AFT Pharmaceuticals makes $72 million deal
Wednesday, 10 June 2020
The founders of Kiwi drug company AFT Pharmaceuticals are selling a small portion of their stake for $3.5 million to increase its accessibility on the New Zealand and Australian sharemarkets.
The company is raising $13 million through a $10m placement of new shares, and a share purchase plan worth up to $2m.
In addition, one of its shareholders, CRG, is selling its entire holding of 16 million shares, and the Atkinson Family Trust, run by founders Hartley and Marree Atkinson, will sell a small $3.5m slice of its controlling stake.
All up, the moves involve about $72m, and will mean 31 per cent of the company is publicly traded, up from 11 per cent.
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Atkinson said there were several reasons for the move, including reducing debt and cleaning up AFT's financial structure.
'''It almost triples liquidity and especially on the ASX, which we see as pretty useful given that most of our business is in Australia as well at the moment.
''We've had various comments pointed out to us over the years. First, it was the high interest level on previous debt so we fixed that, and then it was maybe we had debt a bit high so we're fixing that right now.
''And then people pointed out about liquidity so we're fixing that as well. So we'd hope in general the market would see that positively.''
Funds raised would allow AFT to retire one of its working capital facilities, improve its cash flow and give flexibility to fund future anticipated growth.
It also meant the board could start giving thought to a dividend in 2022, Atkinson said.
Atkinson, who founded the company with his wife Marree at their home 22 years ago, said it was the first time their family trust had sold shares since AFT's sharemarket float in 2015 and there were no plans to sell more.
The family trust will still control 69 per cent of the company after the moves, the sold shares representing a 1.3 per cent stake.
Recently AFT saw some benefits at the start of the coronovirus outbreak as customers and hospitals demanded more of its vitamin and painkiller products.
The company has products registered and licensed in a large number of countries and is increasingly making inroads in Asia.
But Hartley said none of the money raised was connected to news last week of legal action being filed by its partner in a joint venture over the development potential of one of its drugs, Pascomer.
''Pharma's a fairly ligitious business… We pretty much always budget $1m a year on that, regardless.
''We're happy to go to court to sort it out, if it gets that far.''
Pascomer is an ''orphan drug,'' a drug for rare diseases, and has potential to be used as a topical treatment for facial growths that result from tuberous sclerosis.
The company taking the action, PBL Solutions, is a 35 per cent shareholder in AFT Orphan Pharmaceuticals (AFTO), a profit-sharing vehicle for AFT's orphan drugs in Asia.
PBL's claim is that AFTO rather than AFT, should have had the opportunity to pursue the development of Pascomer.
It's seeking an account of the profits made by AFT in relation to Pascomer, including an account of future profits, or alternatively damages.
AFT said the case was flagged as a potential claim in its full year results in May.
To date AFT said it had invested more than $5.6m in Pascomer's development and owned crucial technology to develop its stable formulation.
But it could be four years before the value of its commercialisation was able to be determined, and approvals obtained, the company said.
The AFT placement will be offered at $3.65, a 22 per cent discount to AFT's share price on Tuesday.