AFT Pharmaceuticals Limited (AFT) Earnings Call Transcript & Summary

Good. Thank you very much, and thanks for joining us today. Look, just to go through the presentation that we have up on the NZX. So it's the Investor Presentation May 2021. So that's the cover page. And flicking through, if you could, please, to Page 2, are the disclaimers. So you could just be aware of those. Thank you. And then moving on to the main part of the presentation itself on Page 3, AFT financials at a glance. So here, we've just tried to show you the sales progress. Look, literally, the top graph showing the sales over a period of time, we've had our 23rd year of uninterrupted sales growth. So we were pleased during the global pandemic to still be able to grow our sales line from $106 million the year before to $113 million this financial year. And on the bottom of the page, we have operating profit and profit after tax. So the operating profit, you'll note that, that was $10.7 million. And that was slightly down from last year, $11.4 million. We had a -- last year, we had some effects due to a $9.8 million one-off from Pascomer where we acquired for rights to that. Basically as well last year, though -- so this is comparable. But last year, we did also have $1.7 million R&D grant from an R&D agreement we did with a collaborating partner. So if you do back those out, and so like-for-like is pretty much line-on-line in terms of the profit. And then if you look at profit after tax, the normalized profit after tax, you can see that last year, we had $2.8 million and now starting to benefit from our refinancing. We're up to $7.7 million, a good improvement on the net profit after tax. And then moving through to Page 4, the FY 2021 financial highlights. There's a number of things over this year. We were able to increase the number of countries that we're selling our first R&D product, Maxigesic, and by 54%. So we grew that number to 43 countries. If we look at operating revenue from product sales, so that is disregarding any licensing income. So basically, we have our main source of revenue is either product sales or licensing. So basically, product sales, we grew that by 9% to $111 million. And then as we mentioned before, the normalized operating profit did drop 6%. If we do, as we mentioned before, back out a one-off item, namely R&D credit, is a slight amount of growth. Then if we look at the normalized profit after tax last year with $2.9 million, this year, $7.8 million, so that's 164% increase in that bottom line on a normalized basis so that we were pleased with that transformation. Net debt improved by 5% to $35 million. Now you may recollect that we had talked about a target of $25 million to $30 million. What happened was we made a conscious decision to increase our inventory holdings by around about $10 million. The reason we did this was we foresaw an increasing likelihood of interruptions to supply chains. And in fact, what we've seen is that is exactly what has happened. So benefit of hindsight, we're still very pleased we made that decision. So yes, our net debt is $35 million versus our target of $25 million to $30 million, but from overall business perspective, we are happy with that and is not out of line with our revised plans. Shareholders' equity improved 111% to $36.5 million. So basically, all in all, considering the pandemic, we were satisfied with the results that we've got. Then moving to the next page, Page #5, revenue growth. You can see here, if you look at the different segments, like Australia, we grew there to $68.3 million by -- grew 11%. New Zealand was relatively flat. We did have some interruptions on a monthly basis. We sold very large amounts last March with the shutdown looming of things like vitamin C, which slightly maybe some inflated or increased the results last year and then made it harder this year to grow past that, but still, we're able to grow up by 1%. Rest of World, we grew by 8%. If you back out licensing amounts, we've relatively had less licensing amounts this financial year. The product sales grew by some 47%, which is probably the better indicator. Asia, we did have a decrease by 10%. However, having said that, the Asian profit significantly grew, and part of this was a transition to higher-margin products. So whether or not the sales are slightly behind or not, the profit importantly still grew. What we've also done as some of you may also notice that as we had predominantly talked about Southeast Asia, this was based around our sales offices in Malaysia and Singapore. But really, as time's gone on, that has grown and spread out, where we're now selling into T-Mall sites in China. We also have deals across most of Asia, Indonesia, Korea, et cetera, Thailand. So really, it makes sense now, more accurate in terms of descriptor, to talk more about Asia as opposed to Southeast Asia. And in fact, just a couple of days ago, we got our first opening order from Korea as well, which clearly is not Southeast Asia. So that's a slight change there. Then to flick forward to Page #6. Just -- what we sort of wanted to give you a flavor for here is that, clearly, our R&D portfolio is predominantly at this point Maxigesic, but we actually are spreading it out. But just that the main part of the business still at this stage has a diverse Australasian-based portfolio, around 7 key therapeutic areas being pain, eye care, medicated vitamins, allergy, gastrointestinal, dermatology and hospital. And there's a lot of work has gone into growing that portfolio through additional in-licensing and additional product development, which has carried on during the pandemic. Then for Asia as well. So as I've mentioned before, we are growing our Asia base in terms of geography with the opening of T-Mall sites. At the moment, we just started off with 3 products being a liposomal vitamins as a trial, and that has gone well. So what we're doing now is we're broadening out our product offering from the T-Mall site as well. So basically, in Asia, we have our pain products, medicated vitamins, dermatology and hospital. So it's our Asia business on Page 7. And Page 8 is a global portfolio, and that is centered primarily around the R&D products that we are developing ourselves. So we have our pain product being the Maxigesic oral dose forms, and then in hospital, the Maxigesic IV. You would have seen recently, we did a large deal in the United States just after 31 March closing date. And certainly, Maxigesic IV, we believe, and our partners around the world tell us, has a lot of potential across multiple countries. We also have NasoSURF, patented nasal drug delivery system. And we're rolling into our first pilot clinical study during this year. Dermatology is another area as well. We have Pascomer primarily in North America and Europe. We have a large study going on in multiple countries at the moment, which is our pivotal study, and we're planning to finish enrollment around about September. Certainly, that hasn't been any easier with the current sort of restrictions in many parts of the world, but it is still progressing well, and our team has done a good job to achieve that. Crystawash Extend is a product that was basically borne out of lockdown where we looked at different combinations of coating agents and benzalkonium chloride, and we've also licensed that in Canada and the Middle East as well. We've launched in Australia and New Zealand where it's going well. Crystaderm is another product that avoids antibiotic resistance. It's a slow release hydrogen peroxide. We're working -- we're selling a lot of that over the years in New Zealand, and we're basically spreading out that product, and we've done our first licensing deal in Canada. So part of it as well is expanding our R&D. So look, now to hand on to Page 9 and to hand on to Malcolm, our CFO, to talk about the financial details.

