Is AFT Pharmaceuticals undervalued after NZ$208m in FY25 Revenue? What’s next for AFP stock

AFT Pharmaceuticals Limited (ASX:AFP) has delivered its second consecutive year of record-breaking top-line performance, reporting annual revenues of NZ$208.0 million for the financial year ended March 31, 2025. The figure marks a 6% year-on-year increase, surpassing the psychological $200 million milestone and strengthening its position as one of the fastest-scaling pharmaceutical players in Australasia. However, retail investors are now asking whether this robust growth story is fully priced in—especially with the stock trading at a PE ratio of 21.88 and a market cap of just A$256.9 million.

While operating profit and net profit declined due to one-off events and lower licensing fees, AFT’s aggressive R&D investments and global market strategy suggest a deliberate pivot from short-term earnings maximisation to long-term value creation. Management remains optimistic, guiding for FY26 operating profit between NZ$20 million and NZ$24 million, with a revenue target of NZ$300 million by FY27.

Why Did AFT Pharmaceuticals Stock Slide Despite Record Revenue?

On May 22, 2025, AFT Pharmaceuticals stock fell by 3.92% to A$2.45 on the ASX following the earnings release. Despite the revenue record, investors reacted to the 23% decline in net profit after tax to NZ$12.0 million and the 20% drop in EBITDA to NZ$20.9 million. Operating profit also slid 27% year-on-year to NZ$17.6 million, primarily due to reduced licensing income and lingering headwinds from destocking and a medical strike in South Korea during H1 FY25.

The market’s muted reaction contrasts sharply with the underlying fundamentals: AFT remains profitable, is growing top-line revenues across core and emerging markets, and is paying an increased dividend of 1.8 cents per share. The disconnect could be attributed to the short-termism of some retail traders or concerns about operational cost expansion amid global scaling.

How Did AFT’s Core Markets Perform in FY25?

Geographically, AFT’s Australasian markets remained the anchor of its performance. Australian revenues rose 17% year-on-year, recovering from H1 turbulence caused by demand interruptions for Maxigesic IV and wholesaler destocking. New Zealand, its home base, contributed solidly with 10% growth.

Asia showed a marked rebound in the second half, recording full-year revenue of NZ$11.1 million, up 4% from NZ$10.7 million in FY24. Importantly, second-half Asian sales surged 50% over H1 FY25 and 26% over 2H FY24, signaling a firm recovery. Meanwhile, international sales (excluding Asia-Pacific) posted a 19% increase in H2 over the prior half but still closed the year down 20% from FY24 due to a high base effect driven by the prior year’s US licensing income.

What’s Driving Margin Pressures and Profit Decline at AFT?

Despite an 11% rise in product and royalty revenue, licensing income fell significantly from NZ$8.5 million in FY24 to NZ$0.7 million in FY25. FY24 had been bolstered by a one-off NZ$6 million milestone payment related to Maxigesic IV’s U.S. launch. Excluding licensing income, operating profit would have actually increased 7% year-on-year to NZ$17.0 million from NZ$15.7 million—underscoring the strength of AFT’s underlying business.

Gross margin on product sales improved slightly to 44%, up 1 point from FY24, driven by a richer product mix. But total gross margin including licensing revenue slipped due to the aforementioned decline in milestone payments. Operating expenses grew by NZ$10 million, with increased R&D and international market investments accounting for most of the rise.

What’s in AFT’s R&D Pipeline and Why Are Investors Watching Closely?

AFT’s R&D strategy is central to its long-term thesis. FY25 R&D spend climbed to NZ$15.0 million, up from NZ$12.4 million, fully funded through internal earnings. The company now has 13 active development projects, including five in or near commercialisation, such as new Maxigesic formulations, Crystaderm antiseptic cream, Kiwisoothe for digestive health, and Micolette.

Of particular interest is AFT’s expanded collaboration with Belgium-based Hyloris Pharmaceuticals to co-develop a late-stage injectable iron deficiency therapy. The intravenous iron market alone is projected to reach US$7.4 billion globally by 2033. AFT is also progressing a topical treatment for keloid scars, a niche with substantial unmet demand.

With over 20 licensing agreements under negotiation—including signed term sheets—the company expects renewed momentum in milestone payments during FY26. This should restore some of the high-margin revenue profile seen in prior periods.

What’s AFT’s Global Expansion Strategy and How Is It Funded?

AFT’s international ambitions are materialising through strategic business hubs in Singapore, Hong Kong, South Africa, Canada, the U.S., UK, and Europe. These centres are intended not just for distribution but as bases to incubate licensing and commercialisation strategies using both proprietary and in-licensed products.

Importantly, AFT is not overly reliant on the U.S. for growth, reducing vulnerability to geopolitical or tariff-related disruptions. The company currently has a late-stage injectable drug development programme with a potential addressable market exceeding US$400 million.

Financially, AFT remains on stable ground. Net debt stood at NZ$14.5 million as of March 2025, down from NZ$16.2 million in FY24 and well within the company’s target leverage range of 1x EBITDA. The healthy balance sheet gives it headroom for continued global rollout without diluting shareholders through aggressive equity raises.

How Are Retail and Institutional Investors Viewing AFT Pharmaceuticals Stock?

AFT Pharmaceuticals is not widely covered by major brokers, but its fundamentals are gaining traction among retail-focused investors, particularly on forums like HotCopper. The stock’s current PE ratio of 21.88 is modest for a profitable, high-growth healthcare company with global expansion underway. At A$2.45, AFP trades just 14% above its 52-week low of A$2.15 and nearly 22% below its 52-week high of A$3.16.

Dividend yield, though small at 0.40%, signals management’s confidence in cash flows. Moreover, the stock’s low average daily volume and limited analyst coverage could make it attractive for long-term investors seeking under-the-radar opportunities in the pharmaceutical sector.

What’s the FY26–FY27 Outlook for AFT Pharmaceuticals?

Looking ahead, AFT is targeting FY26 operating profit between NZ$20 million and NZ$24 million, implying up to 36% growth year-on-year. The company is also doubling down on its revenue ambition of NZ$300 million by FY27—a 44% increase over FY25 levels.

With five new commercial products, licensing deals in late-stage negotiation, and international hubs moving toward profitability, AFT appears well-positioned for the next leg of expansion. Risks include regulatory hurdles, competitive pricing in generics, and market entry challenges in saturated territories—but these appear mitigated by management’s prudent diversification strategy.

Final Word for Investors: AFT May Be at an Inflexion Point

AFT Pharmaceuticals has reached a pivotal stage. With a diversified revenue base, rising R&D pipeline, and global infrastructure in place, the company seems poised to unlock higher valuation multiples. The earnings dip in FY25, driven by one-off disruptions and licensing timing, should not obscure the strong fundamentals and management execution.

For retail investors seeking a medium-term healthcare play with clear growth catalysts and modest downside risk, AFP may warrant closer attention—especially if the broader market continues to underappreciate its expanding global footprint and innovative product pipeline.