. Vitamins.

Some OTC products can be picked up directly from a supermarket or pharmacy shelf, while others can only be supplied through a pharmacy or after speaking with a pharmacist.

This is mostly a branding game.

While regulatory approval is necessary, it doesn’t guarantee sales.

Shelf space and distribution are key.

(It’s more like an FMCG product than a healthcare product)

Why do people choose to buy Nurofen rather than the generic ibuprofen that costs half the price?

Branding and shelf space.

Take a look at the “Panadol” section compared to the generics at my local chemist:

Some products require a prescription from a doctor or another authorised health professional.

These products treat more specific and serious conditions.

The product may also need government reimbursement through schemes such as the PBS before it can gain meaningful traction.

This can create more repeatable demand, but it also means convincing doctors, regulators and potentially the government that the product deserves to be used and funded.

These are products sold into public and private hospitals, often through tenders and hospital formularies.

Injectables are the obvious example.

Getting regulatory approval isn’t enough.

The product still needs to be accepted onto the hospital’s list, purchased by the hospital and used by doctors.

AFT operates across all three.

OTC, prescription and hospital.

And there isn’t a simple rule that one channel always produces better margins than another.

The economics depend on who owns the product, how much competition it faces, whether it is reimbursed, how it is manufactured, and how much AFT needs to spend to sell it.

Which brings us to the products themselves.

There are generally four ways a company like AFT can fill its product portfolio.

Each step requires more time, more money and more risk.

But it also gives the company a chance to keep more of the upside.

A generic is a version of a medicine whose original patent protection has expired.

Same active ingredient.

Same dose.

Same intended clinical effect.

The company still needs to satisfy regulators that its product meets the relevant quality and performance requirements, but it doesn’t need to invent the underlying drug.

The problem is that other companies can do exactly the same thing.

That means less differentiation.

More competitors.

Winners win on brand, price, distribution and volume.

You also need to convince pharmacies and wholesalers to carry your version when established brands are already sitting on the shelf.

Generics can generate steady sales, but the moat is thin.

This is where AFT takes a product someone else has already developed and pays for the rights to sell it in a particular market.

The original owner might have a strong product in America but no sales team in Australia or New Zealand.

AFT has the local relationships and distribution network.

So they do a deal.

Depending on the agreement, AFT might pay an upfront fee, purchase the product at an agreed price or pay a royalty on sales.

It is generally faster and less risky than developing something from scratch.

But the economics need to be shared with the company that owns the product.

And when the licence ends, AFT may no longer control it.

This is where things become more interesting.

Instead of discovering a completely new drug, the company takes one or more existing medicines and tries to improve them.

A different dose.

A faster-release tablet.

A new delivery method.

An injectable version.

Or a fixed-dose combination that puts two medicines into one product.

… like Maxigesic.

The underlying ingredients may already be well understood, which can reduce some of the scientific risk.

But the company still needs to develop the formulation, generate evidence, win regulatory approval and protect what it has created with patents.

This is the big one.

A company funds the development program, runs the required studies and builds an intellectual-property position around the resulting product.

If it succeeds, the company may earn product sales, upfront licensing payments, development milestones, and ongoing royalties.

It owns the asset rather than renting it from someone else.

But this is also the most expensive and slowest way to build a pipeline.

Years of development.

Years of regulatory filings.

No guarantee of approval.

And often no revenue from the product while the company waits to find out.

Generally speaking, pharmaceutical developers don’t try to outspend Big Pharma in enormous areas such as cancer or heart disease.

They look for gaps.

A condition that affects enough people to support a meaningful product, but not enough to move the needle for Pfizer or Roche.

Hartley Atkinson describes the strategy as exploiting niche opportunities that larger companies overlook:

Early on, the company largely imported, distributed and licensed other companies’ products.

Steady. Lower risk. But limited ownership.

Management then started moving up the ladder.

From generics and licensed products…

… to reformulations and proprietary R&D.

That required more money.

It also pushed the company into operating losses for the first three financial years after listing.

The core business was still growing.

AFT was redirecting the money into products it could own.

The payoff is the pipeline it has today.

A profitable pharmaceutical distribution business funding the development of higher-value proprietary products.

The compounding loop.

AFT now has 10 R&D projects, including eight patented products, spread across pain, dermatology, eyecare and injectables.

The biggest is its novel intravenous iron product.

AFT is preparing to start a 1,366-patient global Phase III confirmatory trial in September 2026, targeting a market estimated at ~US$7.4 billion.

Behind that sits Pascomer, an antibiotic eyedrop, a treatment for strawberry birthmarks, room-temperature injectables and a pipeline of hospital products.

Then there is the launch machine.

Across its international hubs, AFT has submitted 86 regulatory filings, has another 138 in preparation, and has 145 awaiting supporting data.

That is 369 potential filings before including anything that may eventually emerge from its own R&D pipeline.

AFT Pharma is well established in Australia and New Zealand.

NZ$150.8 million in revenue from Australia with NZ$30.3 million in operating profit.

In New Zealand, the company made NZ$59.7 million in revenue and NZ$9.4 million in operating profit.

That accounts for MOST of the business.

But the company has also expanded internationally, throughout Southeast Asia, South Africa and Europe.

… but the next stop is probably the hardest battlefield.

The land of the giants.

The USA.

Now, I won’t go into all the details of the entire US pharmaceutical industry (because this article would go on forever), but I’ll mention the AFT Pharma strategy.

AFT Pharma has signed a deal with Mark Cuban’s Cost Plus Drugs to leverage the sales and pharmacy network to get their products into the hands of US hospitals and individuals.

Cost Plus Drugs was established to lower the distribution cost of medicine throughout the US and is a perfect fit for a smaller outfit like AFT Pharma.

THIS is the distributor it has chosen for its US go-to-market strategy.

When the industry talks about healthcare as a “defensive” industry…

It's not the high-risk, high-reward drug developers.

It’s the compounders, the pharmacy businesses like AFT Pharma, that CAN grow in any economic conditions.

Bull market, bear market, AFT Pharma compounds its sales every year.

It’s an amazing underdog story of a small - essentially a family business - that started with $50 grand and a dream…

And grew it over 20 years of hustle and hard work.

You don’t need to be the best to be great.

You just need to be better than yourself…

Year on year, on year, on year.

… even just that little bit.

That is the story of compounding growth.

That is the story of AFT Pharma. 

A big thank you to CEO and founder Hartley Atkinson for sharing the story with me.

See you tomorrow,

The Armchair Analyst.