Thanks, Hartley. Yes. So on Slide 9, the income statement. Total revenues on the top, up 7% to $113 million. Gross profit of $49 million has gone down 2.5%. And that's for 2 reasons. The first is the cost of the inventory went up during the pandemic of getting -- as we're building the stock levels up. So if you look down at the bottom of the page, we're showing gross profit from the product sales and royalties. And we can see that margin has gone down by 1.6%, which is basically the currency went down -- as we were buying up the stock at the start of the financial year, New Zealand and Aussie got quite weak against the American and euro. We're carrying that in the inventory levels. And then we also used some airfreight to make sure we had enough stock here. Predominantly, we used sea freight, and we did move stock on in the air, which is expensive. And then the second reason for the gross profit now at the top there is the lower licensing income of $2.2 million versus $3.8 million last year. Looking at the underlying expenses, 33.6% of revenue, down from 34.9% last year. So a little improvement in sales and distribution, saving in general admin and a slight increase in the -- well, an increase in the R&D, but predominantly, that's because of the credit we got in the last year. So looking forward, in terms of guidance, that would -- that percentage will probably stay about the same for next year with the launches of new products that we've got into Australia and New Zealand. And then over time, that will become a smaller percentage of revenue as the international business grows. That doesn't have a very high overhead structure to it. So that gets us down to the operating profit of $10.7 million. Significant savings in the finance expenses, $2.8 million versus $8.3 million. There was a little bit of -- actually, the currency did come back, as you know, at the year-end. So there's a bit of a gain in the restatement of the assets there. The new facility is giving us significant savings. We were able to execute that at the heart of the pandemic at the end of last year. We now -- we've made some further improvements on it, and we're down to around about 5% cost of funds now. So profit after tax of $7.7 million versus the $12.7 million last year, which has the gain in it, so the one-off gain. Moving on to Slide 10, the balance sheet. Total assets up to over $100 million. The current assets, the climb there is predominantly the $10 million increase in inventory levels. The increase in spend on net current assets is the capitalized development costs. Net debt has come down from $35 million -- $ 37 million down to $35 million, and then total equity up to $37 million. Moving on to cash flow on Slide 11. So most of the operating profits were used up in building the inventory levels on those operating activities. The investment activities, again, is the development costs. And then the financing activities was the successful equity raise of $12 million that we did in June time, less the debt reduction and a bit of interest and then a few other costs in there. So cash is now down to $3.2 million. We're more relaxed about cash. Now we're back into operating profit. And we've got plenty of headroom in our current working capital facilities. Moving on to Slide 12. Just showing you the pathway that we've been going on after the IPO and the investment into development through '15 to '18 years. Then back into profit '19, '20 and '21. And '22, we're giving guidance of $18 million to $23 million. So that's the difference in the green color you can see over on the column on the right. I'll pass back to Hartley for the next slide, #13.

Yes. Thanks, Malcolm. So basically, this slide looks at our new products, revenue pipeline, which effectively is the R&D that we're undertaking at the moment. Maxigesic tablets in the U.S., we did receive a complete response letter from FDA that indicated we've resolved all regulatory issues other than a final GMP audit of the manufacturing site. That to date has been delayed because FDA has only just taken up remote audits. So we would be working to resolve that and clear the approval in this financial year. Maxigesic IV registrations. We made good progress on these, having completed the clinical studies, like literally, the last study was completed in the U.S. during the height of the pandemic, which was actually quite a challenge for the whole team where hospitals have been closed and patients have been restricted and all sorts of things, but we completed that study. And we now have approval in 21 countries around the world, and we see that as growing quite significantly over the next year. The Maxigesic Oral Liquid, we are waiting our first registrations and approval in Europe and ANZ. We just recently received notification that major objections had been removed by -- or have been resolved, I should say, during the current first wave of approvals in Europe. So we would be confident of achieving approval sometime this calendar year in Europe for Maxigesic Oral Liquid. Kids medicines, as you may or may not know, is actually very challenging from a regulatory perspective. They're probably the most complicated products. Maxigesic Hot Drink Sachets. So this is sort of cold and flu product, lemon-flavored hot drink. The first approval has been achieved in Australia. So we're getting ready to launch that. And then we'll also roll that out in Europe as well. We're getting ready to file at the moment. Maxigesic Rapid, still on track to file during the end of this calendar year. The Maxigesic Cold & Flu, that is still in registration, and that is progressing as expected. Pascomer, we are in the middle of the first large global multicenter study, U.S., Australia, New Zealand, Europe. That has been quite challenging, though, due to the pandemic. It's not easy to enroll the patients at clinics because they don't like in hospitals in case there's COVID exposure. But having said that, we have got over 80 patients enrolled, and we would be planning to complete enrollments around about the end of September. So there's been really good progress considering the global conditions of these sort of studies. NasoSURF, we've completed the development of the drug delivery device, had various remote audits of the manufacturing site. Development of the first dose form is underway at the moment in the United States. And we're also looking to start at this clinical pilot study late this calendar year. So making reasonable progress on that and really want to put on the accelerator and get these projects underway. So those are those ones. And then flicking on to the next page, #14. You can see this is our global map where we had 3 colors. We have yellow for where we have launched Maxigesic. We have blue for where we've licensed that will have a distributor and the launch is pending. So the gap there between getting someone signed up and actually launching is due to drug registration, which typically takes a couple of years, sometimes 3 years. There is the odd exception, like South Africa is particularly slow, and there's literally 7 or 8 years in South Africa, but that is really the exception, where most countries are about 24 months. So we do have some areas still in white where we are looking to license, and those are still areas we're working on. The major ones are China, being the second largest pharmaceutical market in the world at the moment; also Japan, where we have had licensing discussions, and we are working on that, same in China. The other area, key as well, is Brazil. And then there are a number of other areas probably are not really priority. India is definitely not a target. We're not concerned or looking to commercialize there and in places like Argentina as well, which is the other kind of big chunks of white. So really, it's just working on this. So getting at -- so most of the world then turns yellow. That's literally the plan. And then going on to Page 15, we have a chart of the number of countries where we've launched Maxigesic in. This year, we're up to 43. This current financial year we're in at the moment, we're targeting 54, then 85 and then get it up. We have licensed 120-or-so countries. We will look at getting it to over 100. There may be some sort of small countries in some places really where at the end of the day we may still not launch, like Sierra Leone or Guyana or somewhere like that. But really, the key thing is more the major countries, which is across Europe, Russia, North Africa, Middle East, United States being the key market, Canada and in places like China and Japan. So that's that slide there, Slide #15. And then moving on to Slide #16, which is the outlook, what we're working on. So really, it still remains driving international sales. We want to accelerate the number of new countries that we launch in. One example that we would expect to come up this year would be Russia, which is a significant market for Maxigesic with a population of about 140 million people. It's certainly a decent size market with good potential. And as I mentioned before, we have got our first order from South Korea as well. So we are looking at expanding in quite a lot of countries. And then it's also growing sales in those newly launched markets. We've recently launched in Canada, Germany, Switzerland. So certainly, the pandemic hasn't really helped our product launches. It is generally more difficult to launch a product where there's a number of lockdowns or things like that, definitely slows things down. It makes it more difficult. So as the lockdowns in the main markets generally ease up with increasing vaccination rates, then we see that this will be favorable. Then launching the new line extensions, Maxigesic IV, and there's a good spread of countries there. And clearly, it's working hard on the registrations, which we're doing, and then doing the launches. Extending international licensing agreements is still a project that we're working on. So we have got a couple of major territories being China and Japan. I haven't mentioned it here, but Brazil is not as important but still is a key target that we're working on. So it's really getting something finalized there. What we find as well, interestingly, in places like China, is once you do a U.S. deal, it really piques their interest. So as much as they compete against each other, they also look to each other as well. So certainly, we've had a lot of interest out of China since we completed our Maxigesic IV deal. And then as well, it's working on banking these increased licensing payments. We recently signed the U.S. deal for Maxigesic IV, which was a significant deal in terms of upfront payments, and also licensing payments, the total amount, I think we announced just recently is about USD 18.9 million worth of upfronts and milestones over the next few years. So that was the Maxigesic IV. And then there are also other milestones that we get as well for the oral dose forms in various jurisdictions. Adding additional territories, as we mentioned, China and Japan. Then there are additional milestones of Pascomer. What we're able to do with that is we announced this about -- I think it was about 18 months ago, we did a big deal with a North American corporation called Timber Pharmaceuticals. They pay for all our ongoing R&D, which is very attractive for us as it lessens our risk. But as well, there's various milestone payments for successful completion of clinical studies and also registrations as well. The instilled key, though, is driving our local Australia/New Zealand sales. Still, at this stage, the majority of sales come from the Australian market with New Zealand also as well. So Maxigesic sales, we still have good potential to drive them. We launched Maxigesic IV in the Australian market, which we still -- the hospitals have been quite closed down, which sort of really has put that on hold, but then we can -- as they open up, we're starting to try that to get on formularies, then that will drive sales. We have the line extensions, so -- such as I mentioned, we've got the Maxigesic sachets in Australia. So it's just looking to drive the sales plus the line extensions. We've done a lot of in-licensing work. Our regulatory team and BD team have been working very hard during lockdowns, and we're targeting up to 31 new approvals across Australia and New Zealand. That would be 15 in Australia and 16 new approvals in New Zealand. And then we have still got ongoing in-licensing work to expand our Australasian business. There's a lot potential for that. And then obviously, we had the new launches as well. So we've got quite a lot of launches coming up in Australia and also in New Zealand as well. So working hard on those to just grow and expand that local business as well as the international business as well. So key to all this is growing the operating profit. We're targeting $18 million to $23 million. And then also, we are looking, as we've said, to get our net debt down to $25 million to $30 million. And what would drive that really would be the profit. And then over time, being able to normalize our inventory levels to reduce the days cover. We do see this will probably take up to 12 months till freight normalizes around the world, but we're keeping a close eye on there. But regardless, the profit, anyway, by itself also brings us back to that net debt target position. And we're pretty comfortable with that sort of level of debt because, really, mainly, it's funding our working capital. And as we've always said, and we're consistent with this, is that once we get our net debt down to our target and we're getting to our targeted profit range, then we would look -- which -- we will look at the end of this financial year to paying -- to look at whether we pay a dividend. So that's certainly something that we want to do once we've got the net debt down to target levels and we've got our operating profit to expected ranges. So thank you very much for your attention and can now pass it back to the floor to open up for questions.

[Operator Instructions] Your first question comes from Chelsea Leadbetter from Forsyth Barr.

I guess if I could start with a question maybe for you, Malcolm, in terms of gross margins. So you gave us a little bit of context around some of the pressure points in FY '21. Are you able to quantify the FX impact and the freight impact? And then I guess, how do we think about this as we head into '22? Just noting your comments, Hartley, around the fact that it may take still some time for freight to normalize, should we be thinking about some pressure as a result in the '22 gross margin as well?

Yes. Thanks, Chelsea. It's around about -- we worked out around $2.5 million. So that was $1.5 million of currency, which we can put that into the inventory. And then as we sell the inventory, that's where that comes through. So most of that should be through by now. And then we got a balance, just under $1 million of air freight costs. We don't do much here at all, and we have gone back to sea. Sea is still very slow. And there is extra money being paid for sea freight if you want to get the containers on an urgent basis. But it's not overly significant, and so it doesn't have a huge impact on the margin.

We see the margin broadly as recovering, don't we, Malcolm?

Yes.

And I mean we are looking and have had some small price increases as well because there had been some inflationary increases in costs as well. So we have passed on some costs as well, and we're keeping on looking at this really as well.

Yes. We think it will go to at least on the normalized one that was on Slide 9, where it was 43.7%. We think it will be at least that.

Okay. No, that's clear. And then in terms of guidance, I mean, I appreciate the range is wide and there's still a number of moving parts in the world at the moment. But I guess, just trying to understand a little bit more context for the bottom of the range versus the top of the range. And specifically one thing around license income as well, if you can provide some clarity on what you've actually included within your guidance for that.

Yes. So the biggest moving parts, there's 3, really. There's a license income. It's the launch in the international markets and then the launch of the new products into Australia and New Zealand. And there's a product we've been waiting to launch in Australia for a while now that we're expecting anytime that -- for it to come through, but it hasn't arrived yet, the approval. So we have put -- there's a range of the license income. We're working on a range of sort of between $4 million to $6 million or $6-plus million. And then the revenue is just variable on those launch times.

Okay. And when you talk about timing of approvals, et cetera, in Australasia, is that easing now? Or what's the sort of handbrake point that's happening in this market in terms of getting those processes through?

Yes. The regulator has actually been extremely good, especially in Australia, very much on time. It's just there had been some holdups with things like GMP inspections. Like, I mean, there was one example where the particular agency, the inspectors wouldn't move out of the agency due to the pandemic at all, and they just sat there and they haven't done inspections that would normally have occurred. So because you're literally waiting for that final sign-off of the site, which you then need that sign-off and that piece of paper to file with TGA to complete your registration, that's literally what holds things up. So you can have a $3 million or $4 million product kind of sitting there waiting on that. So that's a little bit hard to forecast, but it is in Europe and it is easing up. So we would anticipate getting it during this financial year.

Okay. No, that makes a bit more sense. And then just in terms of last question while we're in the Australia and New Zealand markets, how are you -- I'm just kind of interested, your hospital growth is obviously very strong in FY '21. Is some of that, I guess, abnormal? Or are you thinking this is a new base and there's still potential to grow off the levels that you're at now? Just trying to understand, I guess, context for opportunities in that particular area.

Yes. We did get a bump during this year because, especially in Australia, the hospitals are very proactive with taking on some additional safety stock, I think, that's what they told us. However, we do still have quite a lot of launches in the hospital area anyway and right across the whole Australian business. So really, we still do see probably less growth in the hospital area this financial year than last, but we still see growth. And we see higher growth in the sort of OTC area this financial year. But certainly, Australia, we do overall -- we've said before that we've got a target of getting it in the next 3 years to be $100 million business by itself, and that's certainly something that regardless of ups and downs in various submarkets that we still see that we can achieve.

Your next question comes from Christian Bell from Jarden.

So just again on the range, the earnings range that you've provided. Malcolm, you just said before, you're working on a license fee of $46 million. Does that include both the Maxi IV U.S. deal plus the Pascomer deal that you just did in Europe?

Pascomer was in last year. And yes, it does include the U.S. IV.

Okay. Cool. So would it be fair to say -- well, just trying to bridge this year's $10.7 million of EBIT to next year's, call it, $20 million of EBIT. So it will be roughly $5 million coming from license fees, and then the remainder coming from delayed product launches across ANZ and also Maxigesic launches that probably should have happened in FY '21?

Yes. Yes. If you look at our 13% 10-year CAGR, if we were to do that this year, that's another $15 million of revenue, and on our margin, that's around about a $6 million additional gross profit. And then as I said, on the overheads, we will need to spend a bit of money this year in more Southern New Zealand but New Zealand as well on the launching those OTC products.

Okay. And then, right, just -- so ANZ, keeping in mind what you said about Aussie, as the revenues grow, do you expect the cost base to increase in line? Or should we start seeing some more operating leverage in -- and I guess the whole ANZ division?

Yes. Just in ANZ alone, we will get more leverage because we've got the -- pretty much the sales -- the overhead -- the sales force is a big element of that overhead structure, and that stays pretty constant. We only -- if we add reps, it's only 1 or 2. And so yes, that gets better as a percentage. And then the marketing, when you launch a product, what we're -- a normal experience is that you get to a $1 spend that's adequate for that brand. And then as the revenue grows, you can keep the dollars at the same sort of level.

So you expect -- so for this year, R&D will be slightly up, but sales and marketing should be relatively flat this year and going forward?

Sales and marketing as a percentage of revenue will be flat this year, so regardless of dollar because we're launching products in ANZ. And then as a percentage of revenue, as the international grows and comes in, the overall company will decline -- improve, becomes a smaller percentage.

Okay. Cool. Also, it looked like -- were head office costs less this year? Last year, they were about $5 million. And then this year, it looks like it was more like $4 million.

Yes, there's a bit of -- we spent a fair bit on legal fees last year -- year before. And the year that's just finished, we had lower legal fees, but we always budget legal fees. It's just part of the pharmaceutical industry.

So is $4 million a better representation for head office should be going forward?

Yes, I think that was a good number.

I mean we haven't -- we've got a further increase in staff. This slowly increasing in head office, not -- in proportion to the sales line, those are...

Here, $4 million to $5 million.

And that shouldn't change too much going forward?

No.

No. I mean it will slowly grow, like we've put on, for instance, another marketing person and yes, but the rest of it stays relatively flat. It doesn't grow out of line with the turnover.

Yes. Okay. Cool. And then just on -- in terms of CapEx, how much have you got to go for Maxigesic across the board or across all of your products? When I say CapEx, I mean, the purchase of...

I haven't got the split. I haven't got the split to hand. It's about $6 million we'll spend next year. So they will get capitalized.

Yes.

And that's all on Maxigesic?

No, it's spread on many. So the NasoSURF is costing a bit of money.

Yes. Okay. So there'll be a bit of mix next year. But then from maybe FY '23, will it be predominantly NasoSURF and maybe like a little bit of Pascomer, keeping in mind that you've sort of -- you -- is it the right way to think...

I mean we're not looking at escalating out of line R&D spend, but we are looking at carrying it on year-on-year. So we actually want to step up R&D activities. I mean we did see initially some of the really expensive studies of the Maxigesic IV ones, and some of these follow-on studies are actually cheaper relatively or we're able to do deals where our partners pay for them as well, like part of the Hikma deal as well as we do have to do some pediatric studies in the U.S., but we're able to get payment for them. Same with Timber, we did the Pascomer deal where we've got a couple of big studies we had to pay for -- we would have had to pay for, but then they paid for them. So that makes a lot of difference really. It keeps our R&D costs down.

Your next question comes from John Hester from Bell Potter.

Just have a couple of questions again about the guidance. The 4% to 6% that we've got in there for next year, how much of that is represented by the Maxigesic deal that you've just completed after year-end? And also, how many additional deals do you think you need to do in order to achieve that guidance now, to achieve that 4% to 6%?

Yes. The bottom end is the Maxigesic IV U.S. And then to get to 6%, there's a bit of upfront. There is some commercial milestones coming through now on existing products. So as they're selling in market, when they get to certain levels, they give us the next -- that milestone, the commercial milestone.

Okay. So you pretty much got the bottom end of the 4% to 6% in the bag? And then...

Yes.

Commercial milestones coming through. Okay. That's helpful. And just in relation to the gross profit calculation there, Malcolm, can you just confirm for me that, that gross profit excludes those one-off items? Or what does it include or exclude in the [ historical number '21 ]?

Yes, it excludes -- so on slide...

9?

9, down the bottom there, that excludes -- that has no licensing income in it at all. That's just sales and royalties. So that's the 43.7% from the year before, and we're confident that we will go back to that level or better.

Yes. So that mix does not consist of unfavorable ForEx, unfavorable freight and things like that. And then we do also have the option to put some prices up. So we do have various levers we can pull to maintain margin.

Okay. Now just looking forward to slide 15, which is the graphic on the new product launches for Maxigesic, I just want to chat about this for a minute. You've got 9 countries coming on in FY '22 and then 31 in FY '23. I'm just sort of wondering how much control you have over these product launches, if any. And my concern is that if you're -- okay, it's still pretty bad with COVID, are these distributors going to take a punt on launching the product in these circumstances? Or are they really going to continue to defer until social restrictions are lifted? I'm just sort of wondering what you're assuming in those -- in the guidance there.

Yes. We're basically assuming that they do launch a lot of those countries, Europe. So we see, as you know yourself, in the western world, typically, the pandemic is starting to recede as vaccinations increase. So clearly, though, there is some more risk in some places. But there's been a lot of vaccination throughout the Middle East. Certainly, they are -- UAE, for example, is miles ahead of Australia or New Zealand in its vaccination rates. So yes, there always are some risk, but we still see, though, that as vaccination rates kind of increase around those various spaces, that it does make it easier to launch. I mean it's really like the concern in many ways isn't just the launching, it's launching effectively because I know that we slowed down our hospital launches in Europe because, really, launching Maxigesic IV to closed hospitals is not a particularly sort of good idea really. But I mean we are seeing the European hospitals starting to open up. So the launch stock has been ordered for Germany, for example, has been made at the moment, and we'll start to roll that out. There is some risk, yes.

That does conclude our question session. I will now hand back to Hartley for closing remarks.

Look, thank you very much, everyone, for your attention. Certainly feels like it's been a challenging last 12 months, but really pleased overall the way despite the various challenges. We are in a much better position where we have much better balance sheet, much better funding than we've ever had. And we're also well set up as a platform to drive the business going forward as well. So thank you very much, and we'll certainly continue to work hard on delivering our plan. Thank you